The Australian ICT Contractor Market: Inmates running the asylum

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  • 22/05/09Copyright 2006 Longhaus Pty Ltd - All Rights Reserved<number>22/05/09Copyright 2006 Longhaus Pty Ltd - All Rights Reserved<number>
  • 22/05/09Copyright 2008 Longhaus Pty Ltd - All Rights Reserved<number>
  • 22/05/09Copyright 2006 Longhaus Pty Ltd - All Rights Reserved<number>
  • 22/05/09Copyright 2008 Longhaus Pty Ltd - All Rights Reserved<number>
  • 22/05/09Copyright 2006 Longhaus Pty Ltd - All Rights Reserved<number>

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  • 1. The Australian ICT contractor market: inmates running the asylum Peter Carr Managing Director Sam Higgins Research Director ACS, June 2008 Copyright © 2008 Longhaus Pty Ltd
  • 2. Who is Longhaus? • Longhaus is a research publisher and • Strong international and technology advisory company with a specialty in research experience technology • Leading industry voice in press and • We publish business reports and media broadsheets advise executives and management across Australia's government, business, and consumer sectors on the application • Queensland founded and headquartered and direction of technology – Website: 5,000+ site visits per month • Our directional research reports are – Website: 12,000+ page visits per month utilised by both SME and major – Website: 7-10 minutes per visit organisations across the world – Blog: 3,000+ hits – Newsletter: 2,500+ distribution per month • Through our AAA (Access All Areas) – Downloads: 1,000+ per month advisory service we answer big business – 8,400+ SlideShare visits questions that most often pertain to customer, product or services markets – strong focus on government 2 Commercial-in-confidence
  • 3. Research Focus 3 Commercial-in-confidence
  • 4. CIOs know the ICT Asset Cycle is ending and its time to “keep the lights on” Post Y2K Synchronised ICT Asset Renewal Cycle Asset Replacement Renewal Business Planning As Usual 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Longhaus
  • 5. This means CIO are focusing on addressing skills and service management issues 5 Commercial-in-confidence
  • 6. Skills is a key concern when people consume a large portion of the typical ICT budget 6 Commercial-in-confidence
  • 7. And contractors represent a significant part of the labour pool Longhaus estimates that: • There are in excess of 105,000 ICT contractors in Australia • Representing up to 30% of the core ICT labour force • With a market value of over AUD$18 billion • Accounting for close to 20% of the ICT sector activity 7 Commercial-in-confidence
  • 8. Yet it is not the “big members” of the ITCRA who own the market 8 Commercial-in-confidence
  • 9. TOPIC 1: Contractors begin with the big brands, but end as sole traders Transition to Small Firm Transition to Sole Trader Transition to Co-operatives 9 Commercial-in-confidence
  • 10. TOPIC 2: The contractor market has seen a decade of change • Ralph Report • Workplace Relations • GST • Industry Consolidation • Tightening of employee • Outsourcing and rights Offshoring • Standardised Contracts • Labour Shortages • Indemnity Crisis • Publicly Traded Recruitment Agencies 10 Commercial-in-confidence
  • 11. TOPIC 3: Successful independent contractors are operating in networks Specialisation is the new market modus operandi • One size fits many is no longer valued by clients • But…many sizes help make a good fit – If not my solution for the client...then one from my trusted vendor partners Network Collaboration E.g. Constant joint Collaborative engagement. Silo E.g. Consortiums for tenders. Time 11 Commercial-in-confidence
  • 12. TOPIC 4: The Queensland economy is sensitive to changes in professional services • The Queensland Government ICT market is highly sensitive to the level of professional services work available. • An estimated 153 firms, are 100 percent reliant on government technology activity for income. • Professional services plus maintenance and support make up 61 percent of the total revenue of ICT industry to Queensland Government. • The majority of GITC technology suppliers earn from systems management technologies, database management systems and storage. • In relation to technology labour mix, over 34 percent of activity or staff effort was attributable to infrastructure activities (with 14 percent in networks and seven percent in data centres)
  • 13. Café Topics • What was your journey to professional contractor or consultant? • What are your strategies for addressing the changing IR landscape? • What is the value proposition of a virtual network from the members of your conversation / table? • How do you expect technology consolidation in the Queensland Government will impact the local contract market? 13 Commercial-in-confidence
  • 14. Selected Longhaus source material • The Australian ICT contractor market: inmates running the asylum, Trend, August 2007 • IT Spending and Priorities Study 2008, February 2008 14 Commercial-in-confidence
  • 15. Implications • Specialist networks + Social Sites + Cheap CRM – there is now a clear alternative to the job portals of Seek and MyCareer to find new opportunities. – it has never been easier to build and maintain a pipeline. • Converting staff from permanent to contract can help avoid hidden costs – once an employee is lost to the contract market, finding a replacement will be even more difficult. – Organisations should consider conversion of critical staff members onto contract arrangements at close to market rates. – Setting organisational goals or management KPIs around tenure or retention will help to measure and manage this process. • Co-operatives and employee based ownership is viable given market rates and margins – Continued profiteering with little value add by private firms and the need to maintain EBIT of 6-8% by large brands operating in the ICT contract market will ensure ongoing success of the sole-trader and small firms. – By comparison, these smaller firms operate on margins closer to 10-15%. Yet at these levels there is little cash available to invest in infrastructure or growth activities on the same scale as the large brands. – A clear alternative to the existing models is the use of co-operatives.
  • 16. Thank you Longhaus Head Office Level 30, AMP Place 10 Eagle Street Brisbane QLD 4000 Longhaus Research Centre 7/269 Abbotsford Road Bowen Hills QLD 4006 p: +61 7 3868 4796 f: +61 7 3303 8445 inquiry@longhaus.com 16 Commercial-in-confidence