APAC IT outsourcing services market declines, under increasing pressure

  • Down 3.7% in 2015, continued pressure on traditional providers: IDC
  • Being challenged by pure-play cloud providers such as Amazon and Google
APAC IT outsourcing services market declines, under increasing pressure

THE IT outsourcing (ITO) services market in Asia Pacific (excluding Japan) was worth US$23.1 billion in 2015, a 3.7% decline year-on-year (YoY), according to IDC.
This was driven by the fundamental shift in the outsourcing market to a new consumption and service delivery model, as well as the decline in legacy assets under management in mature markets like Australia, New Zealand, and South Korea, the research and analyst firm said in a statement.
“Owing to ever-changing market dynamics, traditional outsourcing service providers are continuing to struggle around redefining their value proposition in this age of greater automation, standardisation, and adoption of cloud services,” IDC Asia Pacific’s IT Services senior market analyst Sherrel Roche.
“Competition in the region remained stiff, with the market share of the top 10 ITO service providers declining by 1.8 points, suggesting a struggle to sustain growth in the current volatile outsourcing services market spending state,” she added.
According to IDC’s recently published market share research report Asia/ Pacific (Excluding Japan) IT Outsourcing (Managed Services and IS Outsourcing) Services Market Shares, FY15: Continued Pressure on Traditional Outsourcers, IBM, Hewlett-Packard Enterprise (HPE), and Samsung SDS continue to be the top three service providers in the ITO market in 2015.
Accenture and Telstra enjoyed the No 4 and 5 positions, respectively, with both gaining market share over CSC.
Outsourcers such as IBM and HPE with significant product-centric businesses are struggling to compete more effectively due to the decline in their attach services, IDC said.
Additionally, traditional outsourcers are being challenged by pure-play cloud providers such as Amazon and Google and local vendors such as TCS, Samsung SDS, 21Vianet, and so forth.
The pressure on service providers’ revenues is opening the market to consolidation, and the emerging outsourcers that have developed technology or industry-specific expertise are attractive targets for potential acquisitions, IDC said.
Although the ITO market is currently declining, owing to the above-mentioned factors, IDC expects a compound annual growth rate (CAGR) of 6.9% by 2020 on the back of emerging markets such as China, India, and South-East Asian countries, which continue to win outsourcing deals in the current market.
“In the coming years, outsourcing and managed services will pick up pace as enterprises are transitioning from a capex (capital expenditure) to an opex (pperating expenditure) model by reducing investments in infrastructure,” said Roche.
“Additionally, the increasing data centre footprint in the region – due to the growing demand for data localisation arising from regulated industries – will boost the ITO market,” she added.
IDC recommends outsourcers enhance their services portfolio to include cloud-based services, adding that they need to highlight the major cloud-based outsourcing deals they have won to create awareness of their ability to provide cloud-based outsourcing services.
This IDC report also highlights the shifts among the top 10 outsourcers and the strategies that service providers are utilising to either maintain leadership or climb the ranks to become the leader in these markets.
It also includes information on the leading vendors in the managed application services, managed infrastructure services, and IS outsourcing services category, including ranking as well as a description of the market conditions and major changes in the rankings.
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