Baby boomers choking AU$11bn IT outsourcing

Baby boomers choking AU$11bn IT outsourcing

Summary: IT outsourcing in Australia is set to crack AU$11 billion in 2008, according to Gartner, but Australia's dwindling IT baby boomer generation will cause problems

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IT outsourcing in Australia is set to crack AU$11 billion but Australia's dwindling IT baby boomer generation will cause problems with both outsourcers and in-house IT projects.

Research from analysts Gartner found that the Australian outsourcing market is set to grow at a rate of 4.7 percent in 2008, with skills shortages pushing more companies to turn to offshore providers.

"We're going to see staff shortages because a lot of experienced IT professionals are ageing," Gartner research vice president Jim Longwood recently told ZDNet Australia.

"IT is one of those areas we're seeing the effects of an ageing population. In one sense, it will be inevitable to see a higher utilisation of offshore resources in the future," he said.

Historically, offshore labour supplies could have solved skills shortages, however these may become less attractive to Australian organisations in the future: "Staff shortages for internal and outsourced projects are a growing problem in Australia and in most other countries in the Asia Pacific region including India, New Zealand, Thailand and even China for some specialised skills and experienced staff," said Longwood.

Indian IT skills in particular are expected to become more difficult to access due to upward pressure on local wages.

"Strong demand is putting a strain on the available Indian labour force, while staff attrition and cost increases remain high," said Ian Marriott, research vice president at Gartner.

Marriot expects this situation to cause sophisticated buyers to seek "multi-country" offshoring strategies, allowing them to choose foreign suppliers that can work with the organisation's primary time zones.

Gartner expects the trend towards multi-sourcing, where contracts are divided between several suppliers, to continue, although for some, contract management will remain a major problem.

"For many, their IT sourcing strategies and governance structures are still immature ... or misaligned with enterprise objectives," said Kurt Potter, research director at Gartner.

"In extreme cases, the lack of needed trust and control to optimise the outsourcing relationship results in deal failure," he added.

Australia's largest bank, Commonwealth Bank recently announced it will move to selective sourcing, dumping incumbent EDS from its application services work and hiring IBM and Tata Consultancy instead.

Others using multi-sourcing strategies include Australian Customs Services, the South Australian government and the Australian Tax Office.

Gartner's Longwood expects labour shortages to change the way organisations fulfil the demand for application development work.

"There's a lot of talk about enhancement and transformation -- that's happening at the Department of Immigration, the ATO with IBM as well as AGL's transformation," he told ZDNet Australia.

"Because of the economic environment [these organisations] are doing enhancement projects such as ERP upgrades for SAP or Oracle. These new business systems being implemented will drive more application outsourcing and is forcing clients to look at new delivery models," he said.

Topics: Outsourcing, CXO, IT Priorities, China, India, IT Employment

Liam Tung

About Liam Tung

Liam Tung is an Australian business technology journalist living a few too many Swedish miles north of Stockholm for his liking. He gained a bachelors degree in economics and arts (cultural studies) at Sydney's Macquarie University, but hacked (without Norse or malicious code for that matter) his way into a career as an enterprise tech, security and telecommunications journalist with ZDNet Australia. These days Liam is a full time freelance technology journalist who writes for several publications.

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9 comments
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  • What skill shortage?

    It's not a skill shortage.

    It's a student IT shortage!
    anonymous
  • shortage!!

    They need to start employing people that don't have a qualification, Most IT guy can do the work if given the chance to prove it.
    anonymous
  • Reap what they sow

    If companies would stop selling out our industries in favour of boosting the economy of India then there would be more incentive for Australians to gain qualifications and experience in the IT sector.

    In years gone by I have given thought to entering the IT sector and each time decided against it. Why should I spend thousands of dollars gaining qualifications to support and boost my experience levels just to sit around waiting for jobs that only last for short times.

    The IT industry has to stop listening to bean counters otherwise the situation is not going to improve. Some may believe this suggestion to be an ambitious way of doing things but that is how it is.

    I am in the building/engineering sector and the jobs are far more long term and not susceptible to the mood swings of accountants.
    anonymous
  • re: Reap what they sow

    Yet another industry killed by bean counters who do care about quality or security..just the bottom line.

    I was in the IT industry for over 30 years and saw the transfer of jobs overseas for vital software projects. I have never seen a successful conclusion to any outsourced project. Maybe others have.
    anonymous
  • Seeking other alternatives

    India has remained like a monopoly for out sourcing. but have you thought about the alternative labour from mega knowledge in Africa and particularly in Kenya. I have an out sourcing firm here and most American Companies have chosen Kenya as the hub of out sourcing. Now with the development of the transindian ocean fibre, this is opening up the communication barrier and network availability to allow for offshore jobs from many countries to be done here in Kenya.

    It has been the best place, the staff are very dedicated, we work two shifts to ensure that our clients abroad keep up with the time differences, we have online collaboraive tools that allows for ease of project management with our clients. Besides the few political issues that came up after election and so far peace has been restored and business is back o normal. Companies have reopened and people are back to work, but that not with standing, companies in Australia can save significanly by choosing other alternatives other than India.
    anonymous
  • How real is this really ?

    Problem: Employers wont assist in training or wont train and expect others to provide ready made IT staff.
    Trainees find it hard to enter the workplace because employers expect too much previous experience.
    The experienced trained staff has been a so called issue in IT since the beginning - nothing new.

    As someone already mentioned ; why spend many dollars skilling up to find the accountants only look at the dollar savings and as a consequence increase the wealth of Inda and the likes.
    The Govt should be more selective about issuing the foreign worker permits.
    You dont need a PhD in Network security to be a basic Systems Admin. the preselection criteria for many jobs is in advance of the actual job requirement.
    We keep sending jobs overseas who is going to pay the tax required to keep the pollies in Canberra, Oh I know, some Canberra based public servant will introduce a "Project Tax" .

    This whole lack of experienced staff issue is trotted out by the press when they are having trouble filling media content.
    anonymous
  • get off this wagon

    There are skilled IT professionals here in Australia.
    It just means that you will have to pay them properly and not import "skilled" migrants on working visa's to work for under $50k a year.

    If businesses werent so lazy and hired themselves staff rather than allow contracting companies to totally control the market then AU It might have a chance.

    Why would i work for $35 an hour when the "contracting company" gets $260 ?

    Remove these blood sucking Contracting companies who call for more OS IT outsourcing > that sit wedged inbetween the IT professionals and the people who pay the bills.

    Wake up.
    When some big companies win a bid for an IT project......see how many are individual contractors and how many work for the big name company.
    anonymous
  • seeking other alternatives

    We run outsourcing firm in Indonesia serving local client. It is an ideal place to serve offshore clients.
    anonymous
  • A problem of their own making

    I once worked for an outsourcer - and I never, ever will again. I'd rather be digging ditches than work for one of these organisations.

    Outsourcers treat people like garbage - so what do they expect? People will vote with their feet. Goodbye and good riddance you clowns.
    anonymous