In a climate where cost pressures are ever apparent with the emergence of hyper-competitive markets, International Data Corporation (IDC) Indonesia anticipates that the dawn of the IT outsourcing era will essentially grip enterprises intensively in the next five years.

With large industry sectors such as media and communications, banking, financial and insurance, as well as manufacturing expected to spend close to US$7 billion collectively on IT in 2014, the need to reduce the total cost of IT infrastructure, and aligning/adapting IT to the changing business landscape to essentially achieve Line of Business (LOB) goals is paramount.

At present, IDC Indonesia predicts that business led outcomes will indeed drive the majority of IT projects in 2014, as rising competition, cost of business and the need for better market intelligence emerges as a way for enterprises to gain a leg ahead of the competition. In adequately analyzing enterprise goals in utilizing IT this year, it was noted that many of these organizations were still utilizing their IT budgets for the '€œwrong'€ reasons. A lot of money is still significantly spent on '€œkeeping the lights on'€, essentially meaning that these organizations are parking away large swathes of cash just to pay for maintenance, purchasing hardware where necessary and plugging holes where it emerges. Transformative ICT spending is still not fully on the cards but this is anticipated to change.

Enter the notion of IT Outsourcing '€” an element introduced as a manner for enterprises to manage their IT better. In the past, Indonesian enterprises have been extremely sensitive to this notion '€” and entertaining the thought of parking your data or depending on a third party to manage your IT was akin to lending your child to a babysitter. The current state of the market has shown that 35 percent of enterprises surveyed have no outsourcing at all, and thus group of companies take up the large chunk of enterprises who park more than 40 percent of their IT budgets on traditional on-premise IT. With barely 17 percent of IT budgets parked aside for traditional IT outsourcing, IDC Indonesia anticipates the rising complexity of IT and the future change of the organization toward one being more innovative with its IT use, to be the turning point for many organizations to look toward IT Outsourcing in the near future.

At present, the total IT Services market is close to $1.4 billion, with IT Outsourcing taking up 32 percent of the entire market. Moving ahead to the end of 2014 and early 2015, the shift is expected to occur, where IT Outsourcing should consist of close to 40 percent of the market, with IT Services expected to grow 25 percent year-on-year. Enterprises are going to be looking out for that new partner, and managed services will indeed then become a de-factor standard to live by. The lack of skill sets within the country also plays a critical role. Three years ago, IDC Indonesia conducted a survey on the Indonesian landscape and found that the majority of enterprises were attempting to keep a lot of their IT and Datacenter services in-house, with attempts to acquire the adequate skill sets to help them manage their IT. Fast forward to 2014, and a flip has been noted where majority of end-users have given up the '€œfight'€, and have decided that outsourcing this element might actually be a lot better for the sake of organizational growth.

As we further explore this potential paradigm shift in the market, it should be noted that IT outsourcing is not the '€œbe all and end all'€ of enterprise efficiency, however, a critical tool in enabling said enterprise to further innovate by freeing up costs it otherwise would have to take on, and to park that cost within more critical areas of enterprise growth. IT outsourcing actually represents more of a cultural shift than it does an IT one. The mindset of outsourcing IT in the country is nascent '€” which is a stark contrast from its long-standing labor supply outsourcing issue it faces. However, the first step toward the proliferation and capitalization of four pillar technologies is indeed the notion of '€œoutsourcing'€. In order for elements such as cloud computing, and enterprise mobility to really take shape within end-user organizations, this hurdle would have to be crossed and ultimately accepted as IT being an undeniable element within their organization that is set to only get more complicated should it be allowed to fester within the house without opening the windows.

As the country continues to evolve, so do the requirements and maturity of the organizations in identifying and realizing areas that it can trim. Traditional supplier models will be forced to change in the wake of an adult enterprise customer, and enterprise IT '€œconsumerism'€ will heighten to a point where the locus of control will land in the laps of the enterprise, with vendors having to now jump through hoops to maintain contracts and to score business. The IT industry in Indonesia is facing ever-changing times, and this is expected to be the trend moving ahead for the next five years.

____________

The writer is IDC Indonesia country director

Popular

PDI-P will likely be part of opposition: Ganjar

Indonesia one step from Olympics after beating South Korea

Bahlil leads task force to boost sugar, bioethanol production in Papua