Federal Government ICT market settles after 2009 peak

Some $4.4 billion in contracts signed during 2009-2010 financial year, with lack of large infrastructure and telecommunication deals to blame.

Despite recommendations outlined in the 2008 Gershon report to cut back on ICT spending, the Federal Government’s ICT market peaked at $5 billion in 2008-09, with recently released data indicating it has returned to normal levels in 2009-10.

The data from Intermedium indicated a total of $4.4 billion had been signed in contracts for the financial year 2009-10, a significant fall the market research company attributed to a lack of large infrastructure and telecommunication deals.

Although IT services remained the largest market segment, accounting for $2.45 billion or 56 per cent of the market, it fell 12 per cent on the previous year, according to Intermedium.

Outsourcing agreements in 2009-10 amounted to only a third of the value of the previous years, at approximately $500 million.

“This has resulted in very few companies participating in the IT services market being able to better their 2008-09 sales results, with most experiencing major drops in their total value of contracts signed," managing director, Judy Hurditch, said in a statement.

“Compounding this, in 2009­-10 there was not only a relative lack of new infrastructure outsourcing deals to be won, but a significant number of multi-year systems integration projects also wound down, mostly without any emergent projects to replace them in value, scale or scope,” she said.

According to Hurditch, the 2008-09 year was referred to as a ‘tale of two markets’ as large deals drove the market’s figures up, while the rest of the market fell.

“For 2009-10, we can definitely point to the fact that all IT services suppliers were feeling the market perform in the same way. Broadly, there has been reduced opportunity to secure new business,” she said.

In addition to IT services, telecommunication also fell by 54 per cent in the year 2009-10.

“For the 2010-11 year and beyond we are likely to see some major structural reforms in the telecommunications market, with the Australian Government Information Management Office, (AGIMO) pushing ahead on co-ordinated procurement initiatives,” she said.

Despite a lack of telco and infrastructure arrangements in the last financial year, contract values in these areas are expected to pick up in the forthcoming financial year, as the Department of Finance and Deregulation announces tender results for consolidated telecommunications management and data centre panels as part of the Gershon Review recommendations.

Hardware recorded the fastest growing figures in the entire market from 2008-09 to 2009-10, with a 34 per cent growth, while software increased by 15 per cent, with a value of $750 million in 2009-10.

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