The information technology (IT) industry in China will see a critical turning point in 2008.

As the market matures by then, enterprises and customers should prepare for the change starting now, said a senior IT industry analyst with the US-headquartered research company International Data Corporation's (IDC) Chinese branch.

Ken Xie, general manager and chief analyst of IDC China, said a key measurement of the maturity of an IT market is when the proportion of software and IT service revenues surpasses those of IT hardware and account for more than a half of the total market.

In China, software and IT services only accounted for 27.4 per cent of the whole market in 2003, much lower than the world's average of 62.1 per cent.

"The most noteworthy sign of the Chinese IT market is an all-round change of IT investment structure," said Xie, a veteran observer of the market.

He said the changes are not only reflected in the rise of the proportion of software and IT services, but also in the quoting system of IT vendors, in which software and IT services are no longer only regarded as a free gift bundled with hardware.

This trend represents a change in attitudes to recognize the value of services and it will lead to a change of the IT investment structure.

IDC estimates the proportion of software and IT services will grow to 13 per cent and 28 per cent of the market respectively.

Xie believes that although the number in China still lags behind the Asia-Pacific and world averages, it is a landmark of the country's IT industry. He suggested IT enterprises and customers adjust their strategies to grasp the opportunities offered by transformation.

Enterprise users, especially State-owned companies, should place IT investment and chief information officers in a key position in their corporate strategy.

They also need to focus on the total return of their IT investment in the transformation of their organizations and strategies as well as the enhancement of their competitiveness, rather than only measure the success of IT strategy with direct economic returns.

(China Daily November 11, 2004)