15% CAGR in IT Services Market, IDC Predicts

19 May, 2006

Kuala Lumpur, May 19, 2006 – IDC Malaysia publishes the final 2005's actual performance of the IT services market in the country. The Malaysia IT services market grew 12% year on year from US$801.66 million in 2004 to US$896.37 million in 2005. To date, IT services constitute 25% of the total Malaysia IT spending. By 2006, IDC forecasts that IT service revenue will hit US$1.01 billion, indicating a 14% year-on-year growth rate from 2005 to 2006. Over the next five years, IDC forecasts that the IT services market will grow at a compound annual growth rate of 15% from 2006 to 2010.

In the project-oriented services market, partnerships and alliances have become key success factors in winning contracts. Customer relationship management (CRM) and vertical knowledge also became inevitable criteria to win the trust of potential buyers. "In 2005, the infrastructure service growth was mainly driven by new implementations of a few disaster recovery centers in the manufacturing and telecom sectors, new system and network infrastructure requirements for new banks and hospitals, and 3G and IP network consulting and integration projects awarded, especially in the telecom and education sectors. In the application services, there were higher rates of packaged software implementation than customized software mainly due to the availability and reliability of support given," says Katherine Chan, Senior Analyst, Services Research, IDC Malaysia.

Hardware and software maintenance provided the only continuous sources of spending from the government due to its need to manage and refresh its infrastructure and application installed bases in different ministries, agencies, and departments. "However, there is an increasing trend whereby enterprises (both in the public and private sectors) are looking to purchase maintenance services as operating expenses instead of capital expenses. As such, IDC observed highest CAGR of 31% in discrete outsourcing services in the area of desktop and network outsourcing services. IDC foresees that there will be an accelerated shift from traditional IT outsourcing (ITO) to other forms of discrete outsourcing services or IT provision such as desktop, network and application outsourcing using a utility-based models, or even hosted applications," adds Ms. Chan.

In the dynamic IT environment, IT service providers (ITSPs) need to change their business models to offer their services to clients. "It is vital for ITSPs to strengthen the delivery quality and client service excellence, instill flexibility in services offerings, source intelligently and retain good talent in order to bring more value proposition to transform customers' legacy systems and processes," Ms. Chan added further.

IDC Malaysia will be featuring this report in a webcast from 24th May to 7th June 2006 entitled "Malaysia IT Services 2006-2010 Forecast and Analysis", available at no cost to you. Simply visit our website http://www.idc.com.my/ and click on the webcast icon. If this is the first time you are viewing an IDC webcast, please note that there is a one-time registration process for all new users. All you need to do is select a user name and password and include some primary details.

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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