IDC: Bumpy road for outsourcing in Australia

By Fran Foo
15 September 2003 06:50 PM
Tags: australia, outsourcing, outsource, idc, allen, 3.8, billion, percent
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.

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