APAC IT services spending falls sharply

Key verticals report deal consolidation.

Analyst group Ovum has reported a 25 percent fall in IT services spending across the Asia Pacific region for the third quarter of 2011, as the global economic contagion spreads to the region.

“These markets are not falling into a recessionary tailspin, but the historical double-digit market growth figures are trending closer to high single digits/low teens, as many markets see the current economic conditions as an opportunity to take a breath,” said Ovum IT services analyst Jens Butler, author of the report Asia-Pacific IT Services Quarterly Briefing, 3Q11.

The report reveals that “megadeals” are not yet back in vogue but that companies are tending to engage with fewer vendors.

About 60 percent of contracts signed in the past three years having a single prime vendor for the majority of services put to market.

“Some industries are consolidating their sourcing contracts more than others – with energy, healthcare and retail following the traditional “bundlers” of manufacturing and the public sector,” Butler said.

He added that 64 percent of contracts signed in the Asia Pacific services market during the third quarter came from the telecommunications sector.

Ovum also noted that many IT vendors are reacting to the fall in services spending by increasing their investment in infrastructure, partnerships and resources, especially in the high-growth markets of China, India and Malaysia.