In the face of a multinational blockout in the Northern Territory's IT outsourcing drive, IT services company eNTITy1 has taken the unprecedented step of diversifying its business - announcing its intention to purchase oil and gas exploration company Nexus Energy.
The announcement comes on the heels of an unsuccessful attempt by the company to secure a place in the Northern Territory outsourcing industry. Last year, eNTITy1 invested significant time and energy chasing the outsourcing dollar. However the ASX-listed company was unsuccessful in its tender applications, which largely went to multinational companies.
In light of this, the eNTITy1 board met in March to discuss the "best business development and growth strategy for the future of the company", according to a notice to shareholders and clients.
The results were a restructure of the company which saw the resignation of managing director Prins Ralston and a focus towards alternate revenue streams within the company - namely e-commerce solutions.
If approved by shareholders, the Darwin-based company will acquire 100 per cent of Nexus, which in turn will withdraw its proposed initial public offering and listing on the Australian Stock Exchange.
According to acting general manager of IT, Graeme Sawyer the outsourcing issue was only part of the decision to buy Nexus.
Sawyer joined the company from QANTM Multimedia Centre to build the e-business division.
"We recognised on Prins' behalf that outsourcing is not the be all and end all, and that at the time the company was looking at outsourcing it was still very much an unknown entity."
When Sawyer migrated from QANTM, eNTITy1 took on a number of staff as wall as the code base to develop a number Web sites for the likes of Online-e-media and the Australian Computer Society. This side of the business will continue to be a priority for the company, he said.
"We already have a significant e-business solutions operation in place. Outsourcing hasn't delivered the income to eNTITy1 in the past. That money has been coming in from e-business."
Ralston will be kept on as a consultant, choosing to resign from the company as part of the restructure and move interstate.
Having seen many global companies such as CSC win the majority of NT Government tenders, Sawyer is personally sceptical of outsourcing as a way forward for the local industry. He believes eNTITy1 was left behind in the political manoeuverings that often surround tenders.
"There have been some pretty significant multinationals winning contracts. That is where political clout let them down, I think," he said.
"Certainly the NT Government is not doing a very good job of it. The downside is that key people from the Northern Territory IT industry - like Prins - are moving interstate. There has been a brain drain problem in the Northern Territory for quite some time."
Despite tender specifications by the NT Government to include local companies, Sawyer feels many NT businesses are being left out in the cold whist multinationals reap the benefits.
"The upshot is that it has done exactly the opposite [to what was intended]," he said.
According to a statement issued to the ASX, the acquisition of Nexus represents "an extension of the company's core business of identifying and implementing technology applications in northern Australia".
"In the top end of Australia, oil and gas is obviously a big growth industry," Sawyer said, adding he doubted the acquisition would impact directly on the IT business. However, Sawyer hopes to further position the company to be providing e-commerce solutions for those utilities.
"Most of those companies still don't know what to do with the Internet, but the cost efficiencies it affords them can be quite significant. We have positioned ourselves to work with small and medium enterprises and with gas that will expand to include larger enterprise as well."