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Monday, May 14, 2007

Varied Economics Of IT Spending : Emerging & Developed Economies

I was looking at some available data(collected from various sources) on IT spending geographically – sometimes it is indeed counter intuitive to see the distribution of the spend besides its scale. While the delta in maturity levels are quite easy to understand, a number of factors like cost of service, currency rates, investment lifecycle, sunk investments in legacy,historical returrns on investment etc contribute to the huge difference in the spend composition.

Fig I shows the scale difference. Approximately UK is expected to spend twice as much as china on IT, while the US is expected to spend 10 times more.

Fig II shows the distribution of the IT expense. Look at the huge diversity in the composition of the mix –while developed nations spend almost 40% to 50% on services alone, emerging nations like china spend about 15% on services. Hardware spend in china is almost 75% of the total IT spend whereas the spend in US/UK hovers around 30%.

Next time, when you hear various tech players talk about booming economies in emerging nations, use this insight to find in what specific ways their product/service offering could benefit - ofcourse, an assessment of next level drill down of spend categories is crucial there.

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