An extremely over-crowded and competitive IT market is restricting the ability of local system builders and their channel partners to trade, according to IDC.
Hardware research manager, Michael Sager, said Australia's solid economy and mature IT spending model had seen markets such as PCs and notebooks become over-crowded with foreign vendors. While local system builders were still trying to compete in markets which had worked for them in the past, the steep rise in competition from larger competitors had seen margins all but disappear.
"Multinationals can weather pricing, commoditisation and a declining economy, things which affect local systems builders much more keenly," he said.
"We have a very different market in Australia compared to the rest of the world, even to the rest of Asia. When I go overseas and talk to my colleagues, they say it's very competitive here. Overseas there's no Harvey Norman, for example, with 40 per cent of the notebook market."
The road to salvation for local systems builders, resellers and IT shops would lie in services, Sager said. Already businesses were evaluating what in-house skills could be taken to their customer base.
"Others are looking at particular vertical industries while some are moving into medium and high-end products and not competing at the lower end of the market," he said. "Some are also switching to multinational devices, which is perhaps the easiest road to take of all."
Sager predicted businesses which didn't take some form of remedial action in 2006 would have a high propensity to disappear.
"This news is a knock upside the head saying, 'Hey stupid, it's time to change. You have to adapt'," he said.