Asia's hosted services to reach US$15.5B

Market is boosted by managed converged communication and security services, which will grow 25 percent and 18 percent, respectively, says IDC.

SINGAPORE--Asian organizations will spend some US$15.5 billion on hosted and managed services by the end of 2008, with more opting for a multi-vendor approach when carving out contracts, notes research house IDC.

During a presentation Tuesday, Adrian Ho, IDC's Asia-Pacific research manager of managed services and WLAN research, said market growth will be largely driven by demand for managed converged communication services. This segment, he said, is projected to see the highest growth rate--at 25 percent--to reach US$1.4 billion by year-end.

Managed security and mobile infrastructure services will also see strong growth of 18 percent each, expanding to some US$$984 million and US$309 million, respectively, by end-2008.

While IS outsourcing will see the lowest growth, at 8 percent, this segment will make up the bulk of the overall managed services market, accounting for US$8.5 billion of total spending, Ho said.

Spending in managed network services will make up the second-largest portion, growing by 12 percent to some US$5.3 billion by the end of the year, followed by spending in Web hosting and data center services, which will grow by 13 percent to US$2.6 billion.

Ho noted that Asian organizations previously looked at managed services largely as a way to reduce overall costs, but demand for such services today are driven by a desire to transform the business and workplace.

Their key focus now is on enhancing customer service, the analyst said. In fact, the majority (20 percent) of Asia-Pacific businesses IDC recently surveyed pointed to improving customer service as their number one priority. Some 17.5 percent highlighted the need to improve and simplify IT infrastructure as a priority, while the desire to lower overall costs--which was previously the top priority--came in third at 13 percent.

Ho told ZDNet Asia that the increased focus on customer service, which previously ranked third, reflected a mindset change among Asian businesses.

"Customer stickiness and repeat business will help grow the company faster. Asian organizations now starting to realize that improving customer service is a strategic move, and no longer see it as an afterthought," he said.

Enhancing customer relationship is also a key reason why 18 percent of businesses in the region view communications as a strategic asset, Ho said, with 11.8 percent adopting unified communications as a way to improve their provision of customer services.

Choosing multivendor service contracts
According to IDC, more Asian companies were likely to establish "multi-sourcing" or multivendor services contracts, where the majority (27 percent) of those surveyed viewed this as the best way to access best-of-breed technologies. Some 24 percent said multivendor contracts can provide better pricing deals, offering better cost reductions, while 16 percent used such contracts to attain higher service levels.

Ho also told ZDNet Asia that businesses will likely appoint a "service aggregator", typically providers of IT services such as IBM and Hewlett-Packard, as the key point of contact and to handle the expected complexities of managing the various suppliers.

"We're seeing this already happening in Australia and expect it to filter to other mature markets such as Singapore," he said. The analyst noted that businesses now also want shorter service contracts, and are adding clauses that will allow them to renegotiate the contracts if the need arises.