China, India Ahead in IT Services Growth

Expect China to overtake Australia as the largest services market by 2010, and India will displace Korea as the No. 3 market a year later, according to IDC

The Asia-Pacific IT services market is poised for further growth, riding on the success of the Chinese and Indian markets, according to latest research from IDC.

In a statement released Tuesday, the research analyst noted that the region's IT services market, excluding Japan, will grow at five-year compound annual growth rate of 10 percent to US$48.4 billion in 2010, up from US$29.6 billion in 2005.

In the report, IDC identified China and India as the top two fast-growing markets. China, in particular, will capture 24 percent of the market by 2010, and overtake Australia to become the largest IT services market in the Asia-Pacific region. China is expected to contribute 17.3 percent of this market by the end of 2006, according to IDC.

India is expected to overtake Korea as the third-largest market by 2011, the analyst said. The country is expected to contribute 13 percent of the IT services market in 2010, compared to Korea's 14 percent.

Southeast Asian markets--Hong Kong, Indonesia, Malaysia, Philippines, Singapore and Thailand--will each contribute between 1 percent and 4 percent to the total IT services market spend in 2010.

According to Phil Hassey, IDC Asia-Pacific's director for services research, the bulk of IT services activities over the forecast period will be concentrated in the areas of systems integration, enterprise-wide IT outsourcing and hardware support. However, discrete outsourcing is expected to achieve the strongest growth, Hassey said, but "at the relative expense of traditional outsourcing".

Outsourcing providers, however, still have some way to go to fully capture the growth opportunities in the marketplace, he noted. "There is a gap to excellence [in providing good service] for many vendors in the region," he said. "Clearly this is a frustration for enterprises, which often have outcomes that do not match expectations."

To better bring value and form lasting relationships with customers, outsourcing vendors need to bring a "transformational element to the engagement", said Hassey. IT services providers also need to understand each customer's unique concerns, such as profitability, future strategy, presence in different geographies, as well as "on-demand" requirements.

In a separate report last month, IDC forecasted that China and India together will contribute 65 percent of all incremental growth in the region's IT spending this year. IDC also expects total IT spending in the Asia-Pacific region to reach US$162.5 billion by the end of the decade.