Australian services providers look beyond cost cutting

Australian services providers look beyond cost cutting

Industry representatives play down necessity of cost cutting

Australian services providers look beyond cost cutting

Several industry representatives have played down analyst assertions that cost cutting is a primary driver for IT services growth.

The comments were made in a recent IDC report, which found local companies are continuing to spend on ICT services. The analyst group also predicted the market would grow at a five-year compound annual growth rate (CAGR) of 4 per cent from 2009-2013.

IDC senior analyst in IT services, Marina Beale, said Australia’s world-beating results were strong for a mature market and came as a result of optimisation and cost-cutting programs.

“We’re seeing a lot of projects around unified communications, so as part of keeping costs down people are using technology to rationalise on travel costs,” she said.

“The managed service space and remote monitoring of systems and infrastructure is a growth area as well. It’ll be a mix of delivery models as they suit the companies.”

Beale also said outsourcing was enjoying a boost and said companies were less worried about the ramifications of shifting jobs abroad.

“We still see healthy growth for outsourcing; it’s another way of keeping costs down. People are less conservative about putting it [work] overseas,” she said. Some managed service providers, however,have disputed cost cutting is the only thing on the agenda. Dimension Data CTO, Gerard Florian, said reducing cost was just one element of an overall sales play.

“IT infrastructure is becoming more and more important to organisations – clients are looking to get it running is as well as possible – cost cutting can be a part of that,” Florian said.

“Very few organisations will sacrifice quality for price, but depending on the area of infrastructure, there are definitely areas where customers are being inefficient.

“In reality, it’s all about outcomes with IT spending. If the outcome can be achieved for the same cost or even less, then that’s even better.”

The integrator’s services business continues to grow strongly. In a recent interim management statement, Dimension Data worldwide quoted year-on-year improvement on gross margins for the period of April 1, 2009, to August 18, 2009, with its services business up by about 12 per cent.

Australia was highlighted as one of the regions that experienced record revenue growth and operating profit expansion.

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