Citec hits sourcing sweet spot with school and mining deals

Queensland service provider Citec has won two more managed services deals in a series of contracts and renewals expected to spur its previously flat revenues into steady growth.

Mark Rainbird, managing director at Citec, said the outsourcing specialist -- a fully-commercialised business but owned by the Queensland government -- had won a $6.5 million deal to manage the networking infrastructure of Education Queensland for three years and a similar $266,000 deal with miner Xstrata Copper for five years.

Both deals were netted in June. Citec had previously managed a MIM network prior to Xstrata's spinoff from that mining firm, but the contract with Education Queensland was entirely new, he said.

Citec would manage the IT network needs for 1292 and 40 district offices in the Education Queensland deal, Rainbird said.

Gary Shaw, manager at Citec's education facilities management office, said the company was providing specialised software as part of the package for Education Queensland.

“We will also monitor and manage telecommunications networks for the sites, help schools set up websites, look at security issues -- how to protect those 1292 schools from viruses -- and so on,” Shaw said.

Citec would also manage a helpdesk and five third-party providers of IT products and services to Education Queensland, including ISPs, carriage providers and equipment providers, Shaw said.

Rainbird said the Xstrata deal covered 11 sites -- including locations in Argentina as well as Australia. Citec was managing Xstrata's WAN and providing ISDN backup for the network. Xstrata's WAN ran frame relay with an ATM core.

Rainbird said Citec turnover had held reasonably steady at $120 million for the 2003-04 tax year. However, IDC had tipped the company to grow 10 percent in the next year, and that Citec expected to report a turnover of $127 million for the coming year.

“We had seen a bit of a drop-off in revenue -- well, actually it was more like it was flat -- but what we've been doing is making sure we are only renewing and securing good business,” he said.

Citec reported a $600,000 loss before tax for the 2002-03 tax year. In 2003-04, the service provider reported a relatively healthy $2.5 million profit before tax.

The company also recently won similar deals with Rabobank, Sydney Water and Orix, Rainbird said.

Critical in Citec's success had been its SLA focus. Education in particular had benefited from what Rainbird called Citec's “mature” SLA approach, he said.

“We use a more mature KPI for the SLA,” Rainbird said. For example, appropriate customer satisfaction levels would be nutted out and agreed between vendor and supplier.

In education, that approach worked well, partly because it resembled methodologies already used by schools to assess their own performance for the parents of their pupils, he said.

Its SAP business was also going well, Rainbird said.

Infrastructure managed services was a “pretty competitive market”, he conceded, but was Citec's core business and the provider had worked hard to build good relationships with its customers resulting in a high rate of renewed business.

“What we have seen is an increase from our clients in terms of taking up more product sets [from us],” Rainbird said. “Our competitive advantage is that we're local.”

The company -- which has offices in Brisbane, Melbourne, Canberra and Sydney and some 650 staff -- had high hopes for a good year, he said, especially as the trend for selective sourcing continued.

“Infrastructure management is around 40 percent of our business,” Rainbird said. “We run one of the largest networks in Australia. We have a large frame relay network on which we have rolled out IP over frame. We think that's an emerging trend.”