IDC lowers APAC tech spend forecast

Analyst pulls region's IT spending projection for 2009 down from 9.5 percent to 5.8 percent, but says Asia-Pacific remains "the bright spot" in the global market.
Written by Eileen Yu, Senior Contributing Editor

IDC on Monday revised its 2009 IT spending forecast for the Asia-Pacific region, excluding Japan, down from its "pre-crisis" projection of 9.5 percent to 5.8 percent.

The research firm anticipates tech spending in the region to clock US$195.6 billion next year, down from the previous US$201.4 billion forecast it made in July 2008.

"Strategic investments in IT will remain critical in achieving further efficiency and productivity gains, and driving longer term growth of businesses," Gary Koch, IDC's Asia-Pacific associate vice president of IT spending research, said in a media statement.

IDC polled almost 400 enterprises across the region in the last week of October to determine the impact of the financial crisis on IT budgets. Some 80 percent of respondents indicated a preference for deploying products and services in an innovative way to save cost, rather than buying low-priced equivalents, Koch said.

Some 43 percent revealed they had received instructions from their head office to improve profit margins in 2009, which IDC said indicated an assumption that this region would fare better than its counterparts in the United States, Europe and Japan.

While over 50 percent expected Asia to contract at similar levels to the United States and Europe, more than a third expected Asia to fare better.

In fact, IDC noted that the Asia-Pacific region remains "the bright spot" in the global landscape as businesses here focus on leveraging IT to drive business process optimization. In addition, the region's robust growth over the past 10 years helped cement strong financial ground for businesses and consumers, IDC said. This, it added, puts Asia in a favorable position to invest in IT amid the current financial climate and emerge competitively stronger when the economy turns around.

Asian business leaders surveyed in the IDC poll also indicated a recognition that cost savings alone would not be sufficient to achieve targeted profit margins.

"In this slowing marketplace, in addition to cost management, businesses will target their competitors' installed base to acquire new customers for incremental revenue streams," IDC said. "Customer engagement and enhancement tools that leverage technology will help businesses to respond effectively to customer needs, and improve efficiency and productivity of their client-facing personnel and activities."

Efforts to tighten purse-strings will drive migration to technologies that can support utility or consumption-based pricing, the analyst noted, adding that respondents said they would increase spending on managed and cloud services in 2009.

According to Koch, financial services, government and telecommunication will remain the three largest IT spenders next year. Asian central banks will inject local money markets with cash, as well as push banks--through regulations--to release credit in a bid to avoid a further liquidity crunch in the region.

"Stimulus packages, if executed effectively, will mean aggressive public spending to stimulate demand and employment," IDC said, noting that it expects increased IT spending from the government, healthcare and education sectors.

Last month, the research firm lowered its 2009 global IT spending forecast to 2.6 percent, down from its initial projection of 5.9 percent. The United States alone is expected to grow by only 0.9 percent next year, down from IDC's previous forecast of 4.2 percent.

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