- This Is the Worst of Times and Also the Best of Times!
BEIJING, Feb. 3 /PRNewswire-Asia/ -- CCID Consulting, China’s leading research, consulting and IT outsourcing service provider, and the first Chinese consulting firm listed in Hong Kong (Hong Kong Stock Exchange: HK08235), recently released its article reviewing the IT service market in 2008 and outlook for 2009.
Review of China’s IT Service Market in 2008
In 2008, China’s IT service market reached the eve of explosive growth. Due to a deteriorating external environment, the market entered temporary dormancy. The trend of accelerated growth has been put on hold for the time being. However, the competition pattern remains relatively stable amidst rapid market expansion. The market is still very dispersed, while breakthrough growth remains in the making. Another sign of this conclusion is that the production per person per hour (PPH) in the overall market is rising steadily, which has benefited not only from the efforts made by all major service providers to improve their abilities, but also from the demand for service product upgrading which is generated from users’ deepening IT applications.
In terms of product structure, IT consulting and investment guarantee services account for a greater percentage of operational services. The growing demand for HaaS and information management outsourcing is a highlight among the outsourcing services.
In 2008, despite the impact of the international financial crisis, China’s system integration service market kept a rising trend. Market size has grown by a certain extent, while market growth notably slowed down in Q3 and Q4. On one hand, the overall growth trend of China’s economy and deepening IT applications are the driving forces for the system integration service market to maintain continuous growth. On the other hand, under the broad environment of the international financial crisis, the financial industry, which is an important market for system integration services in China, does not escape the impact. Amidst string calls for “hibernation”, all industries have become more cautious about investing in information systems. SOA continues to gain a growing position in the system integration industry. More and more SOA cases were implemented in 2008. In the telecom, financial services, manufacturing, education and government sectors, the system integration service market has matured. Among them, the government sector has pocketed the biggest growth in market shares. But, many small- and medium-sized enterprises and other industries are still in a starting stage. The niche market there still needs to be developed.
In 2008, IT training also had mixed fortunes. In the first half of the year, it basically continued a good growth momentum, with a steady increase in the number of students and the overall size of the market. But, entering the second half of 2008, as the job market fell precipitously, a grave job prospect for students more or less affected the market.
As spending on software and hardware shrank, IT support and maintenance services were also on a trend of gradual falls for the whole year.
In 2008, China’s IT outsourcing (ITO) service market suffered a lot from the international financial crisis. The crisis, which originated from the United States but has since spread to Europe and the whole world, has penetrated the real economy field. China’s ITO industry, which has Europe and America as the main outsourcing market and banking and insurance as the main service industries, apparently felt an air of depression in Q3 and Q4. Except for ITO enterprises in cities like Dalian, which have Japan as their main target market, most IT outsourcing vendors felt sluggish business growth. Despite this, China’s ITO market may have still seen a rising trend in 2008 as a whole. There was a certain growth in market size.
In 2008, China’s BPO service market was still on a fast growth track. It was slightly affected by a deteriorating external environment. But, such influence is not all negative. The fundamental driving forces for market growth are intact. Long-term growth can still be expected. The competition pattern remains relatively stable amidst fast market expansion. Advantageous vendors grow fast, with rising market shares, but the market pattern is far from fixed.
Outlook for China’s IT Service Market in 2009
2009 is expected to become the gravest year for China’s macro economy since it entered the 21st century. GDP growth for the whole year may fall to around 8.5%. Against this backdrop, industry users in China will adopt a more cautious and conservative attitude when they formulate their budget for 2009.
Preliminary survey data shows that IT investment will also fall in the manufacturing industries most affected by falling demands and economic environment changes. These industries are represented by automobile, iron & steel, electronics, the logistics industry closely related to the manufacturing industry, and in the construction industry related to the real estate industry.
While China’s financial service industry may suffer limited direct losses from the US financial crisis, interest rate differential will nevertheless drop due to falling demand for financial services. Together with shrinking transactions in the securities market, financial enterprises will see their earning power negatively affected. However, as IT has already become part of their core capabilities, financial enterprises will have an opportunity to change their services, improve their IT abilities and strengthen IT investment when the pressure on their business systems fall. Meanwhile, management will have higher regulatory requirements for the financial service system and the introduction of the IT governance standardization documents for the securities industry in 2008 mean that financial enterprises’ IT building will also shoulder the broader responsibilities of smoothing out corporate governance. No cuts in IT spending are expected to be made in the financial service industry in 2009.
In 2009, the telecom industry will witness a peak of investment. As the full-scale introduction of 3G will bring new pressures on carriers’ systems, they need to make new investment in network management, billing, settlement and front-end operations. The most important aspect is that monopoly in the industry is expected to be truly broken in 2009. Intensified competition will make the top 3 carriers aware not be lax in inputs into all areas.
The government sector is expected to become one of the promising key markets for IT and many other industries. There will be large-scale investment of money into the market in a deficit year. Though most of the investment will be on infrastructure, rural areas and people’s livelihood projects and almost 10 months will be needed for these projects to bring their impact to the IT industry, such projects will nevertheless bring a strong and sustained driving force to the IT market in 2009 Q4. For the same reason, IT investment in the energy, transportation and healthcare industries will also be in a trend of being low in the early stage while high in the later stage of 2009.
As total retail sales of social consumer goods in China continuously maintain a growth of over 20%, the retail and circulation industry will still have the ability to keep fast growth. Despite many difficulties at present, the combination of forces from various parties will make 2009 a starting point for China’s retail and circulation industry. IT investment will also become the route for some medium- and large-sized businesses to improve their abilities.
Looking at the Chinese market in 2009 as a whole, IT users’ overall demand will continue its rising trend. IT services should get more opportunities than software or hardware products.
Specifically speaking, the demand for services upgrading and the support for new system building in some industries will push forward the fast growth of IT consulting and system integration services. Among them, market segments such as SOA, IT governance consulting and application development integration will be more notably pushed forward by users.
Thanks to increased investment in the government sector, IT investment guarantee services will grow faster than the average growth of the system integration market. This will be the case of IT supervision, system test, and acceptance and inspection.
IT training is relatively more difficult. In particular, training for personal and household users will continue to be affected by a sluggish job market. The main reason which hampers individual students from registering for IT training is that even with improved IT abilities it will still be very difficult for them to win favors from enterprises, as enterprises have difficulties in offering more jobs due to their limited business growth. However, the economy is expected to stop its falling trend in the second half of 2009. As entrepreneurs expect higher future growth and start to make new inputs, IT training will rebound then.
Relatively speaking, IT support and maintenance will grow more steadily. Some industry users are expected to prefer to adopt the method of prolonging product use cycle to temporarily lower overall IT investment. As a result, operation maintenance spending may increase.
In 2009, the outsourcing field will grow faster than operational services. The key lies in the expansion of internal markets. Looking into 2009, China’s ITO market will also face grave challenges. There are some key issues which outstanding outsourcing service providers need to consider if they want to stand out. These include: how should outsourcing service providers turn their sight from outside to inside? How should they weather the IT outsourcing winter? How should they get a closer understanding of local users’ demands? How can they strengthen their competitive advantages through more targeted market strategies? Infrastructure management outsourcing from big enterprises is being pushed forward steadily. This trend will not change due to the temporary changes in the economic situation. SMEs will reduce their expenditure and use new technologies to try new service models. The demand for HaaS and SaaS will not explode in 2009. Nevertheless, promotional efforts by various parties will gradually make some users start to purchase such services.
As for the structure of BPO market in 2009, the meaning of call center outsourcing services will continue to expand, while service providers will continuously improve their service abilities and firmly maintain their position in the primary fields of the BPO market. Due to a slow release of customer demand in China’s banking industry, data processing outsourcing will grow relatively slowly. By contrast, information management outsourcing will appear more active.
To sum up, 2009 will be an important turning point for China’s IT service market. Structural upgrading and explosive growth of some businesses will lay the foundation in 2009. This is the worst of times. But, history will prove that it is also the best of times!
About CCID Consulting
CCID Consulting Co., Ltd. (hereinafter known as CCID Consulting), the first Chinese consulting firm listed in the Growth Enterprise Market of the Stock Exchange (GEM) of Hong Kong (stock code: 8235.HK), is directly affiliated with China Center for Information Industry Development (hereinafter known as CCID Group). Headquartered in Beijing, CCID Consulting has so far set up branch offices in Shanghai, Guangzhou, Shenzhen, Wuhan and Chengdu, with over 300 professional consultants after many years of development. The company’s business scope has covered over 200 large and medium-sized cities in China.
Based on major areas of competitiveness: industrial resources, information technology and data channels, CCID Consulting provides customers with public policy establishment, industry competitiveness upgrading, development strategy and planning, marketing strategy and research, HR management, IT programming and management. CCID Consulting’s customers range from industrial users in electronics, telecommunications, energy, finance, automobile, to government departments at all levels and diversified industrial parks. CCID Consulting commits itself to becoming the No. 1 advisor for enterprise management, the No. 1 consultancy for government decisions and the No. 1 brand for informatization consulting.
For more information, please contact:
Cynthia Liu
Coordinating Manager
CCID Consulting Co., Ltd.
Tel: +86-10-8855-9080
Email: liuyan@ccidconsulting.com
