Digital transformation and smart city will drive APeJ IT services demand in 2016: IDC

IDC Asia/Pacific expects APeJ IT Services to be resilient – posting a 6.5% value growth year-on-year (YoY) (in US dollar) in 2016. The IT services market faced difficulties this year due to the depreciation of Asian currencies against the US dollar and the slowdown in China economy. Despite this, IDC believes APeJ IT services will remain positive next year with digital transformation and smart city initiatives driving demand for IT services. [caption id=“attachment_2197392” align=“alignleft” width=“380”]  Representational image: Reuters[/caption] “Demand is primarily being driven by digital transformation initiatives across verticals, particularly banking, retail and public sectors. Enterprises are increasingly leveraging 3rd platform technologies to build a cohesive digital agenda that focuses on achieving business outcomes. Smart City initiatives in countries such as China, India and Singapore have also fueled the demand for cloud, analytics, mobility and security solutions”, said Vidhika Sehgal , Senior Research Manager, Services, and IDC Asia/Pacific. China, which has the largest IT services spend in APeJ, is expected to close the year with 9.4% YOY value growth in US dollar. Though historically known to have double digit growth, current estimates of 9.4% is still one of the highest growth markets in the region. In 2015, China saw the continued struggle of foreign players in the domestic market due to regulatory policies while local vendors witnessed a tapering in growth due to slower domestic demand. “While exchange rate volatility can have a large impact on US dollar growth forecast in 2016, it is expected that growth in local currency will pick up in markets such as India and ASEAN, which should also contribute to an overall revival in APeJ IT services growth” adds Sehgal. Within IT services segments, the market is being driven by growth in IT consulting, systems integration and hosting infrastructure service, mainly because of an increased migration to cloud. These three segments together contribute nearly 30% to APeJ IT services market. Consulting and integration services are in demand as companies look for third party services for identifying and implementing 3rd platform solutions to migrate legacy systems and also complement the existing IT architecture and contribute to business outcomes. Growth in traditional outsourcing services continue to be adversely impacted by the shift to cloud, especially as deal size, duration and structure moves in favor of a more hybrid IT environment.