November 19, 2013
A weak global economic recovery and unstable domestic spending slowed economic and tech industry growth in China in 2013, affecting export-oriented economies in Asia Pacific. Combined with ongoing structural problems in India and dwindling foreign direct investment in ASEAN, IT spending growth slowed across the region in 2013. Japan was the only exception; IT spending growth there was faster than expected. Forrester expects overall IT spending growth in Asia Pacific to remain at 4% in 2014. In particular:
- Japan’s IT purchasing growth will slow as stimulus effects fade. Government reforms and stimulus packages have had a positive effect on the macroeconomic environment. But those will wane in 2014; we expect Japan’s IT spending growth to slow to around 2% next year, propped up by large application modernization projects in banking, professional services, and retail.
- Chinese growth will mostly benefit local vendors. Forrester estimates that China’s IT purchases will grow by 8% in 2014. Local vendors have recently strengthened their capabilities, primarily in the hardware space, while multinational vendors face challenges meeting Chinese government security requirements. As a result, we expect most of China’s 2014 growth to benefit local vendors; foreign vendors face dwindling market shares.
- Australia/New Zealand’s shift to systems of engagement will continue its fast pace. Slowing economic growth in 2013 led to an acceleration of the move from capex to opex IT models in ANZ, driven by the need for improved agility in systems of engagement projects. The transformation of systems of record leveraging virtualization and automation approaches has started to erode a lot of the value of the overall IT market. So while the overall ANZ economy should improve, we don’t expect IT spending growth to exceed 3% in 2014.
- India’s IT spending growth will recover somewhat post-election. Currency issues and a lack of reforms have slowed Indian IT spending growth in 2013. And most government agencies have adopted a wait-and-see attitude pending the general elections in mid-2014, delaying a number of IT investments. We expect the economic climate to improve in 2014 and public sector spending to accelerate in the second half. Overall, the IT market in India should grow by about 8% next year.
- ASEAN market growth will continue to underperform. The threat of tighter US monetary policy affected many currencies in 2013, making some enterprises’ IT purchases significantly more costly. While the situation has improved in the second part of 2013, we expect 2014 to remain challenging from a currency perspective. ASEAN IT spending growth should stay around 7% (below 2011-2012 levels), led by growth in Vietnam, the Philippines, and Indonesia.
Dane Anderson and I will be sharing more details on Forrester’s Asia Pacific 2014 predictions during a complimentary webinar on November 26. We’d love to have you be part of the discussion; please register to join us and share your perspectives.