IDC Names Top IS Outsourcing Vendors

NORTH SYDNEY – AUGUST 22, 2001 – The big three of Australia's outsourcing scene continue their market dominance amid signs that opportunities are beginning to open up for others, according to IDC Senior Analyst for Outsourcing, Kathy Benson.

 

In IDCs new report, Australian IS Outsourcing Competitive Positioning, Strategies and Capabilities, Ms Benson identifies the leading players and discusses strategies for success in this lively and highly lucrative market space.

In Australias Outsourcing market space, IBM GSA, EDS and CSC continued their dominance in 2000, accounting for approximately 73% of the total IS Outsourcing market. Table 1 highlights the most significant IS Outsourcing vendors in Australia and their IS Outsourcing revenue in 2000. Revenue numbers are based on IDC estimates.

Outsourcer Estimated Outsourcing Revenue ($M) Market Share (%)

IBM GSA 980 33%

EDS 708 24%

CSC 450 15%

Source: IDC, 2000

IDC ranked the top 10 Outsourcing providers by 2000 revenue. The top 10 are IBM GSA, EDS, CSC, Advantra, Compaq, Fujitsu, Unisys, HP, KAZ and Citec.

Although we believe that at least the top 6 will remain in the current positions, the doors are open for new kinds of players, not only the global organisations that traditionally dominated the Outsourcing landscape said Ms Benson.

In 2000, the Australian Outsourcing market grew to approximately $2.9 billion, an increase of 16% over the previous year. IDC does not expect this growth to slow down in 2001 and is forecasting the market to reach $3.6 billion. IDC expects that by 2005, the Australian Outsourcing market will increase at a compound annual growth rate (CAGR) of 11.7% to reach $5.1 billion.

The scope of services provided by IT services companies has evolved. An industry that began with the delivery of support services centred around products and then progressed to the offering of system-related services now includes the delivery of business services that rely on some element of IT. In fact, today it is more and more difficult to identify IT service offerings that do not involve the solving of a business problem, further commented, Ms Benson.

As a result, disparate firms – from hardware maintenance organisations to payroll processing firms to Internet services pure-plays – participate in what we call the IT services industry. At IDC we believe that there will be more entrants as technology companies look for lines of business with greater margins.

Most of the leading IT services organisations also provide end-to-end solutions centred around ecommerce, enterprise resource management, knowledge management, supply chain management, customer relationship management, security services, data recovery, and mission-critical services, all of which include packaged applications that highly integrate IT into the business process.

We are noticing a shift in application and infrastructure delivery models today with the emergence of Application Service Providers (ASPs), infrastructure service providers, and storage service providers. The main characteristics of these models, very much like telecommunications today, are the following: one-to-many, pay-as-you-go, and remotely delivered.

Given the growing complexity of IT services engagements, vendors today recognise that it is extremely difficult to do it all. Instead, the preferred approach is to satisfy their client's requirements by building alliances and partnerships with other vendors. Developing complementary strategic alliances means gaining competitive advantage, and IDC believes executives of successful firms will be those that adopt a systematic approach to selecting the winning partnerships to maximise value.

About IDC:

IDC is the foremost global market intelligence and advisory firm helping clients gain insight into technology and eBusiness trends to develop sound business strategies. Using a combination of rigorous primary research, in-depth analysis, and client interaction, IDC forecasts local and worldwide markets and trends to deliver dependable service and client advice. More than 700 analysts in 43 countries provide global research with local content. IDC's customers comprise the world's leading IT suppliers, IT organisations, eBusiness companies and the financial community. Additional information can be found at http://www.idc.com.au