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Federal Market Grows Strongly Despite Drop in Defence Spending

by Staff Writers •
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Intermedium research shows that the Federal Government ICT market continued to grow strongly in 2006-07, despite a significant downturn in spending within the Department of Defence.

Preliminary results from Intermedium's research show that the market grew by around 6% during the 2006-07 financial year, a rate similar to that recorded the previous year.

The research shows a significant decline in the number and value of ICT contracts reported by the Department of Defence. In 2005-06, Defence accounted for 39% of the Federal Government ICT market. In 2006-07, its share of the market dropped to 25%.

This downturn in activity within Defence is most likely due to issues arising from the Defence Management Review, and Intermedium expects this situation to turn around in the current financial year. However, any downturn within an agency of this size has major implications for suppliers who have a large share of their business with Defence.

While the total value of contracts grew, the number of ICT contracts reported by Federal Government agencies fell significantly during the financial year, by approximately 15% when compared with the previous year. As a result, the average value of contracts in 2006-07 grew to more than $256,000, compared with $185,000 the previous year.

Growth in the value of the market is due to growth in IT Services contracts, the category that includes IT outsourcing, consulting, labour hire, training, and hardware and software support. Most of the IT Services growth in 2006-07 resulted from an increase in the value of Managed Services (including IT outsourcing) contracts.

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