Singapore managed services market to grow 8%

Singapore managed services market to grow 8%

IDC says expected global slowdown not likely to affect market growth, writes AMIT ROY CHOUDHURY
THE expected global slowdown is not likely to affect the Singapore managed services and outsourcing market which is expected to grow by 8 per cent this year, according to IDC.

Mr Ho: ‘We do not expect any early termination of contracts…’ 
Speaking to BizIT, the research agency’s Adrian Ho noted that this year the enterprise ICT (infocomm technology) outsourcing and managed services market is expected to hit US$1.5 billion, up from US$1.4 billion it achieved last year.

Mr Ho, who’s IDC Asia-Pacific’s research manager for managed services and enterprise networks, added that over a five- year period the market in Singapore is expected to grow at a compound annual rate of 8.2 per cent.

Value added managed services or discrete outsourcing is expected to have a five-year CAGR (compound annual growth rate) of 7 per cent in Singapore.

For the Asia-Pacific, excluding Japan (APEJ) region, the market is expected to exceed US$29.5 billion in 2008, an 11 per cent increase over last year’s figure.

IDC expects value-added managed services to outperform the market in APEJ with a 16 per cent growth, reaching US$9.1 billion in 2008.

Mr Ho noted that in Singapore, as well as the region, the expected global slowdown will not have a terribly adverse effect on the market as most managed services contracts are long term or multi-year deals.

‘As a result, we do not expect any early termination of contracts on a large scale in Singapore, as primarily one of the main driving forces and benefits of managed services is cost savings,’ Mr Ho noted.

He added that if anything, it is likely that the Singapore market would be relatively resilient over the next 24 months even with a slowdown.

‘However, transformational kind of managed services might be looked at more closely as it involves an additional amount of capital investment so pay-back times must be short,’ he added.

The analyst noted that the Singapore market is one of the relatively more mature markets in the region. ‘So Singapore is usually an early adopter of newer technologies and solutions which is always an attraction for any service provider.’

He added that service providers always use Singapore as ‘test beds’ for their newer solutions and technologies.

Moreover, Singapore being a regional hub would be the centre stage for a lot of data centre consolidation and outsourcing action over the next couple of years, he added.

Commenting on the recent mega $1.3 billion outsourcing contract, SOEasy, signed by the government with a consortium led by IT services provider EDS, Mr Ho noted that such large-scale contracts have been around and will always have a place in the industry.

He, however, added a caveat. ‘We have detected a trend towards selective outsourcing or managed services which is smaller in scale and contracts tend to be shorter.’

Explaining, Mr Ho noted that this is because enterprises want ‘best of breed’ partners, better pricing and believe it is best to spread out their risk.

‘This is happening across the region and we have actually seen some large scale outsourcing contracts being broken up,’ he added.

Growth would be higher for business transformation deals in Singapore because of the maturity of the industry here, Mr Ho noted.

He added that managed services solutions that give tangible business value and cost savings will be the fastest growing.

Messaging and collaboration are now integrated into a lot of desktop management and IP transformation projects, to improve communication and customer services, he added.

Moreover, data centre consolidation is also increasingly sought after as Singapore is a regional hub.

‘Application performance or delivery is also becoming important because of data centre consolidation and the rise in the number of branch offices,’ he added.

In the APEJ context, IDC believes that data centre-managed services will continue to feature prominently in the years ahead.

Managing a data centre is one of the biggest ‘pain points’ for today’s IT managers as a result of the escalating cost associated with it, Mr Ho noted.

‘The cost of managing data centres has reached a breaking point but fortunately there are technologies out there from virtualisation to power and cooling that can help,’ Mr Ho noted.

He added that enterprises are looking for service providers that can deliver a holistic approach and solution in an outsourced and hosted model to resolve their data centre issues.

With consolidation and centralisation of data centres, IDC also believes that application performance delivery across the WAN (wide area network) will become another critical factor.

‘Managed WAN optimisation and load balancing are some of the emerging forms of managed services that are being derived out of data centre consolidation activity. In 2008, IDC expects data centre-managed services to grow by 18 per cent in APEJ,’ Mr Ho noted.

Another interesting development emerging is in the realm of offshoring. IDC believes that the uptake of offshoring will increase as enterprises mature, moving beyond basic bread and butter maintenance to project-based initiatives, including application and network management.

‘Organisations are seeking more project-based engagements,’ Jenna Griffin, IDC Asia- Pacific’s senior analyst for global sourcing practice noted.

‘Services like application modernisation and transformation are being delivered and then managed offshore. There is a growing willingness to use global sourcing for more strategic engagements,’ Ms Griffin said.

Source : Business Times - 29 May 2008

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