IT Services Market Projected to Hit US$1.04 billion in 2006

13 November, 2006

Kuala Lumpur, November 13, 2006 – The latest Malaysia IT Services forecast in 2006 was revised upward by 2%. In IDC's publication back in May 2006, it anticipated a 13% growth for 2006. Based on the recent updates, the growth for 2006 has revised to 16% to reach US$1.04 billion. The services market is expected to increase at a compound annual growth rate (CAGR) of 15% for the 2006–2010 period.

Based on the latest forecast, the Information Systems (IS) outsourcing services market (known as enterprise wide outsourcing services) was reduced by 3% due to the delayed announcement of IS outsourcing contracts that are still pending customer sign-off, which are only expected to come in by the end of 2006 or early 2007. Besides, the hosted application management (AM) services market forecast was revised upward by 11%. Today, enterprises are more open to embark on hosted AM instead of buying software, paying installation fees, and paying maintenance and consulting fees to external parties. “In first half of 2006, enterprises spent on hosted AM services such as emails, messaging, and front-office and online applications while small and medium-sized enterprises (SMEs) were more willing to invest in enterprise resource planning (ERP), for which hosted AM is a cheaper alternative when automating operation processes, " said Katherine Chan, Senior Analyst, Services Research, IDC Malaysia.

Overall, the Malaysia economy is picking up both in terms of private and public spending. Significant improvements in foreign direct investments (FDIs) also boosted the local economy. According to the Ninth Malaysian Plan (9MP), more opportunities and incentives will be given to local ICT players that can develop creative digital content, provide innovative ecommerce services, value add to IT services, and are experts in bioinformatics research. In short, government’s intention to improve its quality of the public services will spur IT services spending revolving implementing and upgrading IT infrastructure, packaged and customized application.

“Funds allocation for RFID and IP network upgrades projects for the ministries and agencies would open doors for IT service providers that have expertise in this area of technology. Healthcare sector would be one of the engine of growths in the coming years under the 9MP with a total US$3.5 billion allocation for telehealth services, health record and health plan sharing, formation of National Health Informatics Centre, expansion of teleconsultation services, and implementation of hospital information system (HIS) in selected hospitals and clinics to improve health care delivery. In first half of the year, there are already few hospital projects on-going in the country, which spur spending in IT services market. Education is the next sector that is going to grow, however main allocations would be given more to hardware purchase and content development projects for the school and higher educations,” adds Ms. Chan.

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