Local firms to spend less on IT this year; IT outsourcing may thrive

LOCAL COMPANIES are expected to spend less on information technology (IT) solutions such as computers and office applications this year, as the slowing global economy forces them to tighten their belts.
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Industry players said the Philippines would not do better than their global counterparts, whose IT expenses Forrester Research, Inc. said would likely slide by 3% this year — the first decline since 2002.

"Rough projections showed that the first half will be really challenging," Monchito B. Ibrahim, Commission on Information and Communications Technology commissioner for cyber services, said in an interview last week.

"By the second half, we expect a rebound. But, it’s not sure if this will be able to offset the [losses incurred] in the first six months," he added.

Forrester Research earlier said its forecast of lower spending by companies in the US and other developed countries had assumed that the recession in the US and other developed markets will end by the second half. Mr. Ibrahim said companies selling IT hardware and software expect a slowdown of roughly the same rate projected by Forrester Research.

"I think that’s true for local companies," Philippine Software Industry Association (PSIA) President Christina G. Coronel said in an interview yesterday.

She noted that the worsening economy would force local companies to put off nonessential expenses such as equipment upgrade.

But one bright spot for the country, Mr. Ibrahim said, is the outsourcing of IT-related services such as software design and other backoffice work.

"What’s good for the Philippines is that there is an expected increase in spending for [outsourced] IT services, where we play," he pointed out.

Last year, the PSIA said the $420-million local software outsourcing business could grow into a billion-dollar industry that will employ more than 100,000 workers in the next two years.

Ms. Coronel said revenues of the local IT outsourcing industry had gone up by 42% last year to about $600 million. "We were pleasantly surprised [by the growth]... Last year was really a good year," she said.

She added that while the group was projecting 30% revenue growth this year, local companies have admitted a slight slowdown going into the New Year. Companies have become less aggressive in recruitment at the start of the year, she said.

But what is keeping the industry’s hopes up, she added, is the increase in the number of companies asking about how to outsource their IT tasks to local companies.

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BY Paolo Luis G. Montecillo
Source：BusinessWorld ONLINE

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