SMEs dominating PC services industry

Australia's $836 million computer services industry is dominated by small businesses, according to the latest figures released from the Australian Bureau of Statistics (ABS).

More than 14,700 businesses were operating in the industry at the end of June 1999, a 52 per cent increase in three years, with an annual growth rate of 15 per cent, according to the ABS.

Small business represented nearly all computer services in the country, with 98 per cent of businesses employing fewer than 20 people. Businesses with four or less employees made up 88 per cent of all businesses. The industry generated $10.4 billion during 1998/99.

By comparison, 56 companies retained more than 100 staff, accounting for 39 per cent of industry employment, 59 per cent of income and 51 per cent of operating profit before tax.

The most profitable segments were bundled computer services, which earned $3.3 billion, non-bundled customised software services and solutions with earnings of $2.5 billion and computer processing services, which earned $1.1 billion.

According to the ABS figures, the industry had an operating profit margin of 8.2 per cent. Surprisingly, this is a significant increase on the 1995/96 figure of 5.7 per cent.

Labour costs comprise the biggest expense for computer businesses, with $4.1 billion representing around 42 per cent of total expenses. Contractors and consultants for computing and communications services made up a further 15 per cent of expenses.

Small businesses accounted for 48 per cent of employment within the industry and 28 per cent of the overall income.

Most industry income was generated in NSW and Victoria. The two states accounted for 78 per cent of the total industry income with NSW business making up nearly half of the market.