Offshoring could swing our way: Gartner

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Australian IT service providers have so far failed to take full advantage of the increased opportunities offered them by the global trend towards offshoring, analysts said at a Sydney summit this week.

Australian IT service providers have so far failed to take full advantage of the increased opportunities offered them by the global trend towards offshoring, analysts said at a Sydney summit this week.

A chorus line of senior IT services research analysts said at Gartner's Sourcing and IT Services summit that IT services stakeholders had focused on potential losses of business to overseas companies.

Yet globalisation-driven offshoring had created important opportunities for Australian service providers, the Gartner analysts said.

Rolf Jester, vice-president of Asia-Pacific IT services research at Gartner, said the potential for Australia to export such services and software was quite under-developed. “There is potential for high-value services to be exported to lots of places,” he said.

A recent Telstra US$8.4 million outsourcing deal with the Hyatt chain of international hotels showed just what could be achieved, Jester said.

On 15 July Telstra announced a multi-year, global services contract with Hyatt International. Telstra will provide MultiProtocol Label Switching (MPLS)-based telecommunications and managed services -- including network management and hardware -- linking Hyatt's US headquarters with its hotels around the world.

Gartner wanted to re-name offshoring as global sourcing, believing that the onshoring versus offshoring debate had been somewhat miscast, Jester said.

Partha Iyengar, an India-based vice-president and research director at Gartner Research, suggested that Australian skills could prove a serious threat to some potential Indian outsourcing opportunities.

“Australia has this huge talent pool we don't have in India, in middle management, architects and so on,” he said.

That sort of thing was starting to worry Indian industry leaders, Iyengar said.

Meanwhile, overseas companies such as Infosys had cottoned on early and decided to use Australian expertise to boost their own businesses. Infosys might have started a service provision trend, he suggested.

“The long term goal is to leverage resources for global requirements,” Iyengar said.

Bob Hayward, a senior vice-president and chief research officer at Gartner, said that Australia was well-placed to take work -- and jobs -- from nations such as the US and UK.

“There's a pretty large body of work in the US which has requirements for [IT] security at the moment. Very little of that work is done in the US and we could do that under the [new US-Australia] Free Trade Agreement,” he said. “The costs are in our favour.”

Hayward conceded there had been a lot of “bad press” around offshoring. However, much of that was emotional noise based on fear, uncertainty and doubt. “Because people lose their jobs and it's not nice, it's not good,” he said.

However, as a result very little genuine analysis had been offered, he said.

Hayward said that many of those workers would be absorbed by other industries. The pattern of job obsolescence causing redundancies and workers needing to retrain in other fields had always been around -- but the net effect on jobs and the economy as a whole might be positive.

“And if we try and stop [offshoring] from happening, the result will be worse,” he said.

Well-meaning attempts to protect old jobs and ways of working had a habit of leading to economic stagnation and uncompetitiveness, Hayward noted.

Hayward formerly headed an IBM Tivoli distributor in the Asia-Pacific region. He reckoned that many Australian IT businesses had targeted the wrong places in early attempts at winning global deals.

“Forget all these emerging markets. It's hard work selling in China. It's hard work selling in India. Even with a big brand in your favour,” he said.

Rather than aiming at nations such as Malaysia and Indonesia, Australian service providers should concentrate on culturally similar, mature IT market nations such as the UK, US and in the European Union, Hayward said.

Australia had also suffered from a lack of local service providers that could get economies of scale. KAZ Group had almost got there, but had now been taken over by relatively “gun-shy” Telstra, he pointed out.

Craig Baty, group vice-president and research chief at Gartner Intelligence, said that Australia was already a prominent player overseas but more might be done.

“Australia is both a major consumer of offshore services and a provider of onshore services,” he said.

Garry Draffin, CEO at Federal Government body Invest Australia, said that Australian companies had done well “onshoring” financial services -- but not so well in IT. However, the FTA was expected to encourage investment in Australia rather than out of the country.

Australia still had to struggle against the tyranny of distance, its small market size and a popular perception of it as a land of Steve Irwins and Mick Dundees. Australia was seen as a nice place to visit, but not necessarily a good place to do IT business, he said.

“But we can do something about that,” Draffin said.

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