IT will lead Asia's economic recovery

Region's tech spending in 2009 will outpace gross domestic product, growing by 4.8 percent to reach US$300 billion in 2009, finds new IDC study.
Written by Liau Yun Qing, Contributor

The IT industry will play a key role in the economic recovery, particularly in Asia, as companies take advantage of technology to improve cost base and service outcomes, according to a study released Monday.

Conducted by research firm IDC, the study showed that IT spending in the Asia-Pacific region will outpace GDP (gross domestic product) growth in 2009, expanding by 4.8 percent to reach US$300 billion. In comparison, GDP for the region is expected to grow by 3.4 percent.

The study, commissioned by Microsoft, measured the IT industry's contribution to GDP, job creation and formation of new companies in the IT industry and software sector, as well as local spending and tax revenues from IT in 52 countries worldwide, including 14 in the Asia-Pacific region.

It determined that technology sector will contribute 2.3 percent of the region's GDP by 2013, compared to the current 2.1 percent, and will churn US$185 billion in taxes this year. In fact, IT-related activities will create US$74 billion in new tax revenues for Asia-pacific governments over the next four years, clocking an average growth rate of 2.4 percent per year.

Employment in the IT industry, including IT professionals in organizations that use technology, will grow by 21 percent to some 2.8 million by the end of 2013. Some 35 percent of IT employment will be software-related, according to the IDC study.

It also predicted that 32,000 new enterprises will be created in the region by end-2013, with most of these small and locally owned businesses.

"Innovation in technology will play a vital role in enabling new business opportunities and employment growth throughout Asia," Emilio Umeoka, Microsoft's Asia-Pacific president, said in the report. "IT will be a catalyst for the wider economic recovery as companies take advantage of technology solutions to improve their cost base and service outcomes."

Umeoka highlighted the need for Asian economies to establish "open policies" that support enterprises that help drive economic recovery, break down trade barriers and introduce more incentives for research and intellectual property recognition.

The study also identified cloud computing as the next big wave in IT development. While still currently in its infancy, accounting for less than 1 percent of the region's IT spending, IDC said cloud could churn almost US$300 billion in net new business revenues for the Asia-Pacific market by end-2013.

Contributions of Microsoft ecosystem
The study also measured contribution by companies within the Microsoft ecosystem, specifically, vendors that make and sell devices running Microsoft software, or write applications that run on Microsoft platforms including resellers, distributors and service support providers.

Its findings revealed that companies in this ecosystem generate US$10.97 for every US$1 revenue Microsoft churns in the region, which is 25 percent higher than the global average. In fact, these Asia-based companies will accumulate nearly US$125 billion in revenues for themselves in 2009.

Microsoft attributed the difference in global and Asian revenue to hardware manufacturing and purchasing, where the Asia-Pacific region showed a higher hardware revenue ratio but lower software and services revenue ratios. According to Microsoft, this disparity is typical in less mature countries as they have a higher percentage of hardware revenues to software and services revenues.

Companies within the ecosystem accounted for the employment of over 2.97 million IT professionals in the region, and another 2.85 million who work with Microsoft products.

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