LCGMARKETPERSPECTIVESLATITUDEChinaITServicesSectorReview–SpotlightonSystems/NetworkIntegrationCAPITALGROUPNovember2003China–TransformingintoaMajorITServicesMarket&OutsourcingHubOverviewoftheChinaITServicesSectorDrivenbytheboomingChineseeconomy,theChinaITChinaITSpendingservicessectorisexpectedtogrowsignificantlyoverthenextseveralyearsasthetelecom,financialandmanufacturingChinaITSpendingBreakdown(US$billions)sectorscontinuerapidinfrastructurebuild-outanddeploymentofmajorbusinessapplications.Furthermore,Chinaisrapidly70becomingamajoroutsourcingcenterforITservicesas60ServicecorporationsareattractedtoChina’slow-cost,highly-skilled50technologyworkforce.TheChinaITservicessectoris40Softwarecurrentlyhighlyfragmentedduetonumerousplayers,30regionalizedbusinessoperationsandthelackofanydominant20Hardwarenationalfirms.Inaddition,foreignplayersareaggressively100enteringtheChinamarkettosourcealternative,low-cost20022003E2004E2005E2006E2007Eservices.Hence,China’sITservicessectorisripeforconsolidationbybothdomesticaswellasforeignplayers.20022003E2004E2005E2006E2007ECAGRHardware19.021.024.128.432.837.05.6%GlobalITSpendingSoftware4.14.85.97.39.010.83.3%Service5.26.17.710.012.515.36.4%GlobalITSpendingbyRegionTotal$28.4$31.8$37.7$45.7$54.2$63.03.5%(US$billions)Source:CCID.3,0002,500US/CanadaAmongstallareasoftotalITspending,ITservicesinChinais2,000Europeexperiencingthestrongestgrowthandwillaccountforover24%oftotalITspendingby2007,asignificantrisefromjust1,500JapanAPACunder18%oftotalITspendingin2002.1,000LatinAmerica500TheChinaITservicesmarkethashistoricallybeenatotalROW0solutionorientedmarketwheresoftwareandservicesare2000200120022003E2004E2005Etypicallybundledwithhardware.MostoftheleadingIT2000200120022003E2004E2005ECAGRservicesplayersinChinaareorientedprimarilyaroundaUS/Canada9008848759239851,0453.0%particularindustry.Europe6336456486847217633.8%Japan2502432372472592711.6%TheITServicessectorconsistsmainlyofSystems/NetworkAPAC24124