Double Digit Growth Expected in the IT Services Market

05 May, 2005

Kuala Lumpur, May 05, 2005 – The IT market remains harshly competitive despite the promising trends and drivers. Vendors surviving the price war have to continue the battle with the reduced life cycle of new technologies. Enterprises are increasingly emphasizing cost-efficient, core competencies; shedding capabilities that are not core, technical capabilities; expanding globally; capturing performance metrics; and acquiring services in lower cost and higher accountability from the service providers. Because of market stagnation, IT service providers are hard-pressed to shift from the traditional systems integration (SI) model that earns income on a man-month basis to a service model that is able to demand value-based compensation and widen their profit margins in a dynamic IT environment.

"In the SI market, demand for enterprise application, either packaged or customized, will continue to drive a double-digit growth rate in the market at a CAGR of 11.6%. As service providers pursue new technologies and delivery models, there will be opportunities for this market to grow like implementation of RFID application, virtualization application, and others. Network consulting and integration continue to spur growth in the market, especially when the concept of ubiquitous computing is embedded in the user community", said Katherine Chan, Analyst, Services Research, IDC Malaysia.

Based on IDC's latest services research, Malaysia's IT services market reached US$801.81million, a year-on-year growth of 29% in 2004 compared with 2003. In 2004, the consulting and SI market has the highest share of the services pie at 42%, followed by support and training at 33% and outsourcing at 25%. Boosted by strong outsourcing requirements, the IT services market is forecast to show a 16.3% CAGR for 2004–2009.

In the long term, the number of blanket outsourcing projects will increase. At the same time, companies are likely to increase the use of outsourcing for IT investment rationalization such as system sharing, the use of application service providers (ASPs), outsourcing of systems infrastructure operations management, and so forth.

In the deployment and support segment, hardware and software maintenance will grow at a decreasing rate, seeing higher competitiveness from the value-added service providers in the market to provide a more dynamic service offering to take over the maintenance responsibilities using a managed service model, rather than the traditional annual maintenance service model.

According to IDC, service providers should bridge the gap between IT and business in the coming years to expand good relationship with their customers. Service providers have to develop a strategic road map and execution plan on implementing IT solutions that can help their clients achieve operational efficiency and good responsiveness to market.

IDC's recent research entitled "Malaysia IT Services 2005-2009 Forecast and Analysis: 2004 Year-End Review", presents an in-depth market overview of the 2004 actual performance of Malaysia's IT services market by IDC definitions, supported by market sizing and forecast analysis, vendors' ranking analysis, and top 20 contracts awarded in the IT services market in 2004.

IDC Malaysia will be featuring this report in a webcast from 18 th May to 1 st June 2005 titled "Malaysia IT Services 2005-2009 Forecast and Analysis", available at no cost to you. Simply visit our website http://www.idc.com.my/ and click on the webcast icon.

For more information about the research or purchasing the data, please contact Anna Vida Padua at +632-889-7066 or vpadua@idc.com

Contact

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