20 Jun 2016

SINGAPORE, June 21^st, 2016 – IDC's recently published market share research titled "Asia/Pacific (Excluding Japan) IT Outsourcing (Managed Services and IS Outsourcing) Services Market Shares, FY15: Continued Pressure on Traditional Outsourcers" , states that the IT outsourcing (ITO) services market in the region reached US 23.1 billion in 2015 - a 3.7% decline year-on-year (YoY). This is driven by the fundamental shift in the outsourcing market to a new consumption and service delivery model as well as the decline in legacy assets under management in mature markets like Australia, New Zealand, and Korea.

"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, standardization, and adoption of cloud services," states Sherrel Roche, IT Services Senior Market Analyst, IDC Asia Pacific. “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.”

IBM, Hewlett Packard Enterprise (HPE), and Samsung SDS continue to be the top 3 service providers in the ITO market in 2015. Accenture and Telstra enjoyed the top 4 and 5 positions, respectively, with both gaining 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. 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.

Although the ITO market is currently declining, owing to the above-mentioned factors, IDC expects a compound annual growth rate (CAGR) of 6.9% 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. Sherrel further states that “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. Additionally, the increasing data center foot print in the region due to the growing demand for data localization arising from regulated industries will boost the ITO market”.

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.

This IDC report also highlights the shifts among the top 10 outsourcers and the strategies that service providers are utilizing to either maintain leadership or climb the ranks to become the leader in these markets. This document also includes information on the leading vendors in the managed application services, managed infrastructure services, and IS outsourcing services category including ranking as well as a description of the market conditions and major changes in the rankings. Also, the authors provide guidance to service providers based on the market trends and opportunities.