Japan IT Outsourcing 2006-2010 Forecast Update

In 2005, the Japan ITO market grew 6.7% against the previous year to 1,763.5 billion yen. The rapid growth was due to several factors, including an expanding hosting service market, the pervasion of application management services in the financial industry, and moves by SPs to acquire information subsidiaries. IDC forecasts that the year-on-year growth rate registered by the Japan ITO market will decrease from 2006 as the market expands. The market is forecast to expand at a compound annual growth rate (CAGR) of 5.8% from 2005 to reach 2,338.2 billion yen in 2010. ?Presently, the effects of ITO expected by companies are getting broader and more diverse. Man month/product price?based outsourcing services are losing competitiveness, and price competition is growing more intense. As technology gaps among SPs are narrowing, it is now more difficult for vendors to brand their services based on technological strength, and ITO services are increasingly being commoditized. In order for SPs to remain competitive, it is necessary for them to move away from commoditization and develop services that are highly industry-/business-specific. To do so, it will be important for them to acquire industry/business-specific knowledge, develop industry/business-specific solutions, and beef up their consulting ability," says Satoshi Matsumoto, senior market analyst, IT Services, IDC Japan.