Integrators are gearing up for a busy 2007, with many tipping the increase in selective sourcing as a golden opportunity to nab business away from the multinationals.
While it's not a new phenomenon, IDC predicts selective sourcing will continue to gain favour this year because customers can share the IT workload and risk across multiple vendors. Outsourcing and BPO research manager, Aprajita Sharma, said this trend should benefit tier two or niche providers with expertise in specific technologies and services. ASG managing director, Geoff Lewis, said signs were pointing to a strong growth year. The ASX-listed services provider envisages increased sales across Oracle middleware, VoIP, and infrastructure and desktop management.
Lewis put ASG's increased sales largely down to government and corporates breaking down IT contracts. It reported a 45 per cent increase in revenues to $59.5 million in the last financial year. "Organisations are definitely looking for a different style of contracting," he said. "Customers want organisations that are going to be more responsive. It's great for us as it means we can engage in contracts we couldn't touch before."
ASG's recent wins include Qantas, Ericsson and Alinta.
UXC managing director, Cris Nicolli, said Australia's strong economy had helped to prop up IT project spending. He claimed the market would continue to offer opportunities over the next 18 months.
"Everyone is still competing ferociously but there's more to go after," he said. "There's a lot of project work and strong activity around core ERP and supply chain systems. With the launch of Vista, I think people will start looking at upgrading their desktop products. That might spin off opportunities for better integration between core systems and the back-end."
Nicolli said UXC's bottom line had also improved as a result of selective sourcing. Its Business Solutions Group increased revenue by 24 per cent to $301 million in the last financial year. "With selective sourcing, customers go for somebody with a very good cost model or that has expertise and depth of skill," he said. The biggest selective sourcing community today was medium enterprises, who were transitioning from an in sourcing model, Nicolli said. UXC was delivering more integrated technologies to customers than ever. He argued local players were a strong alternative to the multinationals in selective sourcing because they could offer deep skills and less cumbersome costing in specific areas. "We can't compete on the data side or desktop, but we can in ERP, networking, project management and programming. As a local, we can offer better costing," he said.
Oakton CEO and managing director, Neil Wilson, said the increase in strategic IT investment was driving selective sourcing. This was opening the door for the ASX-listed business systems provider to steal market share.
"When you're talking about costs only, you look for the supplier that can reduce your unit costs to run the business as usual," he said. "But if you want innovation and new capabilities, you look for organisations with that expertise. Our view is customers are buying selectively to get the best in those fields."
UXC's Nicolli predicted growth this year would be fuelled by business intelligence and performance management solutions demand. VoIP and communication upgrades were also top of mind.
"Companies want smart ways to use their data to manage the business," he said. "People are starting to recognise that they need to improve risk and project management capabilities." ASG's Lewis said the key was increasing business productivity.
"Customers want access to more information, and a more modern working environment," he said.