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IDC: Finance, gov't to dominate Asia's outsourcing sector

Computerworld Hong Kong staff | July 17, 2008
The financial services and government sectors will be the two key verticals to see major outsourcing contracts renewals over the next 12 to 24 months in Asia Pacific, says IDC.

HONG KONG, 16 JULY 2008 - IDC announced Wednesday that the financial services and government sectors will be the two key verticals to see major outsourcing contracts renewals over the next 12 to 24 months in Asia Pacific.

These two verticals accounted for more than 50% of the total contract value (TCV) of publicly announced deals in 2007, and will continue to be important IT services end-users in the future, the analyst company said in a statement.

Examples include the upcoming renewal of IBM's IS outsourcing contract with Westpac Banking Corporation Australia, which will expire at the end of 2010, as well as EDS's IS outsourcing contract with Australia Taxation Office which will also expire in 2010, IDC added.

In addition, one of the key trends is the shift from 'single-vendor' outsourcing to multi-sourcing deals. This trend is mainly seen in the renewal of existing long-term contracts particularly in Australia, as these deals are 'carved up' by organizations looking to diversify the work across multiple IT services providers in order to drive down price, said IDC.

However, it is also filtering into 'new' contracts too, the most recent example being the SOEasy project in Singapore, IDC added. In this deal, the Singapore government took a multi-sourcing approach to a 'new' mega project, which requires several vendors to be involved in different aspects of the outsourced standard operating environment that is being set up for approximately 60,000 workstations and laptop computers at 74 public agencies across Singapore, IDC noted.

"Moving forward, IDC expects this multi-sourcing trend to create more complex contract structures in the outsourcing market, resulting in reduced length and value of deals as well as increased number of contracts per client," said Emily Tee, senior market analyst of IDC's Asia/Pacific IT Services Research. "This will create more opportunities for the services aggregator. We have already seen a number of vendors putting up their hands for this role in order to drive more strategic relationships with clients."

IDC also observed that the number of market participants in the outsourcing space has approximately doubled over the last five years. Vendors that have created more competitive pressure in the outsourcing space include telecom providers like BT and AT&T, as well as pure-play hosting providers like Savvis and Rackspace.

The Indian-based players are also playing an increasingly important role in the Asia Pacific outsourcing market as the contract values won by these vendors have grown in 2007 as compared with 2006, said IDC. Examples of the outsourcing contracts being awarded to the Indian players include a recent application management (AM) contract awarded by one of the Singapore government agencies to Satyam, and the CBA Australia's AM deal won by HCL Technologies in 2007.

 

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