With the rapid growth in global demand for IT services, India and China are not going to be the only beneficiaries. Emerging regional IT-services markets like Indonesia and Vietnam are set to register significant growth in the near future, according to a recent study titled ‘Asia Pacific IT Services Market and Forecast, 2006-2011’ conducted by Springboard Research, an IT market research and advisory firm.

“The Asia Pacific IT-services market is arguably the global leader in terms of growth, supplemented with a mix of mature and emerging markets,” says Phil Hassey, Vice President – Services Research, Springboard Research. “The markets of interest are not just the top four — China, India, Australia and Korea — but the emerging ones like Indonesia and Vietnam, which will register significant growth going forward,” adds Hassey. 

However, Vietnam has to travel miles before registering the higher growth rates. For instance, IT businesses in Ho Chi Minh city, the capital region of Vietnam, earn more than VND 9,720 billion each year, of which 90 percent comes from imported hardware products, according to statistics from the city’s Department of Post and Telecommunications (DPT). This signifies that the country has to spend millions of U.S. dollars to import IT equipment, but the profit potential is low.

Top ten IT-services Market in APEJ

1.         People’s Republic of China 2.         India 3.         Australia 4.         Korea 5.         Indonesia 6.         Vietnam 7.         Malaysia 8.         Rest of ASEAN 9.         Singapore 10.        Philippines Source: Market Attractiveness Index, Springboard Research

The research report also reveals that the IT-services market in APEJ is expected to grow from $37.5 billion in 2007 to $55.9 billion in 2011, according to the study. (See Chart) As expected, Indian IT services market with a CAGR of 18.6 percent will remain the fastest growing in the region, although as a region China will offer the largest market opportunity in dollar terms at the end of the forecast period.

Interestingly, the study also feels that both for India and China, local capabilities, offerings and presence is just the start of a list of essential requirements for success. On the other hand, existing relationships, marquee clients and strong partnerships can provide capabilities for expansion in markets such as  Hong Kong and New Zealand with relatively limited opportunities. However, unlike India, China will not engage in IT outsourcing in the near future because “China is not culturally, economically, or legislatively predisposed to outsourcing from a broad enterprise-wide IT perspective,” according to the study.

But there are many challenges for the companies in Asian countries. And, the most common challenge for them in 2008 is to serve both emerging and matured domestic markets at the same time. In order to solve this problem, the study suggests to increase mergers in matured markets such as Australia, New Zealand and Korea. 

Serving Emerging and Mature Markets in Asia

•           Getronics sold its Australian subsidiary to UXC, whilst retaining the rest of its Asia Pacific presence •           Fujitsu appears to be aggressively consolidating in New Zealand •           EDS has also taken the brave step back into the Korean market through a joint venture, which EDS  hopes provides more balanced outcomes than its previous partnership with LG-CNS. •           For emerging markets, Sun announced its partner program, SEP, which enables Sun’s greater penetration in Asia’s developing markets, and beyond. This in effect, franchises the Sun model in markets such as Vietnam, Indonesia and China’s tier-2 cities. In theory, the franchise approach will accelerate Sun’s presence in the region and maximize cost and scale efficiencies. Source: Springboard Research