Market Research

January 8, 2004
IDC predicts global IT market to resurrect in 2004

SINGAPORE -- According to IDC's recently published research highlighting its top 10 predictions for the IT market in the region, double digit growth is likely for the Asia Pacific IT market (excluding Japan) in 2004.

Piyush Singh, managing director, Asia Pacific, IDC, said: "We believe that the IT market worldwide and in the Asia Pacific region will resurrect in 2004. Key to our outlook is the positive economic news that has been emerging on several fronts and the fact that investment budgets for 2004 have been set in this relatively optimistic environment. The stock markets around the world, which are a leading indicator for market recovery, have risen to two-year highs. The region's two largest developing economies -- China and India -- are charging forward on the economic front and driving overall regional IT market recovery.

He said: "Our top 10 predictions for the Asia Pacific market in 2004 highlight some key structural changes within the IT industry -- a move away from proprietary architectures and an emerging business innovation focus. In a market that is entering a new growth cycle, we believe that the strategies that IT vendors will employ and the choices that they will make in order to capture the imminent growth will be substantially different from the past. In fact, 2004 will be a pivotal year and choices made this year will determine shifts in market shares over the next five years."

IDC's top 10 predictions for the IT Market in the Asia Pacific region for 2004 are as follows:

• China, India and South Korea will drive Asia Pacific IT market out of doldrums: The IT market in China will grow by 18 percent in 2004 to US$29.4 billion and will account for 35 percent of the Asia Pacific IT market, outside of Japan. Driven by this growth, the IT market in Asia Pacific (excluding Japan) will register double-digit growth in 2004 and is likely to grow by 11 percent to US $88 billion. More than half of the incremental IT market revenue in the region in 2004, over the previous year, will come from China. Other strong contributions to regional market growth will come from India (19 percent growth) and South Korea (9 percent growth). These three countries together will account for 80 percent of the incremental regional market revenue in 2004, over the prior year;

• Infrastructure commodity strategy takes the lead, testing leading suppliers: 2004 will be the first year in which -- on hardware and system software side -- virtually all of the leading players will see standards-based products as the core of their future business, and not just a fast-growing product category. Major market players will be severely tested in this new context this year;

• Disk storage deployment explodes, triggering acute need for storage management solutions: The total capacity of disk storage systems deployed across APEJ is likely to increase from 190,000 TBs (tera bytes) in 2003 to 300,000 TBs in 2004, an increase of 54 percent. This implies that many customers will struggle to manage the combined load of existing storage hardware investments, which will translate into increased purchase of storage management software and services. IDC expects the Asia Pacific storage management software market to grow over 26 percent in revenue next year;

• SMB segment emerges as a major battlefront: Economic hardships in the last several years along with economic liberalisation are forcing the SMB segment to streamline its operations and for many, become globally competitive. Global vendors are stepping forward to introduce solutions dedicated to the needs of the SMB segment. Expect a marketing blitz in 2004 as these vendors display their portfolios of product, support and service, and financing options designed to provide the best of technology and service to smaller and less defined budgets. Additionally, vendors will vie for the attention of existing channel networks throughout the region with attractive benefit packages and support infrastructure;

• Consumers drive digital media adoption: The lightning-fast expansion of digital media adoption is one of the most important structural changes in the evolving IT industry. And 2004 will be yet another year of consumers driving the market in adopting new media technologies, and challenging traditional media and consumer electronics suppliers. 2004 will be a great year for consumers to add more digital gadgetry to their homes and home-offices. As IT vendors such as HP, Dell, Microsoft and Gateway expand their breadth and depth of products and encroach into traditional consumer electronics markets dominated by the likes of Sony and Samsung, the battle for the digital home will heat up considerably - the winner will surely be the consumer;

• IT suppliers struggle to put on a business face: More than anything else, the future growth of the IT marketplace depends on suppliers' ability to better understand how IT can solve high-priority business problems. In 2004, there will be major reorganisations among more IT suppliers -- orienting by customer industry segments and businesses. Some suppliers may stumble during this difficult process -- with internal turf wars made visible through executive management fallout. Look out for companies that will be struggling between the choice of developing business consulting expertise organically or through acquisitions, or relying on partnerships. The companies that emerge successfully from this transformation will be the big winners in the coming economic upturn;

• Offshore service delivery thrives despite negative publicity: The debate about offshore service delivery is one of the highest profile issues for the IT industry across Asia Pacific and globally. There is a strong backlash against this phenomenon in the developed markets primarily due to concerns about growing unemployment. We believe that the offshore BPO sector in India and elsewhere will continue to grow very strongly. In fact, 2004 will be a watershed year in this respect. Whilst there is always going to be pressure on governments and the public sector to resist the temptations of going offshore, the fundamental principles of maximising shareholder value will drive the private sector to lower cost alternatives sooner rather than later;

• IP telephony gains traction in the enterprise: Long the subject of much hype, IP telephony looks set to finally gain traction in the enterprise market in Asia Pacific in 2004. With the promise of ubiquitous access, a single PBX system for the entire enterprise, long-distance call savings, remote access convenience, feature-rich intelligent IP PBXs solutions are now coming to the fore. Cost savings still present the main attraction to most enterprises -- in terms of actual voice communications, and efficiencies of access and management. Carriers will also have to keep pace with the development of the IP PBX market and so IDC expects carriers to start pushing IP centrex solutions. Significant opportunities exist within the small and medium sized market, which gives them access to the features, functionality and of course cost savings offered by today's IP PBX solutions, but without the same level of infrastructure investment required;

• Mobility enters a new phase - goes mainstream: The mobile revolution continues to unfold on several dimensions. On one hand, mobile access devices are proliferating; notebook shipments and handhelds are growing rapidly -- be it mobile phones, PDAs or converged devices. At the same time, wireless bandwidth bottlenecks are easing up. WLANs have mushroomed in public places and have gained a foothold in enterprises. Wireless applications continue to multiply beyond email, SMS and remote access. In 2004, these developments will come together to push mobility beyond innovators and early adopters in the enterprise as well as the consumer space. While basic communications will continue to dominate wireless applications, location-based information services, MMS, and specific industry specific applications will also take root in 2004; and

• Online advertising crosses the chasm: In 2004, online advertising will begin to be referred to as a mainstream advertising channel in Asia's leading ad markets. Total online ad revenues in the region (excluding Japan) are likely to grow by over 40 percent to US$637 million in 2004. Search ads growth will continue to build up steam, as will other ad forms previously limited to only offline media, such as classifieds, real estate ads, and job ads. For online advertisers, the reachable online audience continues to expand. The total number of Internet users in the Asia Pacific region (excluding Japan), will grow by 22 percent to 205 million in 2004.

Contact:
IDC Asia/Pacific
psingh@idc.com
www.idc.com