The future dominance of IBM Global Services, EDS and CSC looks shaky despite a combined market share of over 78 per cent in the Australian outsourcing market in 1998, an analyst has predicted.
Merv Langby, senior analyst for professional services at IDC Australia, said pressure is mounting on the industry's three biggest players from growing market diversity and the moulding of business practices around e-commerce.
"It's still too early to tell, but aspects of market behaviour covered by IDC's complementary outsourcing market reports suggest that the outsourcing market will begin to diversify and open up to a variety of specialist and niche providers, increasing the diversity of service options and market competition," Langby said.
"In this context, the extent to which e-commerce is adopted by small-to-medium sized enter-prises is likely to prove significant for outsourcers as they seek to reshape existing, and create new, market models and outsourcing service offerings."
According to Langby, the SME market has remained largely untouched by outsourcing companies and provides a number of opportunities for service organisations.
"The most recent contracts reflect the increasing capacity of players other than the big three to compete effectively and attract outsourcing contracts of meaningful scope and value," said Langby.
Raymond Daly, sales and marketing manager for Origin, one of the emerging outsourcing contenders, claims that even large government departments are starting to knock on the door of smaller players instead of going straight to the top two or three outsourcing companies in Australia.
"That really hasn't been happening in the past that I know of," he said. "We've defined the area we want to work in and we're now reaching for IBM, CSC and EDS. That's just a natural part of our growth," he said.
However, Langby told ARN that one of the driving factors behind smaller niche companies gaining market share on the "big three" was due to the growth of the outsourcing market overall.
At a market size of $2.3 billion for 1998, IDC research positions Australia as the sixth largest outsourcing market in the world. It is likely to become the fourth largest in the next five years.
"Market mass carries its own internal momentum, signalling that the buying community has moved beyond the exploratory and early adoption stage and into a more growth-oriented phase," Langby said.