Gartner: China, India fuel IT spending boon

An improving economy in Asia and the Pacific brings increased spending on IT services.

Gartner Inc. is forecasting that the IT services market in Asia and the Pacific will post a compound annual growth

rate of 8.9% from 2004 through 2009, compared with a global growth rate of 6.1%.

The big increases are fueled by China and India, as the two emerging powerhouses strive to build up their large domestic markets, according to a new report from the Stamford, Conn.-based research firm. As the economy continues to improve across the Asia/Pacific region, a prior emphasis on cutting costs has led to business development, spurring demand for professional services, such as IT management and consulting, Gartner said.

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"The comeback of consulting shows that companies need to transform their business, not only by cutting costs but learning how to better use their IT resources and processes to increase their business," the report found.

The robust investment by India and China was apparent during the past 12 months, Gartner said, when India's spending on IT services grew a whopping 26.7% and China's 11.8%.

The strong demand was in contrast to more mature markets, such as Australia, South Korea, Hong Kong and Singapore, where growth rates were under 10%. In Australia and South Korea, the two largest Asia/Pacific IT services markets, the market for development and integration services is saturated, and investment in hardware maintenance and support services is flat.

Growth drivers for India and China

Banking, financial services and telecommunications companies account for much of the increased spending rate in India, Gartner found. A big driver is the need to meet regulatory compliance requirements, especially in the financial sector. Government spending is also growing rapidly, as national and state governments embark on e-governance plans, a trend that should continue for the next five years, according to Gartner.

Chinese companies are investing heavily in IT services, especially in consulting, as they strive to keep up with worldwide competition. Hong Kong, aided by support from the Chinese government, is meeting a pent-up demand for IT services. While Taiwan's political relationship with China is "still sensitive," the economy is increasingly dependent on China. Taiwan's IT services remain focused on product support and maintenance, and on development and integration.

By 2009, India's total IT services market of $5.3 billion will still be one-third smaller than China's, given its smaller base. However, the development and integration services market of both countries will be about the same, at around $3 billion, the report said.

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