IT services market nears double digit growth

A more austere commitment among IT executives to optimise current technology investments will help fuel nine per cent growth in Australia's IT services market this year, says new research by Gartner's market intelligence unit Dataquest.

Gartner Dataquest analyst for IT services, Minjoo Chon, said the global economic slump has shifted enterprises' business focus from generating revenue to reducing cost.

Such business priorities have pushed investment focus in IT services from new products to optimising existing IT infrastructures, said Chon.

In turn, companies' focus on getting value from established systems will propel the IT services sector forward, particularly in providing services for e-business, ERP and CRM projects, Chon said.

This year Australia's IT services market is on track to hit $11.9 billion, a nine per cent increase from 2001, according to Dataquest.

The Australian services market is also set to grow by 10 per cent in 2003, with revenues of $13.2 billion. This will climb to $14.7 billion in 2004, and $16.7 billion in 2005, said Gartner.

Professional services comprises the largest share of the services market.

Business process and transaction management (BPTM) in particular is the fastest growing segment. Gartner forecasts BTPM will grow from $3.7 billion in 2001 to $6 billion by 2005.

"Commenting on the drivers for growth in BPTM, Chon said: "Given the competitive business environment, companies [worldwide] are focusing on their core business processes, causing them to outsource their non-core business processes, particularly back-office functions."

Specifically, end-user organisations are increasingly looking to reduce costs by outsourcing HR or payroll functions, Chon said.

When dealing with suppliers and partners, companies are opting for outsourcing services for finance and accounting. Also, they are automating more of their supply chain activity by deploying payment processing technologies such as cheque and card processing systems.

Companies are also driving more efficiency in their B2B customer activity by outsourcing customer care services like call centres, said Chon.

Industries such as financial services, utilities and telecommunications, which operate in a more deregulated environment, now see stronger opportunity to achieve even higher cost efficiencies in operational management, and focus on their front-end processes, said Chon. For instance, in the financial services sector, outsourcing credit card processing systems is becoming more popular, and more telcos and utilities companies are outsourcing their billing systems and call centres, she said.

Meanwhile, the consulting segment suffered negative growth in 2001 due to the slowdown in Australia's economy.

The consulting arena has been flat because clients demanded bundled services under outsourcing agreements rather than engaging in separate consulting contracts, said Gartner.

Gartner expects consulting to grow by only 1.5 per cent this year, but said that segment would recover after 2002 because of a relatively strong Australian economy and a maturing local services market.

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