Services companies deny gov't spending slump

Services companies deny gov't spending slump

IT services companies have hit back at recent news of a Federal Government IT outsourcing slump, claiming things are not as bad as reports have made out.

Analysis released by research house, Interdata, compared government IT spending between this year and last year and found the majority of agencies recorded a decrease in 2004 figures.

EDS' Federal Government account manager, Mike Smith, said, far from being challenged by the outsourcing choices being made by government agencies, the IT industry was fairly buoyant.

"I don't think there's a slump and I don't think even the small [IT services] companies are missing out," he said.

"Government expenditure is typical to the period immediately prior to an election."

Smith described how recent announcements had created a feeling spending was on a downward trend, whereas it was consistent with the last year of a government's term in office.

"The second year in office is normally when significant investment in operating processes is made," he said. "The third year is often 'steady as she goes'.

"The things the government wants to talk about at the moment are program-based. Public service reform doesn't win elections."

According to Interdata's research, EDS' government sales dropped from over $586 million to $257 million.

Despite the fall, EDS remained its second largest supplier.

Volante CEO, Allan Brackin, said his company was new to winning government contracts, but had got off to a flying start.

"There is a trend across the board to selective source - government agencies can split what they spend," Brackin said.

Volante has won about $70 million worth of contracts since the beginning of 2004, contributing greatly to an 85 per cent profit increase on the previous year, according to its annual results announced last week.

Interdata's report found Govern­ment spending on ICT was about $3.5 billion annually, 60 per cent of which on the extension of existing contracts.

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