Desktop and network outsourcing getting stronger acceptance in Malaysia, says IDC

14 September, 2005

Kuala Lumpur, September 14, 2005 – Based on IDC's latest study entitled Malaysia Network and Desktop Outsourcing Services Market: Replacing Outsourcing?, the Malaysia network and desktop management services market's revenue in 2004 reached US$43.95 million and is expected to increase at a compound annual growth rate (CAGR) of 17.4% from 2004 to 2009 to reach US$52 million in 2005.

End users exhibited higher acceptability levels toward more annuity-based contracts, seeing cost reduction, control, and predictability as some of the positive drivers for market growth. At the same time, both service providers and buyers moved up the value chain. Service providers introduced new value-added services (VASs) that provided higher profit margins while buyers continuously showed improved all-round IT infrastructures. This created huge opportunities for managed services providers in the market.

"Organizations are becoming more interested in employing a discrete than the usual large-scale outsourcing model, as discrete outsourcing will ensure IT strategic decision-making processes more as well as making sure that core IT systems stay within their internal control. Another major driver would be cost predictability that might help decision makers plan their annual financial budgets better," according to Katherine Chan, Analyst of Services Research, IDC Malaysia. "At present, some of the most noteworthy contracts that involve desktop and network management services are being signed by companies from the financial services, manufacturing, utilities, resources, and government verticals. The big players in the market include global players like IBM Global Services, HP Services, and CSC/CSA while the local players include HeiTech Padu Sdn Bhd, Mesiniaga Bhd, and VADS Malaysia Sdn Bhd.,” Ms. Chan added.

The desktop and network management services subsegment is still growing as part of the managed services market. As enterprises continue to focus on their core businesses, they will prefer to outsource their IT infrastructures, including their middle and back-office processes to third-party service providers, which will generate more potential opportunities for both local and multinational managed services providers.

IDC explains, however, that the fragmented nature of the discrete outsourcing services market due to the presence of huge numbers of small and big players will inevitably create certain level of market competition that will drive down service providers' profit margins. "Pricing may differ from country to country or industry to industry. The mixture of local and multinational players in the market will result in more competitive pricing since local service providers will generally be able to offer cheaper prices compared to multinationals," says Ms Chan. “The network and desktop outsourcing services market is a battlefield that is open to both big and small market players. It is a market where established systems integrators and outsourcers only need to adjust their offerings to gain market shares. Small players like local systems integrators, on the other hand, as they are traditionally very strong in terms of winning maintenance contracts from the local community, it would be relatively easy to shift from a maintenance to management mode by leveraging their technical expertise and strong partnerships with technology vendors”, she adds.

Source: IDC, 2005

IDC Malaysia will be featuring this report in a webcast from 20 th September to 4 th October 2005 titled "Malaysia Network and Desktop Outsourcing Service Market Overview", 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 this research, kindly contact Hazmi Yusof at 603-2169-7522 or hyusof@idc.com, or Stephen Chong at 603-2169-7521 or ckchong@idc.com.

Contact

Chee-Kian Chong
Events & Marketing Executive
Tel: +603-2169-7521
Fax: +603-2163-5098
Email:ckchong@idc.com