Asia-Pacific IT spend to exceed $700 billion: Gartner

Economic downturn isn't affecting investment in IT, firm says

IT spending in the Asia-Pacific region is expected to reach almost US$523 billion (NZ$737 billion) this year, according to research firm Gartner.

The firm also estimates that IT spending in the region will grow at a CAGR (compound annual growth rate) of 9.3% from 2007 to 2012, compared with 4.5% for the US and Western Europe.

Despite current economic concerns, worldwide IT spending will exceed US$3.4 trillion in 2008, an increase of 8% from 2007, according to Gartner. Analysts say much of this growth is based on the decline in the US dollar. The estimated worldwide IT spending growth expressed in constant currency is forecast to be approximately 4.5%.

"The US-led economic downturn shows no sign of causing a recession in IT spending," says Jim Tully, vice president and distinguished analyst at Gartner. "In subsequent years we will see reduced growth, but the fundamentals remain strong. Emerging regions, replacement of obsolete systems and some technology shifts are driving growth."

Besides the US, the situation in China becomes a key macroeconomic indicator for the world economy, he adds. Indicators of a "hard landing" in China would cause our outlook on IT to deteriorate, because those conditions would precede a more serious global economic slowdown, Tully notes.

Gartner analysts also say there are important strategic issues facing the IT industry.

"Enterprises are switching from company-owned hardware and software assets to per-use service-based models. This will impact the industry in various ways," Tully says. "The projected shift to cloud computing, for example, will result in dramatic growth in IT products in some areas and in significant reductions in other areas. He added that assets in general will be utilised with greater efficiency, and the overall effect on market growth will be neutral.

Worldwide software spending is on pace for the strongest growth rate in 2008 at more than 10%, with IT services spending being a close second with more than 9.4% growth, Gartner predicts. Analysts say the IT services sector benefits from the continued innovation in software technology.

"Most companies updated their software systems during the period 1997 through 2001, so we are in the middle of an upgrade cycle that should extend past the end of this decade," says Joanne Correia, managing vice president at Gartner. "However, the replacement of systems doesn't automatically equate to new software market growth," she says.

Software as a Service (SaaS)/cloud computing, SOA/Web 2.0, and open source software are causing huge changes to the software market, says Correia, who adds that many of these factors are impacting market growth as enterprises replace assets with per-use services.

IT spending is dominated by services rather than products, with IT services and telecommunications services accounting for 70% of total IT market spending, according to Gartner. Analysts at the company say the telecomms sector has a major effect on overall IT market performance, accounting for almost US$2 trillion in 2008.

"Legacy telecom services have a dampening effect on sector growth, and therefore on the overall IT market," says William Hahn, principal research analyst at Gartner. "The dominant size of the telecom services market guarantees that even with the forecast for relatively slow growth, it will still comprise over 44% of the IT market in five years' time."

The outlook for IT services market growth has improved despite macroeconomic uncertainty. Kathryn Hale, research vice president at Gartner, says IT services spend is being supported by two main factors. "Businesses are investing in improvements to internal processes aimed at reducing costs, while often maintaining some of the prior interest in innovation," says Hale. "The second factor is that globalisation allows IT services providers to mitigate the risk of weakening demand by operating in more markets."

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Tags managementGartnerIT spendingAsia-Pacific

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