Tier two and local service providers could gain ground on the multinationals during 2007. That's according to analysts at IDC New Zealand, which has just released its top 10 predictions for local IT services over the next year.
In the report, teasingly named Setting the Cats amongst the Pigeons, IDC says competition will remain fierce as vendors compete for a share in the local $2.5 billion IT services market. The prediction is there will be a David and Goliath showdown between the large players and multinationals and the smaller, local service providers.
Market analyst at IDC, Jenna Griffin, says 2007 could be a tough year for vendors not willing to step out of their comfort zone and embrace new market dynamics.
“Smaller player will be at an advantage, having played in that space before. The enterprise and high end part of the market is becoming saturated, forcing some vendors to look at other markets. It is easier to scale down than up, and the go-to-market model in the enterprise space is very different.”
According to Griffin, last year saw a greater number of smaller IT services contracts being tendered, moving away from the larger and more cumbersome tenders.
“Some organisations have the perceptions that larger companies, IBM as an example, will not deal with smaller accounts. These perceptions will take quite some time to change.”
IDC’s other predictions for 2007 include the emergence of new technologies set to disrupt the traditional business models and more discrete outsourcing, which could benefit smaller players in tenders.
“Tenders traditionally associated with the higher end of the market, governmental tenders for example, often adhere to strict, formal regulations,” says Griffin. “This could be set to change, thereby benefiting smaller players.”
Griffin's comments square with earlier comments made by Axon CEO Scott Green, who has previously said his company was looking to move into the upper echelon.
IDC's top 10 predictions for 2007
1. David versus Goliath — tier 2 and local service providers will take a turn in the spotlight.
2. Spring-cleaning the IT market — emerging technologies disrupting traditional business models.
3. Destination New Zealand — becoming a lower-cost centre for offshore outsourcing.
4. The good, the bad and the ugly — New Zealand's emerging information and communication technology market.
5. A deficit of IT specialists — the constant challenge for service providers.
6. Wanted — IT consulting: growth will be motivated by emerging technologies and delivery models.
7. Lowering the bar — the importance of small and medium-sized businesses for growth.
8. Contract and expand — business process outsourcing evolves to suit New Zealand organisations.
9. The pressure comes on — IT service commoditisation: the lesser of two evils?
10. The changing face of outsourcing — a little bit more discrete.