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Prepare for a U recovery in 2010

Ross O. Storey | March 9, 2009
IDC forecasts a second quarter 2010 turnaround.

The big question dominating everyones thinking at the moment is when the global economic downturn will end. And will it be a V recovery (dramatic and straight upwards, like a V on a graph) a U recovery (again the graph shape, but with a longer time on the bottom) or the dreaded L, when the bottom continues for who knows how long.

New research by IDC points in a reasonably positive direction, favouring the U. They interviewed 122 financial decision-makers, from across the Asia Pacific at the first day of their Financial Insights' Asian Financial Services (AFS) Congress held in Singapore late in February. Most of the respondents anticipated that clear signs of recovery will take hold by the second quarter of 2010thats about a year away.

IDC maintains that the recovery will be driven by a more active lending environment, healthier demand for financial services by Asia Pacific customers, and a return-to-basics philosophy by financial institutions reeling from the effects of the global financial crisis.

IDCs Financial insights says that: If the financial organisation strengthens its enterprise risk management function and is willing to be more aggressive in attracting new customers to traditional banking products, Financial Insights believe that they will be able to quickly regain momentum when the upturn comes in 2010.

According to IDCs Services Contract database, US$54.6 billion in IT outsourcing contracts are coming up for renewal in 2009another light at the end of the tunnel for IT.

Despite the Satyam scandal, one well-known Indian IT company, HCL Technologies, sees a huge growth potential in the outsourcing SAP space and maintains that it has recently achieved success after success in new client wins. It sees significant growth opportunities, even during the recession. This supports the view that outsourcing service providers, while not immune to recession, will likely be among the first businesses to begin to recover from it.

In December last year, HCL committed £440 million (US$620 million) to acquire UK-based company Axon when many other companies were downsizing and reporting losses.

Its interesting that senior IT executives in Asia have repeatedly demonstrated that they have a more positive outlook than their colleagues in the US and Europe.

Our recent MIS Asia magazine IT Nation research, published in the March 2009 edition, found that nearly 53 per cent of the 320 plus respondents expected their IT budgets to either stay the same or increase. More than 70 per cent of them said the impact of the downturn on their enterprise would be moderate or marginal, rather than serious (28.3 per cent). This could be the result of a stoic Confucian attitude, unique to the region, but also reflects extra confidence because Asia has a number of maturing economies, such as China and India, with China still confident of achieving eight per cent growth this year.


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