Intermedium predicts opportunities in the Federal ICT market will remain flat for the remainder of 2008-09, with an upturn not expected before 2009-10. A return to the peak level of 2006-07 will take some time, but can reasonably be expected within five years, according to Intermedium’s new Quarterly Executive Brief launched today.
The Executive Brief, issued quarterly to subscribers, will be of value to both industry and government. It combines high level commentary with statistical data, and a concise overview of major factors in the market and their impacts, as well as forecasts of expected market activity.
Quarter 1 Highlights from the Executive Brief
Three factors were at play in slowing Federal Government ICT procurement in the first half of the 2008-09 financial year, according to the Brief. Some of these were underway before the start of the current financial year, but their full cumulative impact is only just now manifesting itself in the levels of contracting activity in Q1 of 2008-09. These factors are the:
1. Election cycle/change of Government
2. Gershon Review
3. Changes in procurement arrangements
A fourth major change, the Global Financial Crisis, is having little direct impact on the Federal ICT market currently, but is impacting the commercial sector markets of suppliers.
Election flow-on effect
The residual effect of the election of the Rudd Government on procurement was still being felt in the first half of the 2008-09 financial year, but there were also impacts of the May 2008 Budget.
Following the election-related slow down, the Gershon Review, the largest such review in more than a decade, further delayed ICT procurement activities. Although it was not a procurement review, it had the effect of postponing ICT spending while it was undertaken. The impact of the Gershon Review is clearly visible in the statistical data for Q1, the Executive Brief illustrates.
Changes in procurement arrangements
A raft of procurement changes was introduced by the new Rudd Government. While not specific to ICT, these new measures appear to also be delaying or deferring spending. The report identifies all the changes and discusses their likely impacts on the market.
Intermedium’s current assessment is that the reduction in total value of contracts in 2008-09 may be as much as 25% down on the peak year of 2006-07 year.
However, it is not all bad news in the Executive Brief - "lights on the horizon” include:
- The promised new projects arising from reinvestment of 50% of BAU savings arising from the Gershon review;
- Procurement of commodity products, put on hold as part of the co-ordinated procurement process is also expected to start moving within the next 12 months;
- 198 contracts with a combined value of $300 million due to expire in Q2 of 2008-09, according to Intermedium’s scout IT prospecting tool. While many of these may not be renewed, a significant number represent ongoing requirements which will again be sourced from the market.