NZ outsourcing on the rise as IT budgets tighten

Peter Dinham
Sunday, 28 June 2009 15:57

Business IT - Technology

It’s no longer skilled labour shortages but tightening IT budgets that has largely driven New Zealand companies to outsourcing to meet their IT services needs in the economic downturn.

According to analysts IDC, as the economic crisis continues to hit the New Zealand market, the demand for outsourced services in New Zealand remains high, despite the cutbacks in IT budgets, with the outsourcing sector growing seven percent year-on-year in 2008.

Adam Lee, IDC analyst for the New Zealand IT services market, said the growth in the sector outpaced overall IT services growth, and was expected to do so for the next five years.

Lee forecast that the IT outsourcing market in New Zealand would reach NZ$1.5 billion in 2013, representing a compound annual growth rate of 4.5% over the coming five years.

“By the end of the forecast period, this market is projected to represent 47.6% of the entire IT services market.”

According to Lee, in this time of uncertainty most organisations, government agencies included, developed a “preference for outsourcing and managed services,” and he added, “this is driven by end users’ favour for predictable periodic expenses and potential cost savings from vendors' economics of scale."

IDC report an uptake in hosted delivery models, virtualisation and automation in IT outsourcing, and Lee says that "with some skin left in the game, vendors can better convince customers of their commitment towards fulfilling SLAs. Outcome-based contracts and price-per-mainframe capacity are some of the examples."

According to IDC, there’s what it calls a “continual preference for discrete outsourcing” over enterprise-wide IS outsourcing, and Lee says the trend translates to increasing pressures on vendors to help customers ride through the storm, either via technology or better serving customers' business needs.