Asia's public sector is bulking up on IT.
According to a Springboard Research report, public sector IT spending in the Asia-Pacific region, including Japan, topped US$51.5 billion in 2007, and is forecast to grow at a compound annual growth rate of 6.9 percent from 2006 through 2010.
Japan, while growing slower than the rest of Asia, "is still by far the largest market in the region". It accounts for 45 percent of the regional public sector IT spending pie.
The next two largest markets are China and Australia, making up 20 percent and 11 percent of the market, respectively. India, however, is the fastest-growing market, projected to grow at a compound annual growth rate of 19.5 percent through 2010.
According to Jonathan Silber, research manager for Springboard Research, federal IT spending accounts for 70 percent of all expenditures, but spending is also increasing at the next level which comprises state, regional, provincial and local governments.
"This segment of the market is growing at close to 10 percent a year across the region, and state-level spending is growing twice as fast as federal spending in more mature markets like Japan, Australia, Korea, New Zealand and Taiwan," Silber noted.
Although this spells opportunity, he pointed out that vendors would have more ground to cover. "It also represents more real estate that vendors need to cover as there are a lot more organizations at this level. Also, local government spending has tended to grow slower than state and regional spending," the analyst said.
However, Silber added that India, Indonesia and the Philippines "have seen strong local spending growth that is as fast as, or faster than, federal and state spending".
Of the key sub-verticals within the public sector, which include education, defense/security and utilities, healthcare IT investments are growing at the highest rate.
"We are seeing strong growth in technology spending in healthcare across the board," Silber said. "In most countries, it is the fastest growing sub-vertical as countries invest heavily in infrastructure and to support aging populations in places like Australia, Japan and Korea."
Jingwei Liu, a market analyst for Springboard Research, said public sector IT spending will focus on hardware, although software investments will grow at a higher rate.
"This specifically will be enterprise applications and industry-specific solutions, which will grow at about 11 percent across the region. Countries like China and India, will see close to 20 percent growth in these areas," Liu said.
Healthcare IT spending in the emerging markets of Asia is still heavily focused on hardware as these economies build their basic IT infrastructure.
According to Silber, 61 percent of the 2007 spending was on hardware, and this is expected to continue, dropping slowly to 57 percent in 2010 as spending starts to move into software and IT services.
