• C#ASP.NET Developers
• Head of IT Operations -...
• Commercial Manager - National...
• Support Analyst Programmer
• Senior Flash Developer / ...

The huge Federal Government market just keeps getting bigger

ACS staff, Information Age

15/12/2006 15:00:56

For most ICT companies, multi-national and SME alike, the Federal Government is a mandatory market. But many companies do not know the true dimensions of this market, or how it has been trending over the last few years.

It is possible to obtain deep insight into what occurs in that market from year to year because the Federal Government mandates the reporting of contract activity by over 80 of its agencies. Intermedium, a specialist government market research and sales strategy advisory company has completed its analysis of the 2005-06 Federal Government market to reveal some fascinating results.

ICT contracts valued at $3,198,472,283 were signed by Federal Government agencies during the 12 months to July 2006.

This represents an increase of just 1 per cent over the 2004-05 financial year, which in contrast had seen an increase of 18 per cent over the 2003-04 year. Since 2001-02, the market has grown by approximately $1bn.

Services is king IT services, which includes outsourcing, systems integration, labour hire and training, continued to dominate the Federal Government market, accounting for more than half of total new contract value in 2005-06 at $1.73bn. Its dominance of the market is due largely to ongoing commitment to outsourcing and managed services along with continued strong demand for labour hire, consulting and other forms of staff augmentation. The growth in IT services was 2 per cent in 2005-06.

Hardware (17 per cent), telecommunications services (15 per cent) and Software (10 per cent) were the other largest segments. Hardware was up by 27 per cent to $533m on the back of a major contract with Sharp for e-Passport chips and strong Defence and Centrelink activity. Software declined by more than 30 per cent compared with 2004-05 when a major software contract with Accenture was signed by the Tax Office.

More big deals than ever before The Federal Government market is dominated by a small number of extremely large ICT contracts, as the following graph indicates, most of which are for IT services. Federal Government agencies entered into almost 18,000 contracts valued at more than $10,000 during the 2005-06 financial year and 73 of these were contracts with a value of more than $5m.

Defence dominates The Department of Defence, Centrelink, the Australian Taxation Office, the Department of Immigration and Multicultural Affairs and the Department of Employment and Workplace Relations dominated the market in 2005-06, accounting for 73 per cent of contract value ($2.34bn).

As always, The Department of Defence dominated the top end of the market, accounting for nearly 40 per cent of new contract value ($1.25bn). Its total annual contract values stay consistent year on year, unlike the other large agencies which can fluctuate significantly, depending on where they are in their ICT project and refresh cycles.

Australian companies top the supplier list More than 2,200 ICT companies entered new contracts with the Federal Government in 2005-06. However, the top three suppliers - KAZ, Telstra and IBM - between them achieved 24 per cent of total contract value. KAZ (a Telstra subsidiary) topped the supplier rankings largely on the strength of its Defence desktop service contract of $181m.

In summary, the market is dominated by a giant IT services category, by the activities of six large agencies and by the dominance of the Top 10 suppliers, which took 46 per cent of the market. Even so, there was plenty of activity left for the other agencies and suppliers, explaining this market's perennial attraction to ICT suppliers of all kinds.

Calculated by Intermedium based on new ICT contracts reported by 80 Federal Government agencies in AusTender's 'Contracts Reported' with contract dates between 1 July 2005 and 30 June 2006, as at 30 September 2006.

This article is an extract from Intermedium's "Federal Government ICT Market Highlights Report, 2005-6". www.intermedium.com.au