Asia/Pacific to be Hot in 2004
"We believe that the IT market worldwide and in the Asia/Pacific region will resurrect in 2004," said Piyush Singh, managing director, IDC Asia/Pacific. "Key to our outlook is the positive economic news that has been emerging on several fronts and the fact that investment budgets for 2004 have been set in this relatively optimistic environment. The stock markets around the world, which are a leading indicator for market recovery, have risen to two-year highs. The region's two largest developing economies, China and India, are charging forward on the economic front and driving overall regional IT market recovery
IDC's top 10 predictions for the Asia/Pacific IT market are drawn from IDC's latest research, and a worldwide brainstorming exercise among IDC's 700 analysts, followed by an extensive regional review, to weigh in on where the most intriguing IT opportunities lie, and on the pivotal choices the industry's leaders will face in the coming year.
"Our top 10 predictions for the Asia/Pacific market in 2004 highlight some key structural changes within the IT industry -- a move away from proprietary architectures and an emerging business innovation focus," said Singh. "In a market that is entering a new growth cycle, we believe that the strategies that IT vendors will employ and the choices that they will make in order to capture the imminent growth will be substantially different from the past. In fact, 2004 will be a pivotal year and choices made this year will determine shifts in market shares over the next five years."
IDC's top 10 predictions for the IT Market in the Asia/Pacific region for 2004 are as follows:
The IT market in China will grow by 18% in 2004 to $29.4 billion and will account for 35% of the Asia/Pacific IT market, outside of Japan. Driven by this growth, the IT market in Asia/Pacific will register double digit growth in 2004 and is expected to grow by 11% to $88 billion. More than half of the incremental IT market revenue in the region in 2004, over the previous year, will come from China. Other strong contributions to regional market growth will come from India (19% growth) and South Korea (9% growth). These three countries together will account for 80% of the incremental regional market revenue in 2004, over the prior year.
The coming year will be the first in which virtually all of the leading players, both the hardware and system software, side will see standards-based products as the core of their future business. This is the year in which the major market players will be severely tested in this new context: Can they fully commit their organizations to this model and successfully create differentiation without tall proprietary fences to protect them?
The total capacity of disk storage systems deployed across the region is expected to increase from 190,000 terabytes (TB) in 2003 to 300,000 TBs in 2004, an increase of 54%. This implies many customers will struggle to manage the combined load of existing storage hardware investments, which will translate into increased purchase of storage management software and services. IDC expects the Asia/Pacific storage management software market to grow more than 26% in revenue next year.
Economic hardships in the last several years along with economic liberalization are forcing the small-and-medium business (SMB) segment to streamline operations and, for many, to become globally competitive. Global vendors are stepping forward to introduce solutions dedicated to the unique needs of the SMB segment. Expect a marketing blitz in 2004 as these vendors display their portfolios of product, support and service, and financing options designed to provide the best of technology and service to smaller and less defined budgets.
The lightning-fast expansion of digital media adoption is one of the most important structural changes in the evolving IT industry. And 2004 will be yet another year of consumers driving the market in adopting new media technologies, challenging traditional media and consumer electronics suppliers.
More than anything else, the future growth of the IT marketplace depends on suppliers' ability to better understand how IT can solve high-priority business problems. In 2004 there will be major reorganizations among more IT suppliers reorienting by customer industry segments and businesses. Some suppliers may stumble during this very difficult process with internal turf wars made visible through executive management fallout.
The debate about offshore service delivery is one of the highest profile issues for the IT industry across Asia/Pacific and globally. There is a strong backlash against this phenomenon in the developed markets primarily due to concerns about growing unemployment. We believe that the offshore BPO sector in India and elsewhere will continue to grow very strongly. In fact, 2004 will be a watershed year in this respect. While there is always going to be pressure on governments and the public sector to resist the temptations of going offshore, the fundamental principles of maximizing shareholder value will drive the private sector to lower cost alternatives sooner rather than later.
Long the subject of much hype, IP telephony looks set to finally gain traction in the enterprise market in Asia/Pacific in 2004. With the promise of ubiquitous access, a single PBX system for the entire enterprise, long distance call savings, remote access convenience, feature-rich intelligent IP PBXs solutions are now coming to the fore. Cost savings still present the main attraction to most enterprises -- both in terms of actual voice communications, and efficiencies of access and management. Carriers will also have to keep pace with the development of the IP PBX market and so IDC expects carriers to start pushing IP Centrex solutions. Significant opportunities exist within the small-and-medium sized market, which gives SMBs access to the features, functionality and of course cost savings offered by today's IP PBX solutions, but without the same level of infrastructure investment required.
The mobile revolution continues to unfold on several dimensions. On one hand, mobile access devices are proliferating with notebook shipments and handhelds are growing at a rapid pace be it mobile phones, PDAs or converged devices. At the same time, wireless bandwidth bottlenecks are easing up. Wireless LANs have mushroomed in public places and have gained a foothold in enterprises. Wireless applications continue to multiply beyond email, SMS and remote access. In 2004, these developments will come together to push mobility beyond innovators and early adopters in the enterprise as well as the consumer space. While basic communications will continue to dominate wireless applications, location-based information services, MMS, and specific industry specific applications will also take root in 2004.
In 2004, online advertising will begin to be referred to as a mainstream advertising channel in Asia's leading ad markets. Total online ad revenues in the region (excluding Japan) are expected to grow by over 40% to $637 million in 2004. Search ads growth will continue to build up steam, as will other ad forms previously limited to only offline media, such as classifieds, real estate ads, and job ads. For online advertisers, the reachable online audience continues to expand. The total number of Internet users in the Asia/Pacific region (excluding Japan), will grow by 22% to $205 million in 2004.