Services slump continues in Asia as market clings to ‘faster recovery’ hope

Most providers view Covid-19 crisis as tipping organisations and consumers over to the digital world, labelled as a “a net positive in the long run”

Investment in IT services is forecast to slow further across Asia Pacific during the remainder of 2020, triggered by “worsening economies”.

But despite expected growth of just 1.1 per cent - revised down from 1.9 per cent in March - the region is expected to experience a “faster recovery” in 2021 and beyond, according to IDC findings.

Key markets such as India, Australia and Japan have continued to decline since the Covid-19 outbreak at the start of the year, with China currently bucking the trend through 2.7 per cent projected growth.

“Over the last few months of shutdowns around the world, services providers have largely shifted clients' core IT and business operations to 'work from home' environments relatively overnight without major hiccups,” observed Lisa Nagamine, research manager at IDC. “This further demonstrates how adaptive and resilient vendors and buyers can be in the 'digital age’.”

For IDC, most providers view the Covid-19 crisis as tipping organisations and consumers over to the digital world, labelled as a “a net positive in the long run”.

Credit: IDC

Globally speaking, the IT and business services market is forecast to shrink further during the next six months, declining 2.8 per cent in the process. Growth in 2021 however has improved slightly - rising from one per cent to 1.4 per cent - which reflects IDC's optimism for a market rebound.

The latest forecast is based on the Economist Intelligence Unit's May forecast for worldwide GDP in 2020, which will likely contract by around 4.4 per cent, more than twice as much as March predictions. After almost four months of shutdowns across most developed markets, the economic downturn in the first half of 2020 will be so severe - according to IDC - that even a robust recovery in the next six months will not offset it.

“We will continue to see the services market growth outpace GDP growth, even during a crisis like this,” added Xiao-Fei Zhang, program director at IDC. "The pandemic is clamping down on discretionary spending, and puts the brake on many projects for now, but this will be somewhat cushioned by managed services and support services contracts that support core operations of large enterprises and government agencies.”

Delving deeper, IDC's assessment of the supply side remains “largely intact”. Even as the major delivery countries - such as Philippines and India - were shutting down, service providers adapted quickly to working from home at scale and hatched contingency security plans.

“Buyers also have largely been quick to sign off on these plans,” Zhang said. “The transition has been a predominantly smooth one without major disruptions.”