IT Spend will Fuel China’s Tech Boom

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Published on Thursday, 23 August 2012 07:42


Healthy growth in information technology (IT) spending in China will stimulate adoption of technologies including desktop and server virtualization, software as a service (SaaS) and media tablets, according to Gartner’s “2012 Hype Cycle for ICT in China” report. IT spending by Chinese end users (organisations and consumers) grew by approximately 14 percent in 2011, compared with just over five percent in the United States.





The analyst firm expects IT spending in China to grow from US $277 billion in 2011 to US $312 billion in 2012, an increase of 12.6 percent, presenting opportunities to technology and service providers. “Despite the worsening impact of the global economic downturn affecting both local and multinational companies in China in the first half of 2012, the Chinese government’s 12th five year plan, which began in 2011, will continue to influence the IT initiatives of Chinese enterprises through 2015,” says Jim Longwood, research vice president at Gartner. “The consumerization of IT will also continue to have a strong impact in China, which has the world's largest number of Internet users and mobile handsets, the largest PC market and the second largest hardware market.”


High growth in IT spending will prompt many Chinese companies to adopt technologies that will lead to increased market acceptance of many of them during 2014 and 2015. “Historically, Chinese enterprises have seen more tangible value in acquiring IT hardware than software packages and services,” says Longwood. “In the past five years, however, software investments have been catching up, as local application vendors have found a place in most enterprises and end users have started to see more tangible benefits of using software packages.”

Enterprises have also started hiring external service providers (ESPs) to undertake application development and package implementation, and are now considering outsourced and "as a service" delivery models. Furthermore, a range of hardware technologies, such as blade servers and enterprise-grade solid state drives, climbing the slope of enlightenment as new hardware technologies become more established in China. A number of other software technologies such as domestic office productivity suites and enterprise applications including ERP and supply chain execution are also climbing the slope and will help to improve staff productivity and support the growth of the manufacturing industry in a country that aims to be "the world's factory".

Application services for custom and packaged implementations have moved through the trough of disillusionment as more Chinese enterprises have turned to ESPs to speed up the implementation of new business systems. Traditional infrastructure and communications outsourcing services, managed print services, BI services and emerging delivery models such as infrastructure as a service (IaaS) and software as a service (SaaS) are moving through the peak of inflated expectations as Chinese enterprises look at new options for operating their data centers and sourcing applications, as well as for managing and analyzing their information.

Personal cloud and platform-as-a-service offerings - new mass-market consumer-driven technologies - are moving rapidly up the technology trigger slope, following media tablets, which are now on the peak. There is growing interest in China in the evolution of cloud technologies, health solutions, open source software, shared services, smart cities and green IT/sustainability. There are relative benefits and likely adoption times of relevant technologies and services in China. For example, technologies such as machine-to-machine communication services – which are seen as transformational for telecom-related and "smart"-related technologies – and smart city frameworks – which will enable Chinese cities and China-based enterprises to optimize energy use for sustainability. Gartner believes that both these technologies will take five to ten years to reach maturity.

Technologies Beneficial to Chinese enterprises include:

-  LTE, because of its significant impact on the wireless and network capabilities and efficiencies needed to handle the billions of connected devices.

-  SaaS, because it will give Chinese enterprises opportunities to adopt contemporary and automated business best practices quickly and with limited capital expenditure, to be agile, scalable and competitive, and even to operate virtually in a global environment. These opportunities will be further enabled by x86 server virtualization and management, which provides a foundation for a range of "as a service" options, such as IaaS and PaaS, that Chinese enterprises could use as part of China's growing adoption of cloud computing.

The emerging adoption of personal cloud services and social networking is coupled with use of media tablets, mobile devices and mobile applications is growing and affecting many enterprises, with widespread use in China by "Generation Y" staff, and technologically savvy and "switched on" executives using them to improve the productivity of their management teams. “Senior executives, CIOs, strategists, business developers, sourcing managers and technology planners of local and multinational enterprises established in China should consider the technologies and related services on this hype cycle when developing emerging business, technology and service portfolios and related execution strategies,” explains Longwood.

“Similarly, CIOs of multinational enterprises seeking to set up business operations in China will find the analysis useful in terms of understanding local challenges and modifying their IT strategies to take account of the maturity of China's ICT market in comparison with those they typically operate in. Vendors' marketing managers will also find the analysis useful when preparing and implementing marketing strategies to grow or establish product and service offerings in China's ICT market.”

---Gartner