Gartner: Australian IT services worth $14 billion and growing

End-user spending in the Australian IT services market is expected to exceed $14 billion for the year, up 3.6 percent from 2006, according to a recent report from Gartner.

Michele Caminos, research chair of Gartner Symposium 2007 to be held in Sydney in November, said the resources boom in Australia has helped to create robust business conditions that continue to support healthy demand for IT services in 2007.

“Demand from governments for upgrading IT infrastructure and building new initiatives will remain pivotal to the growth of the Australian IT services market,” she said.

According to Gartner’s latest forecast, the overall IT services market in Australia will expand at a compound annual growth rate (CAGR) of 3.7 percent from 2006 through to 2011. During this period, business process outsourcing and software support will provide much of the growth impetus for the Australian IT services market.

In 2006, Australia represented 30 percent of the Asia Pacific IT services market, but this proportion is expected to drop to less than 25 percent in the next five years due to growth in India and China.

Caminos attributed the decline to the current skills shortage and expected it would not get any better in the near future.

“In Australia's mature, comparatively high-labour-cost market, IT skill shortages are creating difficulties,” she said. “Not only is it hard to find enough people with the right skills to staff major projects, it is putting pressure on service provider margins, as labour costs continue to rise.”

On the US front, growth in IT services is expected to remain steady as worldwide IT services end-user spending is forecast to exceed US$730 billion in 2007, up 8.7 percent from 2006.

“While many businesses remain focused on improving internal processes and reducing costs, investing in innovation is more widespread than in recent years, providing two solid reasons to invest in IT services,” said Kathryn Hale, research vice president for Gartner.