Top ten fuel Oz outsourcing growth

Peter Dinham
Wednesday, 26 August 2009 08:00

IT Industry - Strategy

IT outsourcing services continue to be in demand from Australian businesses looking for cost efficiencies in the economic downturn, with a combination of onshore, nearshore and offshore outsourcing delivery models from vendors expected to be more prevalent as the market matures.

Last year the Australian IT outsourcing services market continued its strong performance, reaching almost $6.5 billion dollars by the end of December, and market analysts IDC say this growth trend has continued in 2009 with key contract wins by vendors early this year, including a billion dollar-plus outsourcing deal with Telstra.

IDC in its latest report on the Australian ITO market says the market growth has been fuelled by the top 10 outsourcing vendors and there have been some major changes in position at the top tier level through both organic growth and vendor acquisition.

IDC associate market analyst for the ANZ IT services market, Adam Lee, cites HP's “leapfrogging-growth” achieved through its EDS acquisition as one of the significant changes in the top tier, and he says several other key vendors displayed strong organic growth in 2008, including IBM, Accenture and Datacom.
 
Lee also says that market concentration at the top tier increased, with the 10 largest vendors representing 51.8% of the total ITO marketshare in Australia in 2008, up from 47.4% in 2007.

According to Justin Ee, co-author of the report and associate analyst for IT services at IDC, the firm continues to see market demand for IT outsourcing across the forecast period.

Ee says this is demonstrated by key contract wins early this year, including Telstra's $1.2 billion 10-year network management contract with the Commonwealth Bank, Optus’ $500 million, five-year network management deal with ANZ Bank, and Fujitsu's $200 million, five-year desktop management for Qantas Airways.

“The ongoing effects of the global financial crisis will continue to drive more organisations to seek cost efficiencies through ITO activities,” Ee forecasts, and he says that the use of blended onshore/nearshore/offshore delivery models will also increase as the vendors' maturing global sourcing strategies coincide with a period of “increased acceptance of more cost-effective service delivery modes.”