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Australian ICT Services Market Overview: 2009-10
Longhaus, July 2009, Pages: 14
Contrary to popular belief Australia’s domestic spending is not driven by agriculture, mining or manufacturing. Instead domestic production activity is dominated by services industries which represented an estimated 71% of onshore output in 2008i. Based on briefings taken by Longhaus from ICT vendors in various sectors, including hardware, software and services, the consensus is that Australia is a highly mature consumer of ICT services. Therefore the current and potential future performance of the Australian ICT services sector is an important consideration for end-user buyers and vendors alike.
To aid in this process Longhaus explored end-user intentions in relation to use of professional and managed ICT services as part of our annual ICT Spending and Investment Priorities Study. The Q1 2009, survey took responses from senior business decision makers across 110 of Australia’s medium to large organisations with 56% of the sample being medium to large businesses (100-1000 employees), and 38% from large enterprises (more than 1000 employees)ii. This combined with briefings from ICT service provides including IBM, EDS, Wipro and Fujitsu has enabled Longhaus to determine the major shifts likely to occur in this crucial sector of the ICT economy during the 2009-10 financial year.
In 2007-08 Australia’s medium to large enterprises spent $11 billion or 10% on managed and professional services from external third parties. Although discussion of the Australian ICT services market in the boardrooms of both end-users and vendors focuses on managed infrastructure services the reality is that outsourcing in the area of application development and maintenance is undertaken by 5% more firms than server management. The Longhaus 2009 ICT Spending and Investment Priorities Study also revealed that in the area of managed and professional services 28% of local organisations expected to decrease spending, with only 22% expecting to increase spending. In fact, managed and professional services spending was the only area in the study with a net number of firms decreasing spending.
While the shift in the ICT economic cycle from infrastructure to application renewal will provide some opportunities for outsourcing of application maintenance, the current economic conditions will make life hard for both local and multinational services firms with a net average of less than 2% of existing client organisations increasing spending in 2009-10. Based on the study results it seems times will be especially tough for firms whose order book is oriented towards strategy or project-based activity such as Accenture, SMS Management & Technology, and Oakton. Given the tight market, now is a perfect time for end-user organisations to engage in smaller scale strategic projects using high calibre external resources that are likely to be sitting on the bench inside many of Australia’s ICT services vendors.
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