Strong growth for outsourcing market

THE worldwide outsourcing market will continue to grow at a healthy 8.1 per cent in 2008, while the Australian market will expand at a more modest 4.7 per cent to A$10.9 billion for the calendar year.

But despite the strong market acceptance of outsourcing practices, Gartner warned customers that hiring outside ICT expertise was not without complications.

“Although organisations often have fundamentally sound procurement departments to initiate outsourcing contracts, for many, their IT sourcing strategies and governance structures are still immature, lacking altogether, or misaligned with enterprise objectives,” said Gartner research director Kurt Potter.

“Because they lack the basic building blocks for successful vendor management, expected cost savings and other benefits are difficult to obtain,” Mr Potter said. “In extreme cases, the lack of needed trust and control to optimise the outsourcing relationship results in deal failure.”

Although outsourcing continues to grow, publicly reported IT outsourcing (ITO) and business process outsourcing (BPO) contract values decreased overall by 50 per cent worldwide in 2007, Gartner said.

Companies are outsourcing more, but electing to use a multi-provider strategy and more deals are simply smaller in size, with many of these deals not large or ground shaking enough to report.

“In 2008, we expect to see some early adopters of multisourcing to consolidate around fewer providers to reduce their service integration costs and harvest the benefits of better relationship management with fewer strategic suppliers,” Mr Potter said.

In 2007, Australia enjoyed a buoyant economy resulting in outsourcing business growth for the many multinational and local as well as offshore service providers who have a growing in presence in Australia, according to Gartner research vice-president Jim Longwood.

“Australia is a mature market in terms of outsourcing, where enterprises are now signing second- and third-generation deals. In 2007, they moved toward more-selective outsourcing and multisourcing deals, where incumbent service providers usually retain core infrastructure services and specialist providers take over peripheral services. The business process outsourcing (BPO) market for back-office functions also started to take off, mainly in the transportation, telecommunications and financial services sectors,” said Mr Longwood.

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Fuji Xerox acquires Kaz business process unit

FUJI Xerox has boosted its Australian business process outsourcing resources with the acquisition of the BPO operation of Kaz Group, the wholly-owned IT services subsidiary of Telstra.

Fuji Xerox managing director Andy Lambert said the Kaz BPO division would be integrated in to the Fuji Xerox Global Services unit.

The terms of the sale were not disclosed.

FXGS general manager Andy Berry said the acquisition would give the company the opportunity to leverage its existing strengths in outsourcing and document management.

“The purchase of the KAZ BPO division strengthens our service delivery capability, increasing the value delivered to both our own, as well as to KAZ BPO customers,” Mr Berry said.

“We expect seamless business continuity for KAZ BPO customers and foresee long term growth for staff and customers alike.”

Kaz managing director Mike Foster said the BPO unit was not considered core to the company’s operations and that clients would be better sold with the unit in the hands of a specialist.

“We considered a number of options for the KAZ Business Process Outsourcing (BPO) division and determined that as it was not core to our ICT services strategy, it would be in the best interests of our employees and our clients to take a decision now to sell the business to Fuji Xerox Australia,” Mr Foster said in a statement.

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