Former CIO slams top tier service providers

Big IT outsourcers don't always provide value for money, niche competitor claims. Rodney Gedda reports

AN EX-CIO has scorned the cost and service levels offered by the multinational IT consulting firms, labelling them “bloodsuckers”.

Marco Tapia, former CIO of P&O Ports and now managing director of Sydney-based IT services firm PicNet, says customers are getting the “rough end of the pineapple” from the tier-1 outsourcers who “want to suck every drop of blood you have.

“There is a huge degree of dissatisfaction with large suppliers [who are] sending a lot of work overseas, which is a bigger problem,” Tapia says.

“People are getting sick of [offshored] service and are tending to use small companies like ours which bend over backwards to make [customers] happy.”

Last month an online poll by Computerworld Australia asked whether organisations would try smaller IT services firms in 2006 and 57%of respondents answered, “Yes, the tier-1 [companies] are too slow and expensive”, while 14% are not prepared to “take the risk”, and 29% already selectively use smaller firms.

Tapia agrees with the survey results, saying it is a “good sign” but doubts any shift towards tier-2 and tier-3 suppliers will occur this year because it will “take longer to realise the poor level of service” now received.

“If I had a big contract, I would break it up to small suppliers and bring management control in-house,” Tapia says, adding he would get better service and value. “Companies can save 50% because an hourly rate [of a tier-1] can be A$200 (NZ$220) or more. Even if it is 40% less, you will save a lot.”

PicNet is a 16-person firm with clients such as the Commonwealth Bank.

Tapia believes it is particularly difficult for smaller firms to win government contracts because of a “flawed” tendering process.

“It’s very difficult for companies like us to compete in government because the size of tenders is so enormous only the big companies can afford to have people working on them,” he says.

“The tendering process is a disaster [and] government management of IT contracts is totally wrong.”

PicNet has been a government-endorsed supplier for two years and in that time has answered two tenders, which, in Tapia’s words, “have been a complete waste of time.

“A tender for a A$2 million (NZ$2.2 million) project is the same size as that for A$15,000,” he says. “Smaller players cannot compete in that environment [because] big companies can spend more time answering the tender than doing the work.”

Capgemini Australia vice president of technology services Bradley Freeman disagrees with Tapia’s claims, saying there is room in the market for both big and small providers.

Customers should be using them for “totally different purposes”, he says, adding that tier-1 companies give the mid-tier providers sub-contracting opportunities they would otherwise miss out on because of the sheer scale of the services contract.

Freeman said this is most obvious in government work where Capgemini “has the machinery” to do the tendering and is happy to bring in a consortium of niche suppliers.

On the question of cost, Freeman says on an average daily rate basis Capgemini is competitive with any tier and “we rarely hear about expense as an issue”.

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