IDC: Bumpy road for outsourcing in Australia - News - Business

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This story was printed from ZDNet Australia.
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IDC: Bumpy road for outsourcing in Australia

By Fran Foo, 0
September 15, 2003
URL: http://www.zdnet.com.au/news/business/soa/IDC-Bumpy-road-for-outsourcing-in-Australia/0,139023166,120278595,00.htm

The Australian IT outsourcing market could be headed for a downward spiral, recent findings at IDC have uncovered.

From a macro level, the technology outsourcing industry will increase in size but at a much slower pace, Philip Allen, IDC senior analyst for services said.

In 2002, the market was worth AU$3.8 billion and by 2007, it will reach AU$5.5 billion. This represents a compound annual growth rate of 7.5 percent as opposed to a decade of double-digit growth, Allen told reporters at an IT conference in Brisbane.

He cited three main reasons for the decline:

AU$3.8 billion represents 40 percent of the Australian IT market. Sustaining growth in such a large segment is hard to achieve.

The market is reaching saturation point from both a supply and demand perspective.

New phase of maturity -- there's a stronger orientation for "strategic" reasons for companies to outsource.

The average length of contracts has also shrunk, he said.

Seven- to 10-year deals were commonplace in the outsourcing heyday but last year, more than 50 percent of contracts in Australia were for three years or less, Allen told ZDNet Australia.