Asian IT services market to hit $56 billion by 2011

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Asia’s IT services market, led by India, is poised to expand at an average annual pace of 10.5% to reach $55.9 billion by 2011, an industry research firm said on Tuesday.

Demand for IT services in the region, excluding Japan, was estimated to be worth $37.5 billion in 2007, according to the findings of a report by Springboard Research, an IT market research firm.

India’s information-technology services market, forecast to expand at an annual 18.6 % rate, will remain the fastest growing, said the report.

But as a region, Greater China will offer the largest market opportunity in dollar terms at the end of the forecast period, it said.

“The Asia Pacific IT Services market is arguably the global leader in terms of growth, supplemented with a mix of mature and emerging markets,” Phil Hassey, vice president for services research at Springboard, said.

“The markets of interest are not just the top four — China, India, Australia and Korea — but the emerging ones like Indonesia and Vietnam, which will register significant growth,” Hassey added in a statement.

In India, annual economic growth of 9% is spurring domestic IT spending as companies upgrade computer systems to stay competitive and consumers log onto the Internet.

The domestic market has largely been ignored by India’s industry, which has boomed on work from Western firms trying to cut costs by taking advantage of India’s English-speaking, computer-savvy graduates who work for lower salaries.

The Indian market is still “fragmented and a long way from maturity,” Hassey said.

“National coverage of service providers is limited, and typically the engagement cost and contract value pales in comparison on a per capita basis when compared with Australia, Hong Kong or Singapore,” he added.

Companies in the region will be forced to farm out IT services work to external providers, as they struggle to retain in-house talent, said Springboard, with offices in the United States, Australia, Singapore and Japan.

India will stay ahead of China as an offshore IT services delivery hub, especially for English-language requirements, “as skill levels, quality, culture and governance” favor India as an outsourcing destination, said the firm, which also has research centers in India, Pakistan and Morocco