Integrators to thrive on services

Integrators to thrive on services

The global services, outsourcing and systems/network integration markets might be booming, but Australian players have been warned not to rest on their laurels and to continue to streamline their service offerings.

This alert from Craig Baty, the principal analyst for Gartner Group/Dataquest's Asia-Pacific IT Services unit, reinforces recent Gartner/Dataquest research that claims a growing band of outsourcers and integrators are homing in on the lucrative SME market equipped with packaged solutions.

According to Baty, vendors, outsourcers and integrators realise that customers have limited budget capacities and are starting to deliver packaged offerings such as cut-down ERP systems and customised e-commerce solutions.

"Customers are becoming aware of the services and integration alternatives that are available to them in the market," he said, adding, "their preference is towards out-tasking particular aspects of the business that can no longer be supported internally."

Baty referred to Dataquest/GR2 research that predicts the local outsourcing market will at least match the 26 per cent global growth of this sector between 1997 and 2002. He said that despite the signing of a number of major outsourcing deals in the past 12 months, including to Optus, Digital, IBM GSA, and Ansett, several Federal Government "mega-deals" to be tabled this year would overshadow these deals.

"The combined total of these multi-year Federal Government deals should be in the vicinity of at least $1 billion this year," Baty predicted.

Further down the chain, Baty predicted the consolidation of the low-end integration market to continue via acquisition or merger. He said integrators such as BCA and Data#3 (with its recent buyout of CICtechnology) would continue to drive Australian growth levels above Dataquest/Gartner's current 19 per cent global prediction.

"Integrators have to acquire to expand in this competitive market," Baty claimed.

"If you are a small integrator, your objective would surely have to be growing the business with a view to selling it to a larger organisation for 10 times its worth."

Start-ups cruelled

"The current climate of low margins has cruelled many start-up services organisations because they handle high staff and resource overheads," Baty explained.

"The key is to develop strengths into two or three niche areas and then build packaged solutions, skills and resources that can be reused for each new customer. You shouldn't have to recreate a services offering for every new project."

Baty cited the creation of common price lists as one component of a repeatable solution, while hot markets such as ERP and e-commerce could be targets for integrators to develop repeatable solutions.

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