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IT services market in Australia: Logica CTO

IT services market in Australia: Logica CTO

John Taylor talks about uncertainty in the stock market and global economy

The uncertainty in the stock market and global economy is driving the growth of the managed services market in Australia. With IT budgets tight, CIOs risk adverse and boards looking for flexibility, managed services appear set to dominate IT activity, according to John Taylor, Chief Technology Officer of Logica.

The Australian managed services market is growing and it has the potential to be a larger proportion of IT activity in a recessive economy, even if overall IT budgets do not increase. With the Top 300 companies in Australia all relying on some level of outsourcing to deliver business efficiency, this level of dependence is set to grow.

At Logica, we believe that the fundamental restructuring that is occurring in the economy may force fast changes on business and government. We are also very conscious of the next mobile technology wave to ensure it is included in core IT architecture and management systems for our clients.

Since the start of 2011, growth in the IT domain has polarised around two key drivers — the resources boom and the consumer tech revolution. Before this, managed services grew substantially in the financial and government sectors while now smart businesses across all sectors are preparing for the future by reviewing managed services options and progressing towards more flexible arrangements such as cloud solutions.

Resources sector

The resources sector requires considerable IT infrastructure and demands complex systems integration expertise, driven especially by corporate mergers or geographic rationalisations.

Resource companies need real-time management systems and also deploy a great number of automation systems. Managing these complex environments, often more diverse and physically dispersed than an ERP manufacturing management or financial system, requires a new range of skills which are underpinned by sophisticated project management skills.

In addition, the resources sector has a need for agility — up-scaling and mothballing of major works can almost be guaranteed within a technology implementation’s lifecycle.

Consumer technology curve

The consumer technology revolution is smashing through the firewalls of corporations. Customer facing areas in banking, retail and government services are being confronted by smart phones or iPads and automation that weren’t yet invented when their long term technology roadmaps were put in place.

At the moment these organisations are often relying on boutique specialists to provide competitive technology systems at the counter top, however, this is complicating many of the back end systems and management activities such as security, networking and systems integration.

In addition, the ‘bring your own’ technology concept is starting to change the workplace — especially for the growing contractor workforce. In times of recession, it is generally the case that part-time and contractor numbers proportionately increase, providing an added burden to CIOs.

While a lot of this consumer technology is cheap, or even no cost, it does require changes to the core technical infrastructure of a business which can be very expensive. In addition, few companies have matured their business model to the point that they can actually make a profit from many of these systems which are now almost deemed ‘compulsory’ for consumers.

Enterprise technology strategy

The major challenge in technology strategy for business and government today is that CIOS are being asked to drive, rather than be driven by, innovation. They have to present the boardroom with clear new business models to deploy in customer facing areas.

Much of this innovation is being driven by the independent application developer community and niche operators. However, business unit managers are often deploying their ideas and approaches onto the mainstream infrastructure platform of large corporations or government organisations with little or no input from the core technology team, which can result in significant risk.

According to research conducted by Frederic Giron, Forrester Research vice president and principal analyst for Asia Pacific, “Australia is one of the leading adapters of virtualisation technology, and so is well-prepared for Cloud and hybrid Cloud”.

However, he also states that the wildcard is in the telecom space and that the National Broadband Network is a mystery box about to spring open. This could be a major driver of Cloud and mobility evolution that will stretch internal governance capability further.

Leading the crowd

“Cloud computing is a new way of delivering computing resources, not a new technology” according to Australian Government Information Management Office in the federal government‘s Cloud computing strategic direction paper Opportunities and applicability for use by the Australian Government, version 1.0 (released April 2011).

This pragmatic business view shapes the whole-of-government policy stance on Cloud computing and supports the conclusion that Cloud strategies can get the green light provided that they can demonstrate that adequate security is in place and they deliver a fit for purpose solution underpinned by value for money.

Clear pointers to the future policy on security were also created when the federal government Defence Signals Directorate published its Cloud Computing Security Considerations in April this year. These guidelines for Cloud articulate the variety of information security risks that need to be carefully considered and give an indication of appropriate mitigating security processes and policies.

Now that the government has established a clear position on how the potential of the Cloud can be effectively harnessed whilst managing the risks, many more reticent businesses are preparing to follow.

Developing a risk assessment helps senior business representatives make an informed decision as to whether Cloud computing is currently suitable to meet their business goals with an acceptable level of risk.

Risks will vary depending on the sensitivity of the data to be stored or processed, and how the chosen service provider has implemented their specific Cloud services.

Service integration and governance

The big play is not just technology — it’s about service integration and governance. Many companies are comfortable within their private Clouds. It’s the transition to public Cloud which still has large question marks over governance and risk.

One question all our customers ask is how can they create a mature, strong governance system that recognises new technologies in the overall technology environment in a seamless, consistent and controlled manner?

In the age of Cloud and consumer owned technology, large organisations are becoming a piece of a larger puzzle, not the whole service in their own right.

Software as a Service (SaaS) is still not a mature part of the overall strategy and governance systems are often weak or non-existent. However, this year we are seeing some companies start to make investments based on their desire to innovate and change their business model or service delivery.

Next year, if the economy does not stabilise or improve, they could move more to a SaaS model as part of their financial strategy to minimise Capex and expense their technology operations through the Opex lines in the budget.

Conclusion

The growth of the managed services market is leading to fundamental shifts in how business is conducted. The traditional organisational boundary is being totally redrawn by both the Cloud and by the accessibility of expertise in security, governance and project management that can be made available through managed service agreements.

These are the skills most desperately needed by business and government to deal with global economic uncertainty in a way that is flexible, secure and sustainable. The effective employment of managed services, together with the growing use of the cloud, will help organisations lower the cost of servicing their technology environments, better respond to threats, and take advantage of the opportunities that present themselves in 2012 and beyond.

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