Asia Pacific IT spending growth to drop to 1.2% in 2020 because of coronavirus, says IDC
Joseph Tsai, DIGITIMES, Taipei

The coronavirus pandemic continues to hamper economic activities around the globe impacting businesses and industries at nearly every level, and IT markets will not be spared.

In January 2020, IDC originally forecast that IT spending in Asia Pacific excluding Japan and China (APEJC) would grow by over 5.2% (in constant currency) this year due to the expected boost in hardware, software, and services spending on infrastructure as enterprises implement digital transformation projects.

However, early indicators from the first quarter reveals APEJC ICT spending in 2020 will significantly drop to 1.2% growth (pessimistic scenario) or worse based on forecast adjustments from the coronavirus impact across the region, according to IDC.

Globally the IT spending is expected to grow at a rate of 1.3% compared to the earlier prediction of 5.1%, with China impacted the most while APEJC is expected to decline by 2%. Due to the extended uncertainty period and rising cases of coronavirus infection, these growth forecasts are predicted to further decline.

"Some of the biggest impact we have seen as a result of the coronavirus outbreak are changing demand on technologies, processes, and mindset as they relate to work-from-home (WFH) mandates and supply chain disruptions," said Sandra Ng, group vice president, Practice Group at IDC Asia Pacific.

Ng added, "Not all organizations have the culture or the experience in enabling a WFH workforce. Even for organizations in the tech industry, the increased capacity load on network, cloud and other technologies is unprecedented. Based on the latest data of our Future of Work Employee Survey 2020, in countries like Singapore, India, Hong Kong and Australia/New Zealand where considerable organizations provide WFH, we have already seen an uptake of video meetings, audio conference calls, and collaboration platforms as a result of rethinking work."

For supply chain disruptions, which started in China and have rippled around the globe, the challenges of logistics are keenly felt as countries employ border controls and restrict movement of people. This impacts SMBs the most, which in turn will have impact on all organizations as non-delivery of a single crew can mean even the largest product cannot be assembled and shipped," said Christopher Holmes, managing director at IDC Insights Asia/Pacific.

Devices (which includes personal computing, mobile phones and peripherals) make around 80% of the overall hardware spend and drives the overall IT spending in the region. Sales of devices will be significantly impacted under a pessimistic forecast, creating both a supply-side production crunch as well as increasing demand-side challenges as the virus spreads to other countries. IDC's February pessimistic scenario assessment shows that devices will be impacted the most, registering a decline of 3% versus its original forecast of 3% growth in 2020.

Software spending would see a slowdown due to business impact in transportation, manufacturing, retail, personal and consumer services, and banking (lending), which consequently is delaying the discretionary spend on software licenses. IDC estimates that the impact would be seen across all software markets like application development and deployment, applications, and system infrastructure software with the exception of digital workplace, cloud platform and automation technologies which can aid in the current situation.

Compared to hardware, the coronavirus pandemic has a constrained negative impact on the IT services market. IT services spending which was estimated to grow by 5.6% will now register a growth of 4.6% instead in 2020. This dip is observed due to the renegotiation of contracts, especially those due for extension or renewal this year.

The overall Asia Pacific excluding Japan services market is likely to experience a hit in the first eight to nine months and rebound in the remaining of the year (should the virus be contained by the early third quarter in the region).

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