China could soon be second in world IT
The Chinese IT services market will grow 18 per cent this year on 2002, according to research group, Dataquest Gartner.
Gartner estimates China's IT services market will reach $4.9 billion in 2003, which represents growth of 18.1 per cent on 2002's total revenues of $4.2 billion.
Furthermore, China's IT services revenue is projected to reach $8.9 billion in 2006, which will represent growth of 19.6 per cent.
China is expected to be the second fastest growing country for IT services in the world. But it lags behind matured IT services economies, such as the United States,
United Kingdom, Japan and Australia, which makes trading with China difficult, according to Gartner.
Jacqueline Heng, a Senior Forecasting Analyst for Gartner Dataquest, explained: "Many multi-nationals find themselves in the unenviable position of educating both the local users and the local service providers on the value of IT services. However, all is not bleak. It is a long task ahead for certain industries while others, such as the telecom services industry have found pay-off from their investments. The other sector to watch is the financial services market."
The researchers said the preparation for free-market competition amongst China's banks will be the key deliverer of solid IT growth in the financial services market.
"The low level of IT usage in the banks, and the full fledged entry of MNC banks post WTO, the need to shore up credit-card infrastructure before the Beijing Olympics and the growing local insurance markets will be strong drivers," added Kingshuk Hazra, Industry Analyst for Gartner Dataquest IT.
China's product support services include hardware and software maintenance support services, which currently yield about 25.3 per cent of the country's total services revenue. This proportion will reduce to 24.1 per cent by 2006, according to Gartner.
China owes much of its success in IT services growth to its Government's five-year plans to boost IT skills and infrastructure in the country. As a consequence, it is forecast to be the largest product support services country within the Asia/Pacific region by 2006 at $2.3 billion.
This will be further driven by the impact of numerous IT infrastructure efforts by the Government this year, says Gartner.
According to the group, the fastest growing services segment will be 'consultancy' through 2006, whilst 'outsourcing' will remain on the back burner.
Outsourcing's relative infancy in China is largely attributable to 'cultural obstacles', according to Gartner.
However, it will be far from plain sailing for China if it is to take second place in the world services market.
"Many factors can inhibit growth in the industry, such as the country's bank debts, the economic difference between the coastal regions and the rest of the country, the lack of a sizable middle-class segment, and slow de-centralisation of the rural governing system," Mr Heng said.