Prominent Australian company Volante has been in the news for two reasons in January - contesting a hostile takeover bid by Commander and then last week announcing a major new outsourcing contract with the South Australian government.
The South Australia win, following the breakup of the whole-of-government outsourcing deal with EDS into smaller clusters from January 2007, will see Volante supporting about half of the SA government’s server fleet. The contract is expected to provide services revenue of $10-20m a year for 5 years and to add another 50 staff to Volante’s Adelaide office of 80.
In the war of words surrounding the takeover, Volante has been criticised for its recent focus on services rather than products. However, the Adelaide win and Volante’s track record in the federal government market shows how important and lucrative the supply of services to government have been for Volante. Services has been its primary area of growth in recent years, particularly following its acquisition of Group 8 outsourcer Ipex in 2004.
Services grew both in total value and as a proportion of Volante business over the four years, from less than 1% of its federal government business in 2001-02 to 90% in 2004-05. Ipex similarly increased its proportion of services business from 60% in 2001-02 to 90% in 2003-04.
Volante also extended its agency coverage from primarily supplying hardware to Defence in 2001-02 to 19 agencies in 2004-05, including major managed services relationships with DAFF, DoTARS and DoFA.
From a whole of government perspective, IT Services (including outsourcing) has accounted for around 50% of the value of reported contracts over the last four financial years, while hardware has declined as a proportion of the market, not so much because the demand for hardware has reduced, but because its provision is now bundled into outsourcing deals, where these exist.