New world order for IT emerging

North America’s share of the IT market is shrinking as China’sshare grows, said Philippe de Marcillac, president of theinternational business unit at research company IDC.

He forecasts that the IT market will more and more resemble thetelecom services market, where North America’s and Europe’s marketshares are decreasing while the emerging countries’ market share isgrowing rapidly.

In 2006, GDP growth in China will reach 9.2 percent and India’s8.1 percent, he said. In contrast, New Zealand’s GDP growth isforecasted to be 2.2 percent, the US will have a GDP growth of 3.2percent and the EU’s GDP will grow only 2.1 percent.

“The growth in the EU is going down, possibly due to lack ofinvestment,” he said. Japan is decreasing slightly by 2.3percent.

Some of the factors that affect growth in the IT market areavailability of talent and the increasing cost of labor, said deMarcillac. China currently has five times as many engineeringgraduates as the US, he said. The emerging countries also have anadvantage in demographics. Twenty-seven percent of the populationin emerging countries are between 15 and 29 – the “MySpacegeneration” as de Marcillac calls it – compared to 18 percent ofthe population in mature countries. Thirty percent of thepopulation in the emerging countries are under 15, while theequivalent number in mature countries is 15 percent.

“China is the fourth largest economy this year,” said deMarcillac. “It is the number one high tech exporter. China hasovertaken Germany as the third largest telco services market, worthUS$72 billion (NZ $115 billion). China is also the sixth largest ITmarket, worth US$35 billion.”

China is also a major manufacturing center, but the U.S. isstill the leader.

Among the challenges that China faces are competition from Indiaand other emerging Asian countries, and demographics, said deMarcillac. He said that inflation is definitely coming in China dueto the one child per family policy, which will result in adeclining working population, but at the same time there are a lotof workers tied up in “useless employments” as an alternative tounemployment.

India is another country with high potential, he said. “India isa very important part of the offshore market.”

The country’s IT revenue in 2005 was just over US$30 billion.The forecast for 2006 is close to US$40 billion, and the forecastfor 2009 is over US$60 billion.

The IT spending in the BRIC-countries – Brazil, Russia, Indiaand China – is expected to rise from US$50 billion in 2004 toUS$115 billion in 2009, said de Marcillac.

“These markets will have the same share as Japan in 2009,” hesaid.

The top economies in 2050 are very likely to be China, followedby the US and India. Far behind come Japan, Brazil, Russia and thenthe EU, according to de Marcillac.

“But it is also possible that India will be number one,” hesaid.

Caveats that could hold the emerging markets back includeinflation, insolvency, inefficiency, insurrection, ineptadministration, corruption and lack of infrastructure, he said.

De Marcillac foresees significant changes in IT as we know ittoday. For example, datacentres will move towards virtualizationand service-oriented architecture. Trends in the software area arenew business models, software for rent and development of opensource. Phone, IP and mobility networks will converge, as willclients.

De Marcillac spoke at the recent IDC Directions conference inAuckland.

IDC is owned by International Data Group Inc., which also ownsIDG News Service.

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