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Top Ten Opportunities and Challenges in the Federal Market

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Major changes are taking place in the Federal Government ICT market. Intermedium has identified 10 significant trends that are impacting the way Federal agencies are using and procuring ICT products and services.

Intermedium’s Top Ten

1. IT infrastructure outsourcing

As the1990s era of single-source outsourcing arrangements comes to an end, a trend towards strategic outsourcing is emerging. Major new outsourcing arrangements are expected within the next 2 years.

2. Growth in ICT spending

Federal ICT spending has grown by an average of 10% pa for the past 5 years. In the 2007-08 budget, an estimated $1.3 billion over four years was allocated to measures with a significant ICT component. In addition, general public sector staff numbers have increased significantly in recent years resulting in increased demand for infrastructure, including ICT.

3. High growth in IT Services

Growth in the IT Services sectors has outstripped other categories, with growth of almost 30% in the past 3 years. IT Services includes Outsourcing, systems integration, labour hire and training.

4. Ownership of Intellectual Property

With the Statement of Intellectual Property Principles announced in May 2007, agencies will start including contract clauses relating to IP by 1 July 2008. Suppliers will increasingly have access to the IP created under Government contracts.

5. ICT contracting framework

Source IT introduces a new set of model contracts for ICT purchases aimed at reducing the complexity and cost of doing business with government. All agencies will be required to use the source new IT “templates” for “simple IT procurement”.

6. Federal election

The forthcoming election introduces uncertainty into the Federal Government market, particularly since the election date is unknown. What will happen to procurement during the lead-up to the election? What will happen following the election?

7. Risk Management

Capping liability is now possible in Federal contracts, so understanding and managing risk is now an essential competency for ICT companies selling to government. RFTs and draft contracts are increasingly requiring risk management plans, and your response could therefore be the deal winner or the deal breaker.

8. Big pubic sector projects

A number of very large development projects are underway or proposed within Federal Government agencies. They bring with them management, governance and resourcing issues, as well questions as to what happens when they finish?

9. Shortage of skills

A serious shortage of IT skills exists in Canberra, within government agencies and amongst suppliers. This has led agencies to increase their use of contractors, and moves to outsource developments to other locations.

10. End of Endorsed Supplier Arrangements

The mandatory ESA supplier accreditation scheme has been replaced by a voluntary ICT multi-use list. This has implications for suppliers who must establish their credentials in every tender/bid.

In addition, there’s an increased involvement by central agencies (Finance, AGIMO, ANAO, Treasury) in the development of whole-of-government IT strategies (eg. eGovernment Strategy) and in monitoring ICT purchasing and other issues

These are just some of the developments occurring in this complex market. And the environment could change again with a change of government. In fact, its likely to change no matter which party is returned at the next election.

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