Market disruptions create opportunity for smaller players, says IDC

Survey shows that 80% of local CIOs intend to partner with multiple providers for ICT outsourcing

The future holds great opportunities for niche players in the local ICT market as large organisations engage with multiple outsourcing providers and move away from single sourcing.

Graeme Muller, country manager of IDC New Zealand, told attendees at IDC’s annual Directions conference in Auckland last week that 80% of respondents to a recent survey indicated they intended to partner with multiple providers for ICT outsourcing.

Earlier this year IDC surveyed 250 CIOs from New Zealand’s largest organisations about their use of IT services and purchase intentions. Eighty per cent indicated they intend to use a number of outsourcing partners across the business, rather than one, enterprise-wide service provider, he says. Only 36% would prefer a one-stop-shop provider, while 64% would prefer to select a number of best-of-breed partners.

As the big contracts are broken down there is a good chance for niche players to get their foot in the door, Muller says. This is just one example of disruption in the ICT market, he says, addressing the theme of the IDC conference.

In 2006 the New Zealand ICT market was worth over $10.6 billion, with hardware, software and services accounting for 47% of the market. IT services, with 23% of the market, has surpassed hardware as the major component, Muller says.

On the telecommunications side, there was strong growth in mobile and internet services, while the fixed line market continued to decline, he says.

“We are starting to see new regulations, increased competition and customer demand — all of these things driving the convergence of traditional IT and telco business models toward managed services,” says Muller.

“And there are some phenomenal growth rates, such as 32% for managed application performance, 34% for managed security services and 92% for managed mobile application services,” he says.

With all these disruptive forces in the market, strong brand recognition is more important then ever, he says.

The survey also asked senior IT managers to rank who they thought were the top ICT companies in New Zealand.

They ranked Gen-i, IBM, Hewlett-Packard, Datacom and EDS as the top five, followed by local company Axon in sixth spot.

Axon is able to “punch above its weight” thanks to its strong brand awareness, says Muller.

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