China and India set for another banner year

IDC predicts both countries will continue to lead the pack in the IT market in 2007, which will also see new outsourcing models emerging.

Asia's two rising stars, China and India, will continue to shine in the IT market next year, with GDP growth expected to hit 8.3 percent and 7.7 percent, respectively, predicts IDC.

In a statement released today which outlines key predictions for the new year, the research house projected that China will maintain its position as the largest IT market in the Asia-Pacific region, excluding Japan--making up 32 percent of the region's IT spending. The Chinese market will be trailed closely by India at 23 percent, IDC said. Both countries are expected to account for the lion's share of the region's IT spending at more than 43 percent.

According to IDC, information and communications technology (ICT) spending and growth for the Asia-Pacific region will be largely driven by "continued economic growth and increasing market demand across the region".

In addition, the IT market in this part of the world will grow at 10 percent over 2006 to reach US$132 billion next year, IDC projected.

Eva Au, managing director at IDC Asia-Pacific, said in the statement "The region's astounding rates of economic and IT market growth have resulted in dynamic and rapidly evolving corporate and consumer markets. This is a role the region has gradually accepted, but the growth is now taking off explosively."

While the major economies are expected to continue to deliver strong results, IDC believes that both China and India will begin "a more serious look internally, focusing on bridging urban-rural divides and developing infrastructure".

"As economic growth rates cool slightly, [China and India] will be pushed to look at domestic markets as recent years of prosperity drive IT infrastructure build-out and the closing of domestic urban-rural gaps" the research company said.

As such, Au noted, vendors will need to have specific knowledge of domestic markets in order for them to successfully compete.

BPO: relationship matters
IDC is also projecting a new model in business process outsourcing (BPO), focusing on vendor-customer relationship to emerge in the coming year.

Companies in Asia planning to outsource their business processes are likely to "test drive" short-term pilot projects first, before taking the plunge into a long-term commitment, IDC said. This will ensure that the vendor is sufficiently capable of meeting the needs of the customers, the analyst noted.

This business model contrasts with the structure typically used to "serve Western clients, who are more willing to transit to BPO based on compelling economics", IDC said.

The researcher also predicted that 75 percent of midsize and large companies in the Asia-Pacific region will plunge into early-stage service oriented architecture (SOA) adoption in 2006, completing the first phases of their projects in 2008.

However, IDC advised organizations to address SOA deployments with caution in terms of internal process assessments and re-engineering--an area in which, vendors and systems integrators could find new business opportunities, it said.