IT services to rebound

IT services to rebound

While discretionary spending on IT projects is not an option for organisations at the moment, Australia's service providers are still hopeful that outsourcing and integration projects will prove big winners in 2002.

Jon Johnston, managing director of Centari Systems, said the product/services mix that compromise channel company revenues has shifted significantly away from hardware products to services. At Centari, for example, growth in product revenues has dropped from 25 per cent to around 5 to 10 per cent. But services revenue in the last eight months alone has risen by 150 per cent.

"Because we primarily service the mid-range customer, which in the last 12 months has shed IT staff like there's no tomorrow, we have more opportunity to do services and out-tasking," he said. "The growth in services will continue because mid-range customers can't afford to keep all their experts on staff, but we can."

Getronics managing director Robin Dixon agrees. "Companies are looking very hard at return on investment - if they don't get it in 18 months, the project won't happen," he said.

Dixon believes organisations looking to trim their IT costs won't be investing as many dollars into new solutions, but will rather focus more on integrating the systems they already have. "Cost efficiency will be key - and that will manifest itself into more opportunities for those of us offering selective outsourcing services."

Considering the disastrous results of the Federal Government's outsourcing schemes, Dixon suggested that the "whole-of-business" outsourcing trend has had its day. In its place, service providers will succeed in areas where they have expertise, he said. "This will be a welcome alternative to getting a prime contractor to do the lot, and have them bring in sub-contractors. All you end up with is finger-pointing when things go wrong."

Michael Ellies, vice president of ASP services at Peakhour, said he sees an upturn for IT services in 2002. "Whether this translates into an upturn for the ASP model depends on how you look at it."

After a quiet year on the ASP front, Ellies believes the ASP market is morphing into being part of the Web-hosting and outsourcing markets, which both have great potential in 2002.

He said the term ASP itself has reached what Gartner terms the "trough of disillusionment" on the hype curve. "That's where we were this year," Ellies said.

"The fundamentals behind the model are still sound: in times of recession, outsourcing models become very viable," Ellies said.

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