IDC: IT vendors must capitalize on innovation

Moving forward, information technology and telecommunication vendors must build bridges to the future. Companies can do this in three ways: firstly, by linking their strategy to their market position. They should do this by determining their position in the market, work out strategies that fit their market position, and being watchful of impending changes.

Secondly, businesses should capitalize on disruptive innovation. The trick lies in treating disruptive innovations as both threats as well as opportunities and putting adequate resources and the right organizational structure behind these initiatives. Above all, set the right expectations.

Thirdly, organizations should re-think their global execution strategy and organize to reduce their cost structure to take advantage of outsourcing opportunities and skills availability in low cost locations. Inevitably, the market will drive towards efficiency and will eliminate inefficient players.

These are the three recommendations for technology vendors put forth by Piyush Singh, managing director of research firm, International Data Corporation (IDC).

This is because technological change and uptake as well as globalization and competition for leadership will be the mega drivers for growth. For this reason, the IT and telecommunication markets are hotbeds for disruptive innovation. In fact, several of these are on the way, from wireline to wireless networks, from PCs to handhelds and from big switches to voice over Internet (VOIP) protocol.

Singh was speaking on the topic “IT & Communications: The New Landscape” at IDC’s Directions 2003, held at the Suntec Convention Centre last week.

These waves of disruptive innovations will give rise to opportunities for Asia Pacific companies. Some of these will be in the areas of research and development, high tech manufacturing, business process outsourcing, distribution and logistics, mobility and connectivity and high growth IT and telecommunication market segments.

In any case, IDC expects IT spending in the Asia Pacific to pick up in 2004 with projected 11.7 percent growth to US$86 billion ($153.1 billion).

IDC data compiled recently for the full year 2002 indicates that the Asia Pacific (excluding Japan) IT market grew by 2.6 percent in 2002 over the prior year and was worth $72 billion ($128 billion).

For the time being, however, the research firm has said it expects market growth to remain modest in 2003, with the market forecasted to grow by 7.6 percent this year to $77 billion.

IT market growth could be even lower once the full economic impact of the SARS (severe acute respiratory syndrome) virus outbreak is taken into account in affected countries in the region, said IDC.

“On one hand, businesses are relieved with the reduction in uncertainty over Iraq but on the other hand the SARS outbreak in the region has eroded hopes of rapid economic revival,” Singh said.

“Though the IT market growth in 2002 in the Asia Pacific region outside of Japan was only around 3 percent in revenue terms, this was largely due to price erosion because of competitive pressure and the slowdown in IT spending in China and India.”

It must be remembered that overall utilization of IT has been growing rapidly in the region. Also, we expect the IT markets in China and India to start picking up this year and will drive market revival in the region in 2004, he added.

In an earlier press release, IDC noted that spending on IT in Singapore fell 7.8 percent in 2002 compared with 2001. Total IT spending in Singapore was $3.05 billion in 2002, down from $3.31 billion in 2001.

Slow growth over the next two years means that spending will not return to the 2001 level until 2004 at the earliest, according to IDC.

The past few months has seen a worsening of the outlook for business investment which has dragged the IT sector down.

“The various economic sectors are certainly linked to each other, hence an impact on the retail, travel, tourism, entertainment and events businesses due to SARS will have an impact on the economy and consequently on the IT market,” said Singh.