Friday, November 13, 2009

Australian ICT Services Industry - The Opportunity

As a keen analyst of the Australian ICT industry, I see huge gaps in the market place and significant opportunity for the strategic, yet savvy IT Services organisations prepared to chart a new and somewhat a different course.

The consolidation that has happened in the last 10 years have created new opportunities with formidable industry players being gobbled up both in the applications and in the Infrastructure sphere. It has happened in the Enterprise & the Mid Tier market place.. creating a the vacuum, in fact a huge vaccuum.

Out of the gaps I see the greatest is in the mid tier enterprise and commercial market, which is commonly described in the industry as 500-3500 seats. Australian corporations between 500-3500 desktops/laptops/workstations. These gaps have been caused by many including, Volante after the acquisition of it by Commander, the self destruction of Commander it self a few years later, Acquistion of Alphawest by Singtel Optus a few years earlier,  a lame KAZ (& Aspect) after its acquisition by Telstra and several other smaller mid tier players acquired by the likes of Oakton, SMS, UXC and others. Another segment of the market has departed due to poor management, lack of funding, economic circumstances or a combination. Entropy is I guess the law of nature yet is speedened up by poor management and turbo charges by poor management (case in point Volante after Commander acquisition).

While the top end space is well looked after and is fiecely competed in, by the likes of IBM, EDS CSC, HP & a few Indian firms, namely TCS, Infosys & Wipro. I believe the sector below that is some what neglected and will have significant opportunity for a dynamic and robust company with a sound customer centric , talent focused approach to the market. Such a company will attract abundant talent from several large and inflexible organisations that have become lazy, inefficient and often incapable in the practices of real human talent management. HR has become a much delegated function with no real teeth or integrity in many IT organisations in this country.

Good talent will always attract great customers in numbers as the delivery of quality professional services need talented, committed and passionate people, not just bodies, certifications and methodology.

Customers are sick of cost over runs on projects, mediocre service, poor advice, and often uncommitted people, and the constant barrage of sales people, selling the same commoditised products and services with little or no differentiation, not understanding the customers business, adding little or no strategic value to the corporation just eating up valuable time of executive and management by countless unproductive meetings..

I am surprised how just a few IT services organisations have architected and modelled their internal organisational structures around the client organisation, while the majority stick to product centric silos that are designed to "push" product yet prove vastly counter productive due to lack of alignment with client organisations. The resultant internal competition and bickering that happens between these silos create huge inefficiencies, reduction in focus and add significant cost to customer. The consolidation that has taken place in the industry in the last 10 years and the resultant internal focus due to understandable behavioural issues over territory and jobs haven’t helped here.

It wasn’t long ago the top end of the market was dominated by IBM, EDS, CSR followed by HP, Fujitsu and Unisys in the enterprise sector. Yes that was until HP acquired EDS in May 2008, and Fujitsu acquired the Telstra owned KAZ in March 2009. Yes, Kaz was a respected mid tier player who had built a solid reputation until Telstra. Kaz were well positioned to dominate the mid tier sector, then Telstra acquired the company infused it with Telstra management and completely changed it's culture and with that it's competitive edge.

I believe the time is nigh. For dynamic organisations and investors to rise up and take advantage of the opportunities created, I believe there is several hundred million dollars of value to be created if not a billion. It will however take vision, new thinking and good management. It will most importantly take courage. The courage to make the tough calls when cross roads are met, cross roads where courageous leaders will not compromise when it comes to treating its customers and its people right.

Dinesh De Silva is CEO of Nexgroup Asia Pacific, he and his team are available to speak to media , organisations or groups as a keynote / guest speaker on above. Contact him +612 8003 3342, via twitter @dineshdesilva or 

NexGroup Asia Pacific, is a World Class Outsourcing business, providing Software development & Accounting, Finance and Legal BPO Services.

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  1. This is an excellent article, it also certainly higlights the stupidity of M&A (Merges & Acquisitions) as far as shareholder value is concerned.

  2. thanks for your comment appreciate the sentiments

  3. Not all M&A activity destroys shareholder value, but unfortunately the Australian IT services market is a case study in how _not_ to do it (especially the Commander/Volante fiasco).

  4. Paul, thanks for your feedback, agree not all M&A destroy shareholder value, CISCO systems are a great example of it. Scale for the sake of scale can go horribly wrong as we have seen.

  5. M & A are purely transactional activities however the value is realised by the leverage they create which is still a mystery for most organisations. It seems that M & A is an activity where select few execs chose to appropriate shareholder value in the short run at the cost of the organisation and shareholder value in the long run. I am yet to encounter an acquisition or merger where the process of M & A itself created value.
    Good work....
    ...a mysterious friend

  6. Hi Anonymous friend, thank you for your feedback, which is much appreciated. I agree, M&A are valuable if they are done for the right reasons not just to get bigger and uglier,for the wrong reasons to achieve short term goals...
    Cisco Systems is an example of how to do it right... and if done right and executed well it can be a powerful tool. But the most powerful tool in the hands of the ordinary can be a dangerous weapon.