IT services spending predicted to increase

IT services spending predicted to increase

Thai market for project-oriented, managed and support services worth an estimated B92 billion, up 9.2% from last year. By Prapussorn Pechkaew

A woman uses an innovative robot service equipped with artificial intelligence.
A woman uses an innovative robot service equipped with artificial intelligence.

Information technology services spending in Thailand is expected to reach 92.6 billion baht this year, an increase of 9.2% over the 84.8 billion spent in 2017, according to International Data Corporation (IDC).

The largest contributor to IT services spending is project-oriented services (40.5 billion baht), followed by managed services (30.9 billion) and support services (21.2 billion).

The latest update to the Worldwide Semiannual Services Tracker from IDC forecasts a compound annual growth rate (CAGR) of 7.6% for IT services spending over the five-year forecast period from 2018-22. Spending will continue to be driven by the public sector, as government spending is expected to accelerate in the coming years.

Despite this, Thailand's IT services market is expected to experience slower growth over the next few years as the market becomes more mature. In addition, the size of deals is becoming smaller, requiring a shorter time for the completion of IT services projects.

The project-oriented market is being driven by the digital transformation initiatives of Thai enterprises. The number of these initiatives continues to rise among Thai organisations, driven by successful examples set by early adopters.

THE FUTURE OF WORK

According to IDC's annual IT services survey in 2018, 63% of Thai enterprises are planning to use external resources such as technology vendors, system integrators, and cloud/telecom service providers for their initiatives.

In addition, demand for custom application development and IT consulting services is on the rise, as more enterprises have clearer digital strategies and goals. Many need to upgrade their infrastructure, networks and applications so that they can embrace the "Future of Work". IDC defines this as the application of new talent management practices along with third-platform technologies and innovation accelerators, such as mobility to support bring your own device initiatives.

Other commonly expressed needs include a desire to become a data-driven organisation, and deployment of artificial intelligence (AI) to automate decision-making at the operational level.

As more Thai enterprises look to adopt these technologies, demand for IT consultancy services will continue to grow. IDC forecasts project-oriented market spending will record a CAGR of 7.3% to reach 53.7 billion baht in 2022.

Enterprises are also investing more in managed services to reduce their time spent on routine tasks, as the IT environment is becoming more complex.

In addition, moving from a capital expenditure to an operating expenditure model for IT investment is high on the agenda of Thai organisations, which should accelerate growth in the managed services market.

CLOUD STRATEGY

Though IT outsourcing will continue to represent the highest contribution within the managed services market, hosting infrastructure services and endpoint management are the two fastest-growing segments. These include the adoption of hosted private cloud and colocation services by large enterprises that are not comfortable with the public cloud model, and the increasing demand for desktop services.

IDC forecasts managed services market spending to record a CAGR of 8.8% to reach 43.4 billion baht in 2022.

The support services market in Thailand, meanwhile, will be driven by demand for hardware and software upgrades and renewal, in addition to IT training services for employees during the transitional period as their workload is transferred to a new platform.

As Thai organisations become more IT-savvy, the demand for training support will decline in the long term. This is because end users will continue to develop their own expertise and internal teams to manage some aspects of IT support, such as in-house training and workshops.

In the future, IT education and training deals will become smaller as competition intensifies; some of these deals could even become free, value-added offerings to deployment contracts by providers seeking to retain their customer base in the long term. IDC forecasts the support services market spending to record a 6.3% CAGR to 27 billion baht in 2022.


Prapussorn Pechkaew is senior market analyst for IT services with IDC.


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