Malaysia IT Services Market – 2006 Top Picks from IDC
23 January, 2006
Kuala Lumpur, January 23, 2006 – In 2006, IDC predicts that the country's information technology (IT) services market will maintain to grow at 15% year-on-year from 2005 to 2006. Drawing from IDC's local and worldwide supply and demand-side research, the latest services research weighs the key trends to look out for in Malaysia's IT services market in 2006. IDC expects IT services spending growth in verticals such as education, health, and government over the next couple of years under the Ninth Malaysia Plan (9MP). In the private sector, banks, insurance companies, manufacturers, telecommunications players, and even wholesalers and retailers show great potential to contribute more to IT spending, driven by the need to comply with regulations and policies, such as Basel II, the Sarbanes-Oxley Act, and the latest provision for government service tax (GST).
Below summarizes the IDC's hot picks for Malaysia IT Services market in 2006:
Malaysia IT Services Market Hitting US$1.04 billion
The IT services market is fueled by outsourcing services (OS) and consulting and systems integration services (C&SI). Despite its overall lowest contribution to IT services spending in 2006 compared with other more mature services markets, the outsourcing market continues to have the best opportunities for growth in the Malaysia IT services industry especially in desktop outsourcing projects imminent in the manufacturing, financial services and insurance, utilities and government vertical.
Enterprisewide Outsourcing Services Overtakes Hardware Maintenance Services Market
In 2006, IDC expects the enterprisewide outsourcing services market to grow at a year-on-year growth of 26% compared to 2005 because of new contracts that would be signed in 2006, either in the banking or telecommunication sector. By 2006, the enterprisewide outsourcing market will be large enough to overtake the hardware maintenance market by 12% to reach US$198 million, with the assumption that enterprises are ready to transfer its day-to-day IS and operation management to external ITSPs than signing an annual maintenance program with the vendors.
Strong Uptake in Storage and Data Management Services Market
IDC expects the Malaysia storage and data management services market to grow at year-on-year of 16% from US$62 million in 2005 to reach US$72 million in 2006. This is largely due to the increased demand for storage-related consulting and consolidation services. These services are required to help organizations align their IT infrastructure with their business, based on the changing value of information over time. According to IDC, there are 3 key drivers for storage and data management services market:
- Security of data and systems
- Need to handle increasing amounts of data
- Regulatory compliance
Life Will Never Be the Same Again for Information Technology Service Providers (ITSPs)
According to IDC, while IT and telecommunications serve different functions historically, and are provided by different vendors and service providers, there will soon be a blurring of lines between telecommunications and IT delivery models and information technology service providers (ITSPs) will offer more telecommunication services while Telecommunication Services Providers (TSPs) will become more like ITSPs. Moving forward, IDC believes that the converging situation within the enterprise in terms of its IT infrastructure reliance on the network and WAN connectivity would see competition and coopetition between ITSPs and TSPs.
RFID Roll Out in Malaysia
Among the emerging technologies, RFID has been one of the most highly discussed "option" among organizations, with the aim to improve inventory accuracy, replenishment cycle time, demands planning, production planning and reduce labor time for material handling. Seeing the RFID adoption among organizations specifically from education, government, manufacturing, services and healthcare industries in 2004 and 2005, IDC believes that it would create huge business impact for companies to re-look at their day-to-day operation, to automate its processes, and to reinstate efficiency level, that will open doors to a new round of IT upgrades with interesting opportunities for revenue growth in a number of vertical industries.
Migration of Enterprisewide Outsourcing to Selective Outsourcing
The desire to offload complexity and tie vendors and consultants to the results of their efforts will continue to spur outsourcing growth, though no longer via mega deals like enterprisewide outsourcing, but through smaller, shorter, best-of-breed deals like selective outsourcing of network management, desktop management, application management, server or storage management services. Among all the selective outsourcing services, IDC forecasts that network and desktop outsourcing services has the fastest year-on-year growth of 28% from USD 55 million in 2005 to USD 70 million in 2006.
Strong Opportunities for Offshore Services Delivery
Offshore is now an integral part of worldwide sourcing strategies of global and multinational services player. In the past two years, as the demand for offshore outsourcing increases, many countries in the Asia/Pacific regions have been strong contenders as viable offshore locations for large companies around the globe. IDC has seen more multinational companies (MNCs) choosing Malaysia as their regional IT/Business Processing Outsourcing (BPO) hub, more known as shared services center. As the offshore businesses opportunities arises, we see Malaysia vendors stand a great chance in delivering offshore services for customers in overseas such as implementation and/or management of packaged, in which delivery of services is fulfilled in Malaysia. In 2006, IDC predicts that this offshore services delivery model will bring good revenue to the services market, as well as to the economy.
Contact
For more
information, contact:
Chee-Kian Chong
Events & Marketing Executive
Tel: +603-2169-7521
Fax: +603-2163-5098
Email:ckchong@idc.com
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