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ITNewcom MinterEllison Technology Consulting has released its Insights in Business IT Investment - Australia and New Zealand 2018 report. The study interviewed Australian and New Zealand industry participants for technology investment insights. The findings reflect the sourcing and supplier landscape, behaviours and trends in the region.
More than half of the respondents forecast an increase in IT spending as they look to deliver value by improving customer and staff experiences via digital transformation.
Major business initiatives are driving the growth in IT investment, as organisations realise they have much to do if they want to enable new opportunities for staff productivity, agility, speed to market and delivering better experiences to customers.
From private and public sectors, large-scale IT investment is establishing fresh channels, opening up markets, improving services, and lowering the 'customer churn'.
Such projects are particularly important to the public sector; with digital government initiatives focused on improving service to citizens. Indicative of this is the current and ongoing focus toward development of applications.
The opportunity to capture some of the increased spend is available for IT service vendors. To achieve this, they will need to stay close to their customer's business, understand the market, and be an insightful, innovative partner who demonstrates real value.
The long-standing gradual growth of outsourcing as a proportion of IT spending looks set to continue. However, participants indicate that ‘mixed’ sourcing (combination of insourced and outsourced services), remains the dominant IT sourcing strategy, particularly in the largest IT service groups – applications and
infrastructure.
This feedback reflects the Australian and New Zealand markets steady increase in spend and trust towards outsourced services, a trend that has been visible for two decades.
Perhaps unsurprisingly, the degree of outsourcing in the public sector is somewhat less than in the private sector, but not in an overwhelming way.
A steady increase in the proportion of total IT spend that is outsourced indicates that good outsourcing opportunities exist for reliable IT suppliers who have the right product range and the flair to get to know their customers.
Respondents are aware of the growing number of security threats, and are combatting this by enlisting outside help.
A good proportion of respondents is using outsourced security services. The steady increase in IT security outsourcing is a continuing trend, with respondents expressing doubt in their own ability to attract and retain sufficiently skilled staff in a world where ever evolving threats require an army of specialists.
Both public and private sectors are calling for suppliers with the right mix of security talents and a commitment to develop a trusted brand. Risk audit and vulnerability testing are most frequently outsourced, particularly in the private sector.
IT suppliers with the right skills and a trusted brand will find good growth opportunities across all aspects of security services in both private and public sectors.
Respondents are getting smarter about offshoring, benefiting from a mature industry, which has now reached significant levels in Australia and New Zealand and created savvy customers.
A significant proportion of public sector respondents are considering offshoring application and infrastructure services. Converting those considerations to actual deals may prove tough, however.
Overall, our results indicate some growth in offshored services, but the competition for these services will increase.
Ironically, at a time when there is more competition in the market for offshored services, there is less demand which means there will be some attractive deals on over.
The established Tier 1 technology suppliers remain firm-footed and the most prominent players in the IT outsourcing game as clients rely on these suppliers to minimise delivery risk.
However, their dominance may be declining, with respondents indicating many of their expectations are not being met by these broad-spectrum players, as shown by negative Net Promoter Scores (NPS). The largest traditional providers with broad offerings fare the worst.
By contrast, overwhelmingly positive NPS reflect that organisations tend to be satisfied with the performance of those Tier 2, Tier 3 and cloud providers that they have chosen as strategic for their business.
The NPS is typically used to gauge customer's overall satisfaction with a company's product or service. If customer satisfaction is a key driver to growing market share, then Tier 1 providers would do well to take heed.
Our findings show soft skills are even more important than price competitiveness.
Reliability, flexibility and intimate understanding of the 'customer's customer' are key attributes when selecting suppliers.
A significant portion of respondents expressed their preference for the flexibility and intimate knowledge of their business that Tier 2 and some Tier 3 suppliers over. These supplier attributes are in line with respondents' desire for qualities beyond pure technical capability.
Furthermore, the smaller, often privately held Tier 2 and 3 suppliers, are likely more nimble in their offering.
While reliable delivery and technology capability are obvious attributes that customers seek, differentiation can come through better understanding of the customer's business and the ability to deliver genuine and valuable innovation to that business.
On 1 July 2017, ITNewcom became part of MinterEllison, one of the largest, full service, independent law frms in the region.
We understand that clients are increasingly looking for technology solutions which reduce their risk, are more cost effcient and easier to administer. The combined ITNewcom / ME offering will give our clients the ability to access seamless end-to-end consulting and legal solutions to achieve sophisticated IT and technology outcomes.
We are now able to over unprecedented performance through the integration of strategic technology advice, financial analytics, benchmarking, strategic negotiation, dispute resolution and human resource support.
Please contact our team to discuss your IT legal and consulting needs.
Brendan is a recognised industry leader in the IT benchmarking and IT sourcing advisory market. He has over 30 years' experience in the IT industry and has advised more than 100 organisations on major technology initiatives.
Anthony is an internationally recognised technology and telecommunications expert, with a wealth of experience in commercial law, particularly in the financial services and communications industries. He leads MinterEllison's Technology Practice.
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