Microsoft is building momentum in an evolving IT services market across New Zealand, challenging incumbent providers such as Datacom and Spark Digital as digital transformation takes centre stage.
In a market being reshaped by new realities, the position of the traditional juggernauts of the IT services market is now being challenged by cloud providers, which are emerging as incumbent service providers.
That’s the view of IDC New Zealand, which states that the inclusion of cloud vendors to the assembly of leading IT services providers reflects the changes in not only how firms structure outsourcing agreements, but also in approaches to external engagement.
Revealed during the IT Services Ecosystem Study 2017 - published by IDC New Zealand - the general preference of the market is now a mix of internal and external sourcing with a multi-provider strategy.
“Largely, the desire to engage with multiple parties that includes a cloud provider is driven by the shift of New Zealand organisations towards an Information-as-an-asset strategy,” IDC New Zealand senior analyst Donnie Krassiyenko said.
“Through this approach the organisation's data becomes a tool for extracting value from digital transformation, allowing it to place the customer in the centre of business efforts.
“As the embedment of data-driven insights into the organisation's processes requires a platform, firms are challenged with factors of how, when and where to put their data from a hybrid and multi-cloud perspective. To achieve this, organisations seek help from cloud providers.”
Despite the overall strong intention to continue external engagement for fulfilment of internal IT needs, Krassiyenko said outsourcing preference varies across service categories.
For example, Krassiyenko said desktop services have the highest level of in-house implementation with 47 per cent of New Zealand organisations choosing to do it themselves.
Conversely, data centre services have the highest level of external use with 69 per cent using either a mix of external and internal or external-only type of consumption.
Looking ahead, Krassiyenko said a “reasonable rate” of market churn associated with market fluidity and a lack of customer service is expected to occur during 2018-2019 period as a number organisations look to insource or change providers.
Specifically, this sentiment is expressed for networking services (20 per cent), cloud implementation (19 per cent), and security services (17 per cent).
Thus, insourcing remains to be the largest threat to an otherwise thriving service provider market.
Service providers
According to Krassiyenko, the service provider market is also becoming highly fragmented outside of the large providers, which is an indication of the end-user's willingness to work with niche providers.
“Higher maturity of technology adoption has enabled organisations to become more aware of the provider capabilities as well as what service excellence should look like,” Krassiyenko explained.
As the result, when engaging with service providers, organisations buy based on such characteristics as industry-specific use-cases, strong ecosystem of partners, and professional services.
However, Krassiyenko said the most "sought attribute" is the provider's ability to deliver consistently against expectations; and if satisfaction with the aforementioned criteria is reasonably high, it is somewhat underwhelming with deliverability.
"For the market to reap the rewards in a more coherent manner, there is a need to close this gap," Krassiyenko added.
But the challenges do not end there because as more complex architectures naturally result in a greater exposure to cyber threat, Krassiyenko said security stands tall as one of the key drivers for choosing a primary provider.
“Security has the highest stated importance from an investment perspective,” Krassiyenko added. “The task for organisations is to have a clear understanding that security is a business risk, not an IT issue.
“Firms that recognise the unattainability of absolute security work across both their own organisation and the wider supply chain in order to ensure representation of the most robust security posture.
“After all, a chain is only as strong as its weakest link. To be ready for a security threat, it is as crucial to hold the right business conversation about risk as to have security policies and training programmes. The greatest danger lurks where it cannot be seen.”
As outlined by IDC research, Spark Digital, Datacom and Microsoft are considered as the three leading businesses offering IT services in New Zealand, ranking at 23.4 per cent; 19.8 per cent and 9.5 per cent respectively.
Dimension Data follows in fourth place with 9.5 per cent share, ahead of Vodafone (5.7 per cent); IBM (3.1 per cent) and Fujitsu (three per cent), with Eagle Technology (2.9 per cent); Hewlett Packard Enterprise / CSC (2.7 per cent) and CCL (2.3 per cent) rounding off the list.
