Competition in the Asia Pacific IT services market over the last two years has got tougher for the major players vying for marketshare, with the market declining by 2.1% year-on-year in 2015, according to the latest report from global analyst firm IDC.
IDC says competition in the IT services space has “stiffened” with the negative growth largely driven by local currency fluctuations against the US dollar and business depreciation in global oil prices.
The major market slump in China - a key trading partner for Australia, Hong Kong, and Taiwan – also impacted the results, IDC says.
IDC says the top 10 service providers are struggling to maintain their market share and service Providers (SPs) such as Fujitsu, Oracle, Cisco, and NCS have gained substantial share over CSC and are “benefiting from the fragmentation of IT outsourcing under the impact of cloud services”.
{loadposition peter}Sherrel Roche, Business and IT Services Senior Market Analyst, IDC Asia Pacific, says the top 10 IT service providers in the region are “continuing to experience a decline in margins and are increasingly facing threats from service providers such as Wipro, Digital China, and Huawei, which are steadily climbing up the market ranking”.
Roche also notes that enterprises in the region are gradually investing in 3rd Platform-related services, like Cloud, Mobility, Big Data and Analytics, and Social Business, to enhance customer experience and achieve strategic business objectives.
And, Roche says this changing end user landscape is compelling SPs to continuously invest in service delivery transformation and management including business consulting, automation, modernisation, and enhanced self-service capabilities.
According to IDC, its APEJ 2016 services end user survey results indicated that enterprises in the region planned to invest 17.2% of their overall services spend on 3rd Platform-related services in 2017, up by 1.9% in comparison to 2015.
“As enterprises in the region increasingly focus on efficiency of service delivery and invest in automation, SPs will need to rethink their role in service delivery,” Roche says.
IDC recommends that SPs aiming to provide end-to-end service delivery capabilities have to decide “what their capability limits are”.
“SPs need to either have their own highly developed automated service delivery capability or have a strong partner that can provide the service delivery platform to them. Alternatively, SPs can also strengthen their capabilities either organically or through acquisition and successful integration, IDC says.
“For example, IBM has shifted its focus on cloud, analytics, cognitive, mobile, and other 3rd Platform solutions which is reflected through its acquisitions in relation to digital marketing, Software-as-a-Service (SaaS) verticals, and business intelligence verticals,” the analyst firm concludes.