Korea, Asia’s Largest IT Services Market By 2005

According to IDC, services firms targeting the banking, communications and media, government and discrete manufacturing sectors will drive the IT services market in Asia-Pacific (excluding Japan), which will grow at a compound annual growth (CAGR) rate of 21 percent, to reach US$38.8 billion in 2006. And Korea, growing at a CAGR of 28 percent from 2001-2006, looks set to overtake Australia as the largest IT services market by 2005.

But besides the traditional services powerhouses of Australia and Korea, the investment and development of Chinese companies, especially as a result of China’s entry into World Trade Organization (WTO) and sustained business interest in Asia’s fastest growing economy, will also see China speed up to become the third largest IT services market in a year, said David Yew, program manager, IT Services, IDC Asia-Pacific.

Between 2001 and 2006, China, Korea and Indonesia will grow at 41 percent, 28 percent and 27 percent respectively. This largely overshadows the growth rates expected in mature markets like New Zealand, Australia and Hong Kong.

In 2006, 65 percent of the money spent on IT services will still be in Australia, Korea and China.

The bottom line for IT services companies is this: Firms would be courting disaster if they focus only on the local markets and abstain from establishing their coverage in other countries. As IT services firms today strive to stay afloat under intense competition, they are realizing the importance of having IT partners that can provide local coverage in order to achieve a global vision.

Another key trend is the increasing market acceptance of Application Service Providers (ASPs) and System Infrastructure Service Providers (SISPs).

“Companies are beginning to realize that the xSP model is powerful and viable, and is not just another hype. xSPs provide a one-to-many service over a network at fixed or pay-per-use rates and is an elegant extension of an outsourcer’s business,” said Yew.

“This growth is creating significant opportunities for vendors in the Asia/Pacific marketplace, and many services players are staking a claim to these nascent markets across the region.”

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