Digital transformation and changing IT procurement patterns are driving IT outsourcing spend upwards in the Philippines, but multiyear and multimillion-peso deals are decreasing on the back of increased cloud use.
IDC is forecasting outsourcing services spend in the Philippines to exceed US$500 million by 2021, with IT outsourcing accounting for $269.1 million – or 53% - of overall spend.
Alon Anthony Rejano, IDC Philippines market analyst for services, says the Philippines outsourcing market is undergoing a dramatic transformation, propelled by the increasing adoption of disruptive technologies.
The analyst company says outsourcing is being seen as a way for companies to address business challenges, such as growing complexity of ICT, lack of ICT budget and the need for proper governance.
“CIOs and technology leaders tap external capabilities to support their DX initiatives, meet ever-changing customer demands, implement solutions faster and reduce cost,” Rejano says.
“In the age of greater automation, standardisation and modernisation, external providers need to keep up and redefine their value proposition, offering new delivery and consumption models,” he adds.
While IT outsourcing takes the lion’s share of the market, IDC is forecasting application management and hosting infrastructure management to account for 14% of the market each, at $71.0 million and $69.8 million respectively; while network management is expected to be worth $34.1 million – 7% of the overall market.
Endpoint management and hosted application management each account for 6% of the overall market, at $31.5 million and $30.5 million respectively.
But while the outsourcing market might be growing, IDC warns that the size and length of the deals isn’t with both decreasing as end users look at cost cutting and show inclination toward cloud.
“The outsourcing market will remain a tough market for competition in the coming years,” Rejano says.
“Local customers want to see vision and a strong offering, and while they want a partnership for the long term, they are also willing to consider new partners that offer innovation.
“Providers need to demonstrat thought leadership throughout the lifetime of the contract and provide high-quality service to help transform customers with DX agenda,” he says.