Overview

When talking about the IT industry in

Australia and for the purpose of this article
we include Computer Sales, Software, IT
Services and E-Readiness. The market is
still showing growth signs despite a robust
performance in the previous years. This growth is driven by consumer, government and
business sector opportunities.
The ICT industry provides 4.6% of Australias total GDP and 4.9% to Gross Value Add,
contributing in a larger scale than mining, education, defense, agriculture and the
individual manufacturing sectors. There is great diversification in the ICT sector and it is
characterized by three layers:
Large enterprises (mostly multi-national) that account for the bulk of revenues.
Small companies (mainly domestic) that are creating proprietary technology and
innovative products for export purposes.
A big (and becoming larger) product variety from software and media content companies
to electronics manufacturers.
As it is typically in other international markets as well, the Telecommunications are
generating more than 40% of the industrys total revenues.
There many different organizations, associations, state & federal policy formation groups
and research institutions that are in general involved and shape the bigger picture of the
domestic industry.
Below are the main activities that are involved in the ICT industry and what is included in
our data analysis and in the attached diagrams:

IT services, systems integration and software support

Internet services and telecommunications

Software and digital content development

Wholesale and retail distribution of software and hardware

Manufacture of ICT products and components

Despite the broader belief, information, media and professional services along with the
education sector (the Knowledge Industries), are among the largest contributors to the
local economy.

GDP March 2007

GDP March 2013

Economic growth

Growth %

Knowledge
Industries:Information
Technology,
Professional services,
Education, and media

$25,320

$33,938

$8,618

34.04%

All other industries,

(including Agriculture
and Mining)

$38,696

$49,538

$10,842

28.02%

Wholesale and retail

sales

$18,173

$22,830

$4,657

25.63%

Health Care and

Social Assistance

$26,881

$32,966

$6,085

22.64%

Construction

$22,446

$27,014

$4,568

20.35%

Finance and Insurance

$48,221

$54,018

$5,797

12.02%

Transport, Postal and

Warehousing

$23,950

$26,610

$2,660

11.11%

All other services

$16,511

$18,267

$1,756

10.64%

Public Administration
and Safety

$33,834

$36,464

$2,630

7.77%

Manufacturing

$19,066

$18,403

-$663

-3.48%

ICT Industry Revenue CIIER Model

Revenue by ICT Industry Sector

Dec-09

Dec-10

Dec-11

Computer Services

$18,499

$19,703

$19,682

Manufacturing

$2,693

$2,687

$2,687

Wholesale Trade

$17,251

$17,424

$17,414

Telecommunications

$43,081

$42,549

$50,809

$82,362

$90,592

$81,524

Market size
th

Although Australia is ranked 54 in the world by population, it is the 14th largest ICT
market globally and the 5th largest in the Asia-Pacific region, after Japan, China, India
and Korea, with an estimated worth of over A$120 billion.
Some key figures and facts about the market:

From the total A$120 billion, Telecommunication services accounted for $34.9 billion,
computer wholesaling for $20.7 billion and computer consultancy services for $19.5 billion.

The ICT industry directly accounts for about 4.6% of Australias GDP and it outperforms most
of the traditional sectors like mining etc.

The Australian ICT exports have surpassed the $5 billion mark, with $3 billion exported goods
and over $2billion in services. Among the major export markets are the US, UK and ASEAN.
The imports on the other hand are around $26 billion, with $22 billion being goods and $3
billion in services, while the biggest importers are China, ASEAN and the US.

According to the ABS and DEEWR there are approximately 400,000 people employed in ICT
related position with nearly 90%of these people being employed full-time.

Industry developments
Australians are among the most tech savvy and sophisticated people in the world who are
always open in adapting new products and services. That, among with the language
factor, makes it a test friendly market that large international enterprises embrace to
develop and trial their new applications. Some of the most common issues that are tested
are the system interoperability, the security of the product and the contribution in
productivity gains. The governmental framework that encourages new technological
solutions, the legislation to protect privacy and prevent spam, are some key factors for
business to go to Australia and develop applications which will be deployed globally.

Some of the well-known international companies that have established a presence in

Australia and offer their products locally and also globally include: EMC that Australia
hosts one of the four worldwide support centers and Red Hat that its continuing the
expansion of Regional Engineering and Support HQ in Brisbane.

Trends

Many research and industry experts have provide information about the current and
future trends in the IT industry.
In the hardware section there will be a decrease in sales and the refresh cycles are about
to get longer. CIOs are very careful when evaluating new products in the PC, server and
storage verticals and try to minimize the costs and thus causing slower sales.
Software seems to be holding on the growth mode but at a slower rate. Verticals such as
database, CRM and ERM are expected to continue to grow. As buyers are very reluctant
on hardware spending and looking to minimize their expenses, investments in
virtualization are the most common factor that will still be increasing.
A field that has benefited from the past crisis and still holds is IT services. The midmarket spending in outsourcing services is expected to grow even more while the total
sector is in growth mode. Especially, offshore outsourcing to low cost countries such as
India and China has shown an increase for infrastructure management and application
services.
Telecommunications globally seem to be unaffected by recessions and the same is true for
the domestic market in Australia. The increase demand in video conferencing and similar

tools and also the spending in mobile solutions will continue to grow, given also the fact
that the local competition has kept the prices to affordable levels for business usage.
At last, the demand for IT professionals will remain in high levels as companies are
looking to recruit more skilled quality professional to tackle the new challenges.

Proximity to Asia
One of the best assets that the domestic market can exploit is its strategic geographical
position and the close proximity to Asia. The combination of the English language along
with the geo-position means that Australia is a perfect place for multinational companies
that want to have a presence in the region and have the best conditions and environment
to quickly set up activities there. Microsoft for example has established a regional hub to
service the Asia-Pacific.

Innovative culture
Apart from being one the most tech friendly nations, the Australians were among the first
to realize that IT products can significantly increase productivity. The synergies between
the government, the industry as a whole, universities, institutions and private
organizations have a great impact in the research and development of products and
processes.
Intellectual property framework and patents are critical factors for many businesses to
thrive and keep investing in research and development. Australias patent and copyright
enforcement regime is ranked eighth in the world and with 1,100 registered patent and
trademark attorneys.

Key forecasts
The demand of government tenders will still play a major role in spending in the
forthcoming years. The regulation framework in the financial sector means that banks
need to continue spending and the competition in the retail industry is boosting the
spending in customer relationship management (CRM) and back-office products and
solutions.

Investment opportunities
As mentioned before, Australia is a great market to test global products. This happens
due to a combination of many factors such as the size of its market, the innovative
character of its customer base and the sophistication of domestic users among others
make it an ideal location to develop and test new IT products and services.
Most of the software products that are developed domestically are rolled out globally if
there is a satisfactory adaptation from the local environment. On top of that, the
workforce is another advantage for companies looking to invest in Australia, there is an

extensive domain-level knowledge and technical expertise, especially in architecture and

integration.
As a result, many innovative IT products have their origin in Australia for a wide range of
industries and verticals. The software industry especially has benefited from the low costs
in development along with the highly skilled workforce and has in turn attracted strategic
investments from ICT companies like IBM, Canon, Citrix, EDS, Google and NEC that
have built major software development facilities in Australia.

Resources: Industry groups and organizations

The main organization for the high tech sector is the Australian Information Industry
Association (AIIA). Some of its activities are setting the strategic direction of the industry,
influences public policy makers and provides members with productivity tools, advisory
services and market intelligence to accelerate their business growth. Find more
information about the organization here: http://www.aiia.com.au
Other significant bodies are the Technology Industry Development Council (TIDC) that
represents the views of the Technology Industry sector and the Australian Interactive
Multimedia Industry Association (AIMIA) representing the Interactive Media and Digital
Content sectors.

Australias SWOT analysis

Finally, we close this post with an analysis of the strengths, weaknesses, opportunities
and threats (SWOT) of the domestic market.

Strengths

Strong Education system

Early adopters of technology

Highly skilled work-force

Proximity to Asia

Good infrastructure (but can be better)

Low risk environment

First world legal and administrative systems

Cultural affinity with America, Asia and Europe

Weaknesses

Local IT firms lack critical mass, international presence

No Australia ICT branding

Too easy to be comfortable just in Australia

Tax system relatively unfriendly towards innovation

Low profile of tech industry, declining graduate intake

Few role models outside of sport, celebrity

Geographic isolation from US and Euromarkets

High labor costs relative to Emerging Asia

Curriculums vs lateral think, questioning education

Extremely weak R&D by Australian business

Opportunities

Industry, academic and government collaboration

IT Services, BPO & KPO

Potential for NBN to inspire

Consumer-oriented web/mobile-based offerings

Vertical and niche software solutions

Exploit FTA opportunities

Services-based experiences for Asia

Leverage huge funds under management

Threats

Competition from emerging economies

Currency volatility/rise against others

Exclusion from regional trading blocs

Risk of global and regional instabilities

Continual brain drain (Australians adapt well)

Original blog post: http://blog.elioplus.com/?p=341

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