India, China to lead in Asia's IT services growth

The two countries are expected to register market growth much higher than the rest of the region this year, predicts market analyst.

The Asia-Pacific IT services market is poised to expand at a rate faster than that of the global market, with India and China as the main engines of the region’s growth in this segment.

According to Gartner, the Asia-Pacific region will see a compound annual growth rate (CAGR) of 8.9 percent from 2004 through 2009, exceeding the global growth rate of 6.1 percent.

The research firm predicts emerging markets India and China, will be propelling the growth across the region. The two countries are expected to garner 22.7 percent and 11.8 percent growth, respectively, this year in local currency terms. Projections for mature markets Australia, Hong Kong and Singapore are mild, clocking growth rates of 4 percent, 3.8 percent and 3 percent, respectively, in local currency terms.

"With business confidence continuing to improve across the region, cost is still a key consideration in IT investment but the focus is shifting to business development in the improved economy," said Rolf Jester, vice president of research and distinguished analyst, Gartner Asia-Pacific.

"While companies are more willing to spend, their requirements are also increasingly demanding and that drives down margins," he noted. "They are also more careful in selecting service providers, which results in longer selling cycles."

In addition, Gartner forecasts that professional services, led by development and integration, IT management and consulting, will be the top performers within the IT services market. The development and integration services segment is expected to grow at 9.7 percent CAGR, due in part to the rapid growth in China and India, which need to build up capability to serve their large domestic markets. The IT management market segment follows closely behind with a CAGR of 9.6 percent, while consulting services will see a 9.5 percent growth.