APAC IT services growth hits 'speed bump'

Global economic concerns and conditions impacts regional growth with past years of high double-digit growth now sliding toward high single digit territory and no signs of "megadeals" in horizon, new study shows.
Written by Kevin Kwang, Contributor

Asia-Pacific's IT services industry is not spared from the global economic slowdown as market growth slows from the double-digits seen previously to lower figures in the high single digits. That said, regional markets are not falling into a recessionary tailspin but seizing the opportunity to "take a breath".

In Ovum's IT services study for the third quarter of 2011 released on Thursday, the research firm stated that engagements in the Asia-Pacific market are "being slightly delayed, becoming re-scoped and having a greater cost management focus". This can be seen by the year-on-year drop of 25 percent during the quarter, with a sense that economic concerns afflicting the rest of the world is now filtering through to the region's growth markets, it noted.

"These markets are not falling into a recessionary tailspin, but the historical double-digit market growth figures are trending closer to high single digits or low teens, as many markets see the current economic conditions as an opportunity to take a breath," said Jens Butler, IT services analyst at Ovum, in the study.

The study also noted that many vendors are taking the current market situation as an opportunity to invest in infrastructure, partnerships and resources in the region's growth markets such as India, China and Malaysia.

Butler said: "Sixty-four percent of contracts signed in the Asia-Pacific services market emanated from the telecommunications sector in the quarter, with cash-strapped industries taking a more conservative approach to any form of services investment in the near-term."

Ovum pointed out that "megadeals" will not return any time soon but companies are consolidating and signing contracts with a number of core suppliers, with 60 percent of contracts signed in the past three years having one "prime" vendor for the majority of services put to market.

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