Defence downturn impacts federal government ICT spending

Overall market grew by six per cent in 2006/07 financial year

The federal government ICT market continued to grow strongly in 2006/07 financial year, despite a significant downturn in spending within the Department of Defence, according to Government ICT market researcher, Intermedium.

The market grew by around six per cent during the 2006/07 financial year, a growth rate similar to that recorded the previous year.

While the total value of ICT contracts reported by federal government agencies increased, the number of ICT contracts fell by approximately 15 per cent during the 2006/07 financial year.

As a result, the average value of contracts rose to more than $256,000 in 2006/07, compared with $185,000 the previous year.

There was also a drop in the number of suppliers who secured federal ICT contracts, from around 2,200 in 2005/06 to just over 1,800 in 2006/07.

Intermedium director, Judy Hurditch, said the market has been sustained by strong growth in IT Services.

This category includes IT outsourcing, consulting, labour hire, training, and hardware and software support.

"The cyclical nature of ICT procurement, particularly where multi-million dollar projects are involved, always creates variations from year-to-year among individual agencies," Hurditch said.

"This year we've seen a significant decline in the number and value of ICT contracts reported by the Department of Defence. This may be due to issues arising from the Defence Management Review."

In 2005/06, Hurditch said defence accounted for a whopping 39 per cent of the market, whereas preliminary figures for 2006/07 show defence at 25 per cent of the federal government ICT market.

"Clearly any downturn in this agency has major implications for the overall market, and a number of suppliers have definitely noticed the effect," she added.

Intermedium will provide detailed information on The State of the Market 2007 at briefings in Canberra on October 31, 2007 and Sydney on November 2, 2007.

Intermedium is an independent advisory firm that helps companies to sell their products and services to federal and state governments.

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