APAC: Not Completely Immune to Economic Slowdown

by CXOtoday Staff    Oct 29, 2008

With ripples of the economic meltdown spreading across the world, Gartner says APAC markets will not suffer as much as their Western counterparts. In a worst case scenario, IT spending in APAC is forecasted to grow 8.3%in 2009 to reach $ 585.7 billion, compared to Gartner’s previous forecast of 11% growth.

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

According to Matthew Boon, managing vice president of Gartner, 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.

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 - 2.3 % in Australia, 7.8 %in India and 8.9 % in China. 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 % in the U.S. and 0.2 %in the U.K. in 2009.

But, the research firm makes it a point to say that the IT industry will not see the dramatic reductions that were seen during the dot.com burst. This is because organisations now view IT as a way to transform their businesses and adopt operating models that are much leaner. IT is embedded in all aspects of the business and is a critical part of multi-year transformation projects that are difficult to cut.

The market research firm recommends the following steps APAC organizations should follow in order to protect themselves.

* 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% down on current year

* Be willing to change and change quickly - be nimble

Related links:
Boosting Asia’s IT Growth with Standardization