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Technology, outsourcing seen to drive growth in ’09

Written by Alma Anonas-Carpio / Correspondent
Monday, 12 January 2009 23:16
INFOTECH think tank XMG sees information technology (IT) and offshoring to serve as catalysts in driving business efficiency and cost savings for the region, although it warned that troubled economic times are in store for the global economy in 2009.

XMG pointed out that IT industry economics “will force alignment with the principle of complexity reduction and economizing IT budgets” and that, “as identified by the survey completed at the end of 2008, good guidance and wise investment tops the list of decision-makers for 2009.”

The research firm noted that the top concerns of Asia-Pacific chief information officers (CIOs) this year include matters that deal with “measuring the efficiency and effectiveness” of and “minimizing the risks of ICT [information and communications technology] CT investments.”

In order of priority, XMG said the top 10 concerns of IT executives this year are measuring the efficiency and effectiveness of IT investments; minimizing the risks; financial planning; establishing a strategic approach to information security; improving decision-making; strengthening IT risk management through technology portfolio management; developing a robust mobile security strategy and policies for an increasingly mobile work force; insituting corporate governance effectively; investing in work force recruitment and retention programs; and strengthening and ensuring service levels are market competitive.

XMG also said companies in the Asia-Pacific region will “outspend other regions,” even as the market is forecast to grow an estimated 6.3 percent, the lowest since the Asian financial crisis of the late 1990s.”

Despite this forecast, XMG projected that the Asia-Pacific region “will outperform well above the global average of 2.4 percent in 2009.” The think tank noted that Japan “continues to have the bulk share of the Asia-Pacific market with a projected growth forecast of 1.4 percent. A distant second and third are China and India.

XMG also identified offshoring as a “rare bright spot in 2009,” even as it said that “very few segments of the ICT industry will hold up well in 2009.”

The research firm said it expects offshore outsourcing to continue to be in play in 2009 with an expected 24.2-percent growth forecast through 2010. The sector is expected to be dominated by India, China, the Philippines, Malaysia and Vietnam.

Captive operations like technical support, back-end processing, collections and customer care, as well as third-party service providers of application management, enterprise application configuration, testing and business-process outsourcing will be driving the offshoring footprint, XMG predicts.

The think tank also predicts the onset of a “workforce revolution.” Driven by the “phenomenal growth of the offshore segments in the region and the high levels of attrition across captives, vendors and non-IT organizations, getting the most from the existing work force and improving talent-management practices are among the top priorities in 2009, it said.

“Well-tuned work force management practices enable employers to attract, deploy, develop and retain the best talent and thereby increase the productivity and satisfaction of employees,” XMG said.

XMG also factored in the “growth of private data center costs, which will “continue to escalate making up an average of 50 percent to 75 percent of the IT budget.

Technologies in harnessing cloud computing, network optimization, server and storage are also seen to drive industry growth this year.

Two thousand nine will also be marked with efforts at “achieving economic resilience through mergers, acquisitions and divestitures,” XMG said. “Unlike the period of the dot-com bust, the current economic downturn reveals several IT companies with the war chest to fund and make acquisitions to dominate select and targeted market segments.”

The think tank said “threat and vulnerability” will take center stage in 2009 as the “above-ground economy deflates and the underground economy inflates.” XMG said it also expects an “increase in economic crimes due to several IT professionals that will be losing their jobs from the financial and insurance industries,” predicting that “cybercrime and the number of malicious software plaguing the Internet will increase at unprecedented levels.”

XMG also warned a downturn in the semiconductor market will lead to job losses across the Asia-Pacific region. The semiconductor industry is expected to continue its decline and may bottom out in the first half of 2009 with an expected 1.9-percent growth forecast. The group noted recovery is expected to be sluggish throughout the second quarter of the year, “with a rebound not expected until 2010.”

With overinvestment and excessive capacity, job losses in this sector of the IT industry are expected to happen in Taiwan, China, the Philippines, Korea and Vietnam.

XMG also sees that the current state of the economy is an opportunity for creators and proponents advocating the use of open source software, the adoption of which, it predicts, will “continue to expand in several Asia-Pacific enterprises and continue to find its way into corporate developer use and become the underlying foundation of commercial software.”

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