CIOs ‘must look to emerging markets’

15 May 2008

IT spending in developing countries will grow at a compound annual growth rate (CAGR) of 9.9pc to reach US$1.3tr by 2011, while in the mature markets it will grow at a CAGR of 4.6pc to reach US$2.5tr by this time, analyst firm Gartner has predicted.

In certain segments, such as the telecom equipment market, emerging markets will overtake developed markets, the company said. By 2011, IT spending in telecom equipment will reach US$263.5bn in emerging countries, while in mature markets it will account for US$236.5bn, Gartner forecast.

Although there is still a huge gap in the absolute sizes of emerging and mature ICT markets, emerging regions are rapidly catching up with mature markets in IT investments, leading Gartner to suggest that a ‘borderless state’ will prevail within the ICT industry by 2015.

In this dispensation, organisations, including governments, will increasingly source their ICT from around the globe without regard to the ‘country of origin’ or ‘headquarters’ of the vendor supplying the solution, be it software, hardware, telecommunications, IT services or people.

“Rapid IT growth in emerging nations is removing borders in business that will impact everyone. Even if you have no direct operations in China or India or anywhere else in the emerging world, your suppliers are probably there and so are some of your partners and customers,” said Partha Iyengar, vice-president and distinguished analyst at Gartner.

“Organisations must learn to trade and compete with these rapidly transforming, highly organised companies, which leverage low-cost, highly skilled labour sources. If they do not, they will be at a significant competitive disadvantage.”

This new dispensation is most visible in the IT services sector where Indian ‘mega vendors’ such as TCS, Infosys and Wipro are increasingly considered for strategically important deals involving multiple services when competing against today’s traditional global leaders.

The main Indian IT services providers have been growing at a faster rate than the traditional global leaders in this field.

“Vendors must consider other emerging markets as a source of future competition and opportunity,” said Ian Marriott, research vice-president, Gartner.

“High-quality vendors will not only be coming from China and India in the future. Regions such as eastern Europe, Latin America and relatively untapped portions of Asia/Pacific are now viable locations for offshore services.

“CIOs must understand the future growth plan of their organisation into many other parts of the world. Possibility to access services in these countries, such as Argentina, Vietnam and Romania, will provide opportunities but there will be challenges in developing the governance required to effectively manage this new breed of vendors.”

By Niall Byrne