IDC announces its top 10 predictions for the Malaysia IT services market in 2007
15 January, 2007
Kuala Lumpur, January 15, 2007 – In 2007, IDC expects to see disruption in the services market in the form of business models, service offerings, and market movements. Small businesses will be consolidated and acquired, more software will become services, more services will become products, business and IT players will address more of the small and medium-sized business (SMB) market, and consumers and SMBs will become more businesslike.
"As the IT services market poses strong potential to grow in the coming years, it is more important than ever for end users and vendors to integrate as well as standardize business processes and the IT infrastructure so that they remain competitive in the flattening world. To reap the benefits of the growing market, tight integration is the name of the game to be able to effectively operate as a true global company. In 2007, IDC believes there are three key themes that will shape the IT services market in Malaysia, i.e. innovation, standardization and smarter go-to-market approach," said Katherine Chan, Senior Analyst, Service Research, IDC Malaysia.
In the recent IDC publication on "Malaysia Services 2007 Top 10 Predictions", IDC predicts the following:
- Systems Integrators (SIs) redefine delivery models to be competitive
Starting from 2007, IDC expects to see more players taking the same footsteps to standardize their services offerings in the consulting and system Integration space. IDC expects "productization" of services would bring a competitive new wave of offering consulting and implementation services that are closer to customers' expectations.
- New life of application services model
In 2007, IDC expects to see opportunities arise for large service providers to better integrate their infrastructure outsourcing offerings with hosted application model (AM). For smaller vendors, opportunities will arise to broaden their IT outsourcing businesses by partnering with the larger service providers in the hosted AM space. Applications that have higher tendency to go on hosted model would be applications such as messaging and collaboration, enterprise resource planning (ERP), and customer relationship management (CRM).
- IT and telco convergence creates "talent recruitment war" between IT service providers (ITSPs) and telecommunication service providers (TSPs).
As managed services opportunity grows, the competition between TSPs and ITSPs would continue to grow with some cases where players choose to cooperate with each other. As competition arises, the "talent recruitment war" is going to continue, an area where ITSPs need to take precautionary action to retain valuable staff in the network management skills area.
- Potential services revenue from the healthcare industry
After the implementation phase of healthcare solutions in 2006 and 2007, IDC expects services opportunities to expand from implementation to management services in the coming years. It is time for service providers to gear up their infrastructure and application skills in the healthcare industry to reap the fruits in the coming years.
5. IS outsourcing (ISO) emerges as the largest IT services segment in 2007
Although the ISO services market is expected to be the largest revenue contributor to the IT services market in 2007, overtaking hardware maintenance and the systems integration services market to reach US$246 million. In 2007–2008, IDC expects at least one ISO signing from each of the telecommunication and banking sectors.
6. Selective discrete outsourcing service potential in the education sector
As government continues to allocate funds to schools and higher-learning institutions to procure IT hardware and network upgrades, IDC expects to see an increase in services contribution in the education IT spending from 20% to an average percentage of 27% in five years' time.
7. Enterprise security and network compliance concerns drives network consulting and integration services (NCIS) growth
Security and regulatory compliance would be the two main concerns of enterprise customers, driving growth in network and integration services (NCIS). As enterprises migrating rapidly from traditional network that could transmit voice or data to IP networks that could transmit both voice and data, IDC expects opportunities arise to provide network security services for voice and data services within and between legitimate corporate networks.
8. Small and medium businesses (SMBs) — large IT players threaten smaller IT players
To address the growing needs within the SMB market, established IT players such as IBM, HP, SAP, Oracle, Microsoft, Cisco, and others are introducing more competitive managed services, SMB packages, or even software as a service (SaaS) to the potential clients. The aggressiveness of large IT players in the SMB space has threatened the local independent software vendors (ISVs) and local SIs in their SMB offerings, in terms of pricing, reputation, or even global support services. As such, IDC foresees changes will be taken place whether through consolidation of ISVs, acquisition of ISVs by local SIs, alliances formation with the global players.
9. Global sourcing and offshore service delivery — growing the shared services outsourcing (SSO) business
SSO companies in Malaysia could be categorized into three groups i.e. internal shared services delivery, global sourcing service delivery, and offshore service delivery. IDC expects the global sourcing and offshore service delivery have better rooms to grow, where these are mainly the service providers who could offer efficiencies and effectiveness in their global economies of scale, compared with the one-to-one model exhibited by the internal shared services delivery group.
10. Storage infrastructure Systems Integrators move up the value chain to offer information security and data management services.
IDC expects the services opportunities pertaining to storage to remain significant through 2010, and as long as customer organizations continue to add storage capacity at record levels. In fact, as the focus begins to shift away from storage infrastructure and more toward information management and applications, storage firms will be challenged to transform their services organizations fast enough to remain competitive. At the same time, storage infrastructure service providers are swimming upstream to venture into higher-value consultancy services addressing issues of compliance, information security, and data management as per customers' requirements.
For more information about purchasing this research, please contact Hazmi Yusof at +603-2169-7522 or hyusof@idc.com; or Stephen Chong at +603-2169-7521 or ckchong@idc.com
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