Editorial: Are things improving?

Editorial: Are things improving?

Services opportunities expected to light the way to recovery

Another week, and another spate of financial announcements to analyse. This time around, ASX-listed channel companies including Oakton, SMS Management and Technology and CSG, were reported varying degrees of success for the year to June 30.

The effects of the economic downturn were apparent on Oakton, which reported a 48.8 per cent net profit drop for the full-year. In its ASX statement, the company labelled the financial crisis the most “severe and pervasive” in its 21-year history.

Things weren’t quite so bad in the SMS offices, where staff managed to keep full-year profits to within 2 per cent of last year’s result. At the other end of the scale, NT-based CSG chalked up a 24 per cent leap in profits, buoyed by its acquisition of Commander’s managed services business last year. The fact that CSG has managed to make the purchase work is positive on its own, but being able to do so in a tough climate is an achievement.

While the results (and retrenchments) varied depending on which organisation you talked to, one thing these services-based companies have in common is a belief that the sky is beginning to brighten. Oakton reported a strong level of committed revenue and a solid pipeline of potential customer spend going into the new financial year.

At SMS, signs of “prolonged” positive sentiment throughout April-June provided the impetus it needed to recommence recruitment. And CSG was bullish about its chances for big contracts in the NT, also pointing to stronger growth in the second-half of the calendar year.

If a recent IDC report is anything to go by, the services-based guys should be feeling fairly optimistic. According to the analyst group, the Australian IT services market remains robust and should continue to grow by 4 per cent year-on-year for the next four years. Not surprisingly, annuity-based, flexible offerings like managed services, that allow customers to push their IT risk to a third party, are forecast to be one of the main drivers.

But while IDC analysts were putting this down to customers wanting ways to reduce cost, several industry representatives we spoke to claimed many end-user organisations were simply wising up to the value IT could bring to their business (see page 1). As a result, most services providers are positioning their offerings around efficiency and productivity.

Services is also proving a rapidly increasing area of opportunity for software reseller, Insight, which has been building up its own professional services business unit for the past 18 months (see page 4). Traditionally a licensing and software asset management player in Asia-Pacific, the company is now going after services dollars and is utilising both internal resources and industry partnerships to do it.

We’ve been saying for a long time now that businesses who haven’t transitioned to a more services-led approach are going to be left by the wayside. If this week’s edition of ARN is any guide, the shining light leading the industry out of the economic gloom is services.

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