Services market leans back after year of mega-deals

Despite fears the US recession will adversely affect Australian IT, the outlook for the services market is rosy, according to new figures.

In 2011, the Australian services market will have grown at a compound annual growth rate of 4.4 percent to AU$15 billion, according to analyst house IDC.

"Executives are turning to IT services firms to assist with issues including Green IT, SOA (Services Oriented Architecture), Web services, selective sourcing -- including offshoring -- and mobility services," Margaret Banaghan, research manager IT Services for IDC, said in a statement.

Aprajita Sharma, IDC research manager for outsourcing and BPO, told ZDNet.com.au that last year saw a lot of mega deals, with many companies extending a contract with the same outsourcer or considering others.

"Our worldwide contracts database shows a very dominant trend towards mega-deals approximately every three years," Sharma said. "In the short term, we are likely to see a decline in global mega-deals, both in terms of number and the size."

The drop in mega-deals will see the outsourcing segment -- 50 percent of the total IT services market -- become more competitive, Sharma said, especially in pricing. Growth will come from companies outsourcing complex, high value services, moving from only outsourcing non mission critical services, she said.

A good portion of outsourced services will go overseas said Sharma. "Most of the mega deals that are happening have some offshore component," she said, adding that a contract of the same value overseas will generally be cheaper.

How much it is possible to outsource depends on the kind of applications and the kind of business, she said. "If something has 100 percent up time it's not likely that the providing of that service will be 100 percent or 80 percent outsourced," she said.