Tuesday, July 01, 2014

ICT Sourcing Trends

Greetings from the CSIRO Discovery Centre in Canberra, where the ACS is holding its Branch Forum on "ICT Sourcing Trends" with Debbie McLaughlin, Partner, ITNewcom and Alan Hansell, IBRS Pty Ltd.

ITNewcom have been surveying IT spending in large organisations in Australia for the last 13 years. Their latest study found three themes, which Debbie commented would not be a surprise to IT professionals: organisation re taking advantage of disruptive technologies, who is doing the buying is changing changing and new suppliers are emerging. Organisations are intending to invest in Software as a Service (SaaS), Mobile platforms in the next two years. SaaS is being used for human resources and similar applications.

There are now seven large Indian providers in the Australian market, as well as Amazon and Google providing services. 

Debbie commented that large Australian organisations have difficulty buying from small start-up IT companies due to the risk of them going out of business. However, I suggest this is unavoidable: if you want competitive advantage, then you have to take a risk. One way to lessen the risk is to use open source, so that if one small company goes broke, you can get another to support it.

The trend is for IT purchasing to take place outside the IT department. There is a slight trend to more outsourcing in the private sector. Public sector has less outsourcing of applications, but significant outsourcing of telecommunications. The private sector outsources 60% of software development, mostly to India. The customer satisfaction with Indian suppliers is increasing. About 30% of public sector organisations have sent part of their software development offshore (mostly state governments). There are obvious security constraints on government sending development outside Australia. Perhaps there is more scope for those offshore companies undertaking development in Australia.

On a visit to Si Lanka I gave a talk at Virtusa and had a tour of their outsourcing operation. They compete with India.

Alan Hansell commented that state governments are focused on new service delivery models. Also he commented that governments and banks do not like to move their data offshore. I was very surprised to Alan say that software development are growth areas. Alan commented that CIOs are increasingly relying on external advice (good for me as a consultant, but may not be good for all organisations). Another growth are is data security.

Alan pointed out that the National Computational Infrastructure at ANU is a centralised $500M facility, while state governments are decentralising. He saw this as a conundrum, however as I see it academia (and ANU in particular) has long experience at hosting successful IT operations, whereas State Governments (Queensland in particular)  have had limited success. Alan commented that the Queensland government was trying to sell CITEC, their shared services IT centre, but it would not be very attractive to the commercial sector.

Alan pointed out that SaaS is not flexible: customers must use the service as-is, without customisation. Also the customer is locked to the provider. As commented earlier, open source software can reduce the lock-in.

Alan warned of less IT work in Canberra, and 20% drop in contracting rates. Also he suggested there would be fewer computer science students.

Alan suggested areas to be in demand are:  .Net development, test analysis, security, Business Intelligence and Data Analytics. Perhaps universities should offer more courses in these fields.

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