The Asia Pacific (AP) growth engine did not fire on all cylinders in 2012, leading Forrester to revise its IT purchases growth forecasts for the year. While Australia, South Korea, and several ASEAN tech markets are showing continued solid growth, in other markets like China, India, Japan, Malaysia, and Vietnam, political leaders are struggling in the face of growing economic problems. My colleague Andy Bartels and I, with the help of Forrester’s AP analyst team, have recently published our revised IT purchase growth forecasts for 2013. Here are our key expectations by country:
2012’s slowdown in China will be short-lived. Despite a slowdown in 2012, China continues to attract intense vendor interest because of its size and potential for further growth. The expected government stimulus efforts in the country will offset factors such as weak demand from businesses and governments. The slowdown in 2012 (+9%) is therefore likely to be short-lived, with stronger growth resuming in 2013 (+10%).
India’s IT growth will remain slower than expected through 2014. 2012 (+7%) was a relatively lackluster year for the tech market in India. Worse than expected economic growth, combined with political gridlock on economic reforms, kept the tech market from reaching its full potential in 2012. While we expect the public sector to drive India’s IT spending growth, the impact will be limited through 2014 due to the parliamentary elections scheduled for that year.
In their Asia Pacific Tech Market Outlook For 2012 report, Andrew Bartels and Frederic Giron show that government and business IT spending in the emerging markets of Asia (including China, India, and the ASEAN countries) will reach US$180 billion in 2012, growing by roughly 13% over 2011. While emerging Asia’s IT spending is surging this year, economic obligations in the developed markets of North America, Europe, and Japan will ensure continued austerity — and limited IT spending growth. In other words, emerging Asia is clearly a lucrative region of opportunities for US, European, Japanese, and South Korean vendors looking for new sources of growth to offset lower business prospects in their home markets.
Asia is a region of highly disparate countries, with regulatory complexity, cultural differences, and a limited pool of skilled resources. These barriers to entry and expansion will compel vendors to look beyond organic growth, which is simply too time-intensive. Instead, mergers and acquisitions (M&A) of local/regional incumbents with local know-how, skills, and client relationships will increasingly be a strategic imperative for vendors targeting emerging Asia. I’ve highlighted some examples from the Indian market below, but I foresee similar trends in the overall ICT sector throughout emerging Asia: