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Unique offerings key to survival in South Korean IT services market

Jack Loo | June 28, 2013
Vendors looking for success need to offer something that local players do not have.

There are several nuances that IT services vendors need to be aware of when operating in the costly and selective market of South Korea, according to analyst firm Ovum.

These include managing local partnerships proactively and focusing on improving efficiencies and productivity within a costly and highly selective market.

Local language barriers and domestic requirements play a major role in South Korea, including the comparatively high market costs and a relatively well-protected and affluent workforce.

The largest component of the South Korean IT services market is infrastructure services, representing 53 percent of the market and is somewhat different to other mature IT services markets, where application services tend to be the largest sector.

"As one of the most advanced markets in the Asia-Pacific region, Ovum forecast that the South Korean IT services market will grow to US$16.4 billion in 2016," said Jens Butler, principal analyst for Ovum.

"What makes the South Korean IT services market uniquely challenging is the substantial footprint and influence of the local providers, such as Samsung SDS, LG CNS and SKC&C, which between them control close to 50 percent of the overall market space," said Butler.

But this means that compared to other international markets, the global systems integrator presence and penetration in South Korea is relatively low, added Butler.

In order to counter the chaebol influence, providers must bring differentiators that focus on very different models (offshoring, global delivery, commodity services) to the ones that Korean buyers have grown accustomed to.

"To succeed, entrants will need to bring their full set of services, innovation, and capabilities to the fore, highlighting approaches that will drive efficiencies, quality, speed and productivity but all with a sufficiently local flavour," said Butler.


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