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South Korea IT services market offers opportunities: Ovum

Veronica C. Silva | June 12, 2013
New market entrants to South Korea can take advantage of stable economy and infrastructure.

A recent study by an IT research firm has noted that there's enough room for growth in IT services in South Korea, given the country's stable economy and improved infrastructure.

Ovum's recent market analysis shows that South Korea's IT services market is expected to grow by seven percent from 2013 to 2016. Given this expectation, Ovum said there are plenty of opportunities to tap, particularly since local South Korean providers are also expected to expand internationally.

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

Optimism in the South Korean market stems from its strong fundamentals - a nominal GDP of US$1.151 trillion in 2012 and a rank of 15th in World Bank's list of largest economies in the world.

Ovum said the largest component in IT services in South Korea is infrastructure services, which represent 53 percent of the market.

But behind these opportunities lie the challenges. Ovum noted that South Korea is "a uniquely complex and competitive market." For businesses interested in tapping into the country's IT potential, the challenges include language, domestic requirements, high market costs and a relatively "well-protected and affluent workforce."

Added Butler: "But, 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. When compared to other international markets, the global systems integrator presence and penetration in South Korea is relatively low," said Butler.

Butler suggested that international providers who are considering tapping into the South Korean market is to study which business model - offshoring, global delivery or commodity services - sets them apart from established South Korean providers.

Despite these challenges, Ovum's market analysis said looking into the opportunities in South Korea is worth it, though with a word of caution.

"From a pure market opportunity view, this sophisticated US$13 billion IT services market is one worth targeting. However, it is an extremely complicated and inward-looking market and needs to be considered as such. 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," concluded Butler.


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