NZ IT services market posts highest growth rate in four years: IDC

Outsourcing remains top earner, but providers need to guard against customer churn

The local IT services market grew 4.4 percent year-on-year for the first six months of 2012, reaching NZ$1.7 billion, reports IDC.

This represents the largest growth in the market since the first half of 2008, prior to the global financial crisis, notes the analyst firm in a press statement.

Until 2016, the revenue growth is expected to even at a five-year compound annual growth rate (CAGR) of 4.0 percent, buoyed by strong growth in outsourced services particularly hosting services and network management, says IDC's IT Services Tracker covering the first six months of 2012.

The outsourcing market remained the largest revenue-wise across the IT services foundation. IDC says this segment is growing by 5.1 percent year-on-year, and was the biggest area of IT spending growth in the first half of 2012.

Hosted services experienced strong growth on the back of a large number of organisations outsourcing datacentre services and using cloud services.

"Hosting services remain in high demand as both the market understanding and available solution portfolios are maturing," says Louise Francis, senior analyst at IDC New Zealand. "This is shifting the conversation from initial infrastructure discussions to applications and specific business processes and workloads."

IDC reports the market share of the top 10 IT service providers is unchanged, with nearly half (44.6 percent) of the total IT services market.

This reflects the stability of the upper end of the market, says IDC, but notes a reshuffle of the market shares of the top five companies in the first half of the year.

Gen-i remains at the top with a market share of 13.9 percent, but Datacom overtakes HP in the second place, with a 10.3 percent market share.

This comes on the back of high revenue growth in IT outsourcing and Datacom's selection as one of three preferred vendors for the government's infrastructure as a service (IaaS) work and its successful leverage of cross-Tasman relationships and resources.

Francis says the results show even large established service providers are impacted by customer churn, as organisations look for value "above and beyond" contracted service level agreements.