Asia IT cushioned, but not immune from downturn

As bullishness turns to caution, Asia Pacific organizations are expected to delay IT hardware upgrades and large technology projects and focus on efforts to improve client retention and acquisition, said Gartner on Wednesday.

In a worst case scenario, IT spending in Asia Pacific is forecast to grow 8.3 percent in 2009 to reach US$585.7 billion, compared to Gartner's previous forecast of 11 percent growth.

Worldwide, Gartner indicated that in a worst case scenario, global IT spending will increase 2.3 percent in 2009, down from an earlier projection of 5.8 percent. The hardware sector will be hardest hit, followed by the IT services sector. Software spending growth will remain strong at 8.6 percent.

According to Gartner managing vice president Matthew Boon, the second half of 2008 has and will continue to see shifts in confidence and willingness to invest, with CIOs paying closer attention to investments and requiring higher levels of approval and justification for decisions.

"CIOs in Asia Pacific are being pulled in different directions," said Boon. "On the one hand they are being asked to grow the business to take advantage of market opportunity, and on the other hand to cut costs.

"This will make the IT buyer less easy to predict. They will seek lower pricing and have lower brand loyalty. Technology vendors will need to be seen to support their customers' cost containment strategies while at the same time focusing on value.

"In Australia, we are still seeing some IT executives with their head in the sand, refusing to believe the grimmer reality of the next six months," said Boon. "This is the 'we aren't seeing it' trap that wastes valuable planning time. IT leaders in this region should take full advantage of the available time to quietly and privately develop plans for a worst case scenario in 2009,"

According to data from Global Insights, most Asia Pacific nations are still expected to show reasonably healthy GDP growth rates in 2009 compared to other parts of the world - 8.9 percent in China, 2.3 percent in Australia, 7.8 percent in India and. While growth in many countries in Asia Pacific is forecast to be down on 2007 levels, in contrast, GDP is expected to grow just 0.1 percent in the US and 0.2 percent in the UK in 2009.

The IT industry won't see the dramatic reductions that were seen during the bust, because organizations now view IT as a way to transform their businesses and adopt operating models that are much leaner, Garter noted. IT is embedded in all aspects of the business and is a critical part of multi-year transformation projects that are difficult to cut, it added.

Gartner advised Asia Pacific IT orgs to take note of the following:

-- Invest effectively in markets that deserve investment;

-- Don't be afraid to postpone investment, decide what needs to be spent, not what needs to be cut:

-- Modernize infrastructure with virtualization and cloud computing concepts, delete some applications;

-- Question every project as if it was new;

-- Understand and demonstrate the value of IT in improving business processes, increasing client acquisition and improving client retention;

-- Use vendors with a clear understanding of return on investment in your business:

-- Prepare a contingency budget approximately 20 percent down on current year; and

-- Be willing to change and change quickly - be nimble.

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