IT outsourcing (ITO) services market in the wider Asia Pacific region reached $US23.1 billion in 2015 - a 3.7 percent decline year-on-year (YoY).
Driven by the fundamental shift in the outsourcing market to a new consumption and service delivery model, IDC findings also attribute the drop to the decline in legacy assets under management in mature markets like Australia, New Zealand, and Korea.
Across the region, IBM, Hewlett Packard Enterprise (HPE), and Samsung SDS continue to be the top three service providers in the ITO market in 2015, with Accenture and Telstra taking the top four and five positions, respectively, having both taken market share over CSC.
Outsourcers such as IBM and HPE with significant product-centric businesses are struggling to compete more effectively due to the decline in their attach services.
Additionally, traditional outsourcers are being challenged by pure-play cloud providers such as Amazon and Google and local vendors such as TCS, Samsung SDS, 21Vianet, and so forth.
Consequently, the pressure on service providers' revenues is opening the market to consolidation, and the emerging outsourcers that have developed technology or industry-specific expertise are attractive targets for potential acquisitions.
“Owing to the ever changing market dynamics, traditional outsourcing service providers are continuing to struggle around redefining their value proposition in this age of greater automation, standardisation, and adoption of cloud services,” IDC senior market analyst, Sherrel Roche, said.
“Competition in the region remained stiff with the market share of the top 10 ITO service providers declining by 1.8 points, suggesting a struggle to sustain growth in the current volatile outsourcing services market spending state.”
Although the ITO market is currently declining, owing to the above-mentioned factors, IDC expects a compound annual growth rate (CAGR) of 6.9 percent by 2020 on the back of emerging markets such as China, India, and Southeast Asian countries, which continue to win outsourcing deals in the current market.
“In the coming years outsourcing and managed services will pick up pace as enterprises are transitioning from a capex to opex model by reducing investments in infrastructure,” Roche added.
“Additionally, the increasing datacentre foot print in the region due to the growing demand for data localisation arising from regulated industries will boost the ITO market.”
Going forward, IDC recommends for outsourcers to enhance their services portfolio to include cloud-based services and need to highlight the major cloud-based outsourcing deals that they have won to create awareness of their ability to provide cloud-based outsourcing services.