Services market to hit $15b in 2011: IDC

THE Australian technology services market will grow at a compound rate of 4.4 per cent annually to reach A$15 billion by 2011, according to research IDC, though skills shortages will present the sector with ongoing challenges.

The IDC report found the Australia services market in 2007 was worth $12.6 billion.

IDCs IT services research manager Margaret Banaghan said the outlook for the broader Australian economy and for IT services remains “buoyant” and that end user organisations were addressing a range of business issues that would underpin growth in the services sector.

“Executives are turning to IT services firms to assist with issues including Green IT, SOA (Services Oriented Architecture) and web services, selective sourcing including offshoring and mobility services,” Ms Banaghan said.

Meanwhile the report found the outsourcing market in Australia, which is approximately 50 per cent of the total IT services market, was as vibrant and dynamic as ever.

IDC research manager for outsourcing and BPO Aprajita Sharma said there would likely be a decline in so-called “global mega-deals” in the short-term, but that this would “result in increased and heated competition in the IT outsourcing segment, especially on the pricing front as players tread on competitor territory.”

The report said skills shortages in the services industry continued unabated, and that as a result “smaller players are finding themselves in greater demand by government and business clients alike, as they often possess skills in a particular technology that have become scarce.

The report also found that market consolidation activity in 2007 was solid. There was a healthy rate of acquisition activity in the Australia IT services arena over the past year which is expected to continue over the next 12–24 months as players strive for growth and an extension of skills or geographic reach.

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Skilled migrants to provide skills relief

IMMIGRATION Minister Chris Evans has announced an expansion of skilled migration to take some of the inflationary heat out of the employment market.

While the scheme announced by Senator Evans takes broad aim at the mining and construction industries, the measures – which include the expansion of 457 long-stay skilled visas – should also have a positive impact in the ICT sector.

As an immediate measure, the Skilled Migration program will be increased by 6000 places in 2007-08. The increase will be made up of permanent employer-sponsored visas and General Skilled Migration visas.

The additional 6000 places will bring to 108,500 the total number of permanent visas granted under the Skill Stream of the migration program this financial year.

Senator Evans has established an external reference group to investigate skill requirement, including the expansion of the Temporary Business (Long Stay) visa (subclass 457), which allows businesses to recruit skilled labour from overseas for temporary entry to Australia for between three months and four years.

The reference group will advise the Minister on current and anticipated future employment trends and the need for overseas recruitment in the identified sectors.

“The group will provide me with specific advice on ways to ensure the temporary work visa system, also known as the subclass 457 visa program, operates as effectively as possible in contributing to the supply of skilled labour,” Senator Evans said.

Senator Evans said he was also expanding the working holiday visa program to provide relief to Australia businesses. Last financial year there were 126,000 people on working holiday visa in Australia. And the number expected to extend their visa by a year is expected to soar this year by more than 50 per cent to 10,000.

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Tanner unveils tech apprenticeships

FINANCE Minister Lindsay Tanner has announced a $15 million ICT apprenticeship program for government as the Commonwealth moves to address a current and projected public sector tech skills shortfall.

The four-year Australian Public Service (APS) program will deliver up to 60 jobs for young people with Government agencies and will be coordinated by the Department of Finance and Deregulation, Mr Tanner said.

“This programme directly addresses the ICT skills shortage in the APS and provides real career opportunities in the technology sector,” Mr Tanner said. “It is all about investing in skills and investing in young Australians.”

“The initiative also highlights the benefits of agencies working together to provide opportunities, produce efficiencies and develop important workforce skills.”

Work placements and the academic component of the program will begin this month.

During their training, apprentices will receive important ‘on-the-job’ experience with an APS agency and graduate with a nationally-recognised qualification - providing them with the essential foundations to pursue an ICT career in the APS.

The initiative has been welcomed by the Australian Computer Society, the peak professional body for the tech sector.

“Maintaining Australia’s global competitive position will depend on the high levels of ICT awareness and knowledge in the general population – people taking on ICT careers and understanding ICT as part of their regular career skills,” ACS president Kumar Parakala said.

“The ACS has long advocated that we would like to see the Government, industry and the tertiary sectors work more closely together to develop initiatives to attract young people into an ICT career,” he said.

“The APS Program is a positive step in the right direction, matching the skills being developed to those the Governments need. We look forward to seeing more apprenticeships, both in the public and private sectors, being made available to graduates.”

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Sustainability key to ICT future: AIIA

INDUSTRY sustainability issues related to ICT skills must become a central focus in 2008 if Australia is to keep a healthy technology sector, according to the peak industry lobby, Australian Information Industry Association.

AIIA chief executive Sheryle Moon said that while environmental sustainability was the focus of media attention – and an important touchstone for the industry – technology needed to look at a broader concept of sustainability.

There were clear threats to the sustainability of the ICT industry, most of which were driven by three factors: falling ICT student enrolments, an increasingly competitive labor market, and the imminent retirement of the baby boomer generation, Ms Moon said.

While the reduction of ‘power in and carbon out’ is the focus of world media, the ICT industry needs to think more laterally about sustainability to remain economically viable and intellectually relevant, she said.

“Traditional ideas about sustainability are becoming too limiting as ICT enters a business era that is being slowly depleted by an industry brain-drain,” Ms Moon said.

“Retaining skills must become an integral part of the way that we think about environmental design in ICT, alongside all the things that we usually think of when we consider sustainable industry practice.”

“Foremost as an industry, ICT will need to address the health of our workplaces to attract and retain the skills that are needed in the future.”

Job stress and poor management practices have become all too common in modern business. These issues are strong drivers of absenteeism and significant factors in high staff turnover, she said. The ICT industry cannot afford this.

“Designing healthier workplaces will mean a return to the age-old management principles of establishing trust, communicating a clear vision, and setting goals and objectives that align with both corporate and individual values,” Ms Moon said.

“We cannot afford to sit idly by while problems that we have long been aware of eat into our most valuable resource, the skilled workforce. 2008 must become the year of the sustainable workplace,” Ms Moon concluded.

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PC-makers eager for a Rudd govt

PC hardware makers have been showered with big-ticket promises from both parties during the election that has them looking forward to sweet years ahead for their education sector business units.

From the Kevin Rudd promise to turn every school into a “digital school” (an admittedly vague commitment) to John Howard’s tax rebates on education expenses, its looked like a Christmas come early.

But just how much of the funding commitments – Rudd said Labor will spend $1 billion over four years on its digital school plan – translates as new money for the industry remains to be seen.

A large number of the middle-class beneficiaries of the election largesse would have purchased computers on a regular upgrade basis anyway – and they’ll simply (and happily) enjoy the middle-class welfare being put forward by both major parties.

Still, in the absence of industry development policy the IT sector might reasonably have hoped for, the money being tipped into the education sector is generally positive for the industry.

Federal Labor’s National Secondary School Computer Fund will allow every Australian student in years 9-12 to have access to their own school computer.

The National Secondary School Computer Fund will allow secondary schools to apply for capital grants of up to $1 million to acquire new or upgrade information technology equipment.

This could include personal laptops or computers, thin clients with virtual desktops and internet network infrastructure to plug our secondary schools into the information superhighway.

Under Labor’s plan, 99 per cent of school children will also get access to broadband connections of speeds up to 100 megabits per second at school through fibre to the premises (FTTP) broadband infrastructure.

The other one per cent of students will get improved access at school, via the best available fixed line, wireless and satellite technologies.

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Nortel taps Macquarie graduate schools for training

TELECOM equipment vendor Nortel has signed an agreement with the prestigious Macquarie Graduate School of Management to drive joint training and marketing activities targeting wireless technologies.

The three-year agreement sees the deployment of a Nortel wireless network at the MGSM North Ryde and Sydney CBD campuses.

Nortel will gain access to a number of certified MGSM courses, and for marketing purposes will be acknowledged and the school’s official technology partner.

“This important agreement goes well beyond the introduction of new technology,” Macquarie Graduate School Dean Professor Roy Green said.

“Over the next few years we can expect to further enhance the quality and relevance of our teaching material by marrying the technology with practical input from a global communications leader like Nortel,” he said.

“By linking 'real world' experience with the most current management theories and principles from around the globe, MGSM provides executives with a learning experience that transcends the traditional boundaries of a business school.”

Nortel Australia-New Zealand managing director Mark Stevens said in the fast-approaching age of “hyperconnectivity” – where the number of devices connected to a network outpaces the number of people connected – managing communications became an increasingly important part of graduate management training.

“There’s a natural synergy between MGSM’s focus on leadership in management education and Nortel’s focus on leadership in delivering enterprise communications solutions,” Mr Stevens said.

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Now India’s turn for skills shortage pain

FOR years Indian IT services companies have attracted customers to the sub-continent by undercutting global rivals because of their access to a seemingly limitless supply of high-skilled tech workers.

Now Indian firms are facing some of the skill shortage pain their developed economy customers have suffered for years.

Financial services firm Dun & Bradstreet has issued a report profiling 184 of India’s top technology companies, finding their biggest challenge to continued growth will be the availability of skilled human resources.

Wages growth is expected to become a major challenge for the industry in India, just as it is already a challenge in developed economies.

The Indian IT industry last year generated about US$47.8 billion (A$58.6 billion) in revenue and is expected to grow to US$90 billion (A$110.5 billion) by 2010.

The D&B report, titled “India’s Top IT Companies 2007” found most Indian tech firms reported employee costs of between 35 per cent and 45 per cent of revenues.

Because employee costs represented such a large portion of revenue, any significant rise in those costs would put strong pressure on margins, the report found.

A growing gap between skills supply and demand, high attrition and turnover rates and the fast increasing participation of global companies in the Indian domestic market were all factors affecting IT skills costs.

“Under these circumstances, managing the employee cost will remain a key challenge for Indian IT industry. It is believed that Indian IT firms will continue to face an average wage inflation of 10-20 per cent annually at various levels,” the report says.

The Indian tech industry’s contribution to the country’s GDP had grown from 1.2 per cent in 1999-2000 to 4.8 per cent in the 2006 financial year, and would break through five per cent this year, Dun & Bradstreet India chief executive Manoj Vaish said.

“The Indian IT Industry has emerged as the flagship of Brand India across the world, and continues to grow at a rapid pace,” Mr Vaish said.

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