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Frost & Sullivan: Australian SMB Market Holds Strongest Potential for Hosted Services

  • 26 June, 2008 07:26

<p>APAC Managed and Hosted Services Market To Reach US$10.25 billion by 2010</p>
<p>SYDNEY, 26 June 2008 – The Australia and New Zealand market is the most mature in terms of managed services uptake in APAC excluding Japan. At the same time, many of its large and medium-sized organisations are looking at how they can optimise their IT investments and become more effective in utilising IT with the help of managed and hosted services.</p>
<p>New analysis from Frost &amp; Sullivan (, in its Strategic Analysis of Managed and Hosted Services Market Opportunities in Asia Pacific, finds that the market covering 13 Asia-Pacific countries ex-Japan was worth some US$6.47 billion in 2007, and estimates this to grow at a CAGR (compound annual growth rate) of 16.6 percent (2007-2010) to reach a market size of US$10.25 billion by end-2010.</p>
<p>The most commonly contracted outsourced services are managed and hosted infrastructure/network (WAN, data centre, web hosting), managed/hosted applications (software applications), managed/hosted communications, and managed/hosted security.</p>
<p>The increasing maturity in such services has improved cost visibility and granularity, making managed and hosted offerings a more compelling proposition to both large enterprises and SMBs (small and medium businesses). As the market reaches a new dimension of increased price pressures and decreased service differentiation, further compounded by the relatively weaker credit outlook, the need to demonstrate cost optimisation and adopt a business value-driven sales approach becomes necessary.</p>
<p>Frost &amp; Sullivan industry manager, Jay Tan, says, “While Australia’s large enterprises and government sector have been at the forefront in utilising outsourcing and managed services, the SMB segment is maturing in terms of ICT usage and will represent very attractive targets for telecom operators, especially in hosted services.</p>
<p>“The large enterprise market tend to be dominated by several global/regional system integrators and telecom operators will do well to establish partnerships with these players to get greater access to this segment and focus on discrete pieces such as managed communications and WAN services to distinguish their capabilities. ANZ customers tend to value and are more willing to pay for best-of-breed services. This is also the market that is expected to first see good traction with SaaS and utility computing models.”</p>
<p>Managed and hosted services allow companies to benefit from faster business rollout, computing overflow provisioning, efficiency in IT operations, specialised skill sets, and real-time management of mission-critical ICT infrastructure and services; some of which are either not available or too costly to maintain in-house.</p>
<p>To-date, multi-national companies and large enterprises especially those in developed markets have led in the outsourcing of specific IT services or even management of the entire IT infrastructure, while small and medium companies have been slow to utilise these services on a major scale.</p>
<p>Some of the more mature markets in terms of technology adoption and managed services uptake are Australia, New Zealand, South Korea, Singapore, Hong Kong, and increasingly, India. Elsewhere in the region, managed and hosted services have yet to take off in a big way, although countries such as Malaysia, Indonesia and Thailand offer good growth potential due to government-driven initiatives.</p>
<p>While the concept of outsourcing is not new to most businesses, more than 60 percent of companies in the region are still predominantly managing their IT operations in an insourcing model. This is especially true of companies in developing and more conservative markets such as China, Indonesia and the Philippines.</p>
<p>According to Tan, the innate fear of losing control over IT operations and compromising confidential business information has been the major factor inhibiting wider adoption of managed/hosted services. “This, together with the bad publicity of some outsourcing arrangements and the lack of strong customer references in some markets are some of the issues that managed service providers will need to address to drive uptake,” he says.</p>
<p>As the market matures, growing competition and pricing pressures from a variety of players including system integrators/IT services companies, telecom/network operators and pure-play managed service providers can be expected. Hence, the need to innovate and go beyond the provision of low-cost infrastructure to deliver increased business value will be important differentiators for service providers.</p>
<p>Tan believes that large enterprises would increasingly embrace out-tasking and multi-sourcing more than complete outsourcing, while SMBs would prefer a hosted model.</p>
<p>“Asia-Pac continues to grow both as a global demand and supply centre. In tandem, the emergence of Asian MNCs from India, China and South Korea continues to shape the demand for enhanced connectivity and related services,” says Frost &amp; Sullivan industry manager Jay Tan.</p>
<p>“Driven by this rapid development and the corresponding need for more sophisticated ICT infrastructure, yet growing pressure to do more with limited IT budget, companies are increasingly looking at outsourcing the
non-core functions to support their critical business processes,” he adds.</p>
<p>Other factors driving the adoption of managed/hosted offerings include the growing convergence of IT and regulatory compliance pressures, as well as the emergence of SaaS (Software as a Service) and utility computing.</p>
<p>The Strategic Analysis of Managed and Hosted Services Market Opportunities in Asia Pacific study is part of the Communication Services Growth Partnership Service program, which also includes research in the following markets: WAN services, enterprise mobility, IPTV, user generated content (UGC), social networking, online and mobile content, telecom services, and network transformation case studies. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.</p>
<p>Frost &amp; Sullivan, the Growth Partnership Company, partners with clients to accelerate their growth. The company's TEAM Research, Growth Consulting and Growth Team Membership empower clients to create a growth-focused culture that generates, evaluates and implements effective growth strategies. Frost &amp; Sullivan employs over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 30 offices on six continents. For more information about Frost &amp; Sullivan’s Growth Partnerships, visit</p>

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