The local IT services market grew 4.4% year-on-year for the first six months of 2012, to $1.7 billion, according to IDC New Zealand's latest IT Services Tracker,
This was the largest growth the market has experienced since the first half of 2008, prior to the global financial crisis.
Until 2016, the revenue growth is expected to even at a five-year compound annual growth rate (CAGR) of 4.0%, driven by strong growth in outsourced services particularly hosting services and network management.
The outsourcing market remained the largest in terms of revenues across the IT services foundation growing by 5.1% year-on-year, and was the biggest area of IT spending growth in 1H 2012. Strong growth is still being experienced in hosted services with a significant number of organisations outsourcing datacenter services and harnessing the potential of cloud services.
“Hosting services remain in high demand as both the market understanding and available solution portfolios are maturing. This is shifting the conversation from initial infrastructure discussions to applications and specific business processes and workloads, says Louise Francis, Snr Analyst at IDC New Zealand.
In terms of IT Service providers, the market share of the top 10 vendors remained unchanged from last year, accounting for 44.6% of the total IT services market.
This reflects the stability of the upper end of the market in terms of competition. However, there was a reshuffle of market shares of the top five competitors in the first six months of 2012.
While Telecom's IT and telco services division, Gen-i, remains at the top with a market share of 13.9%, Datacom has leapfrogged HP, achieving a 10.3% market share and second place.
This comes on the back of high revenue growth in IT outsourcing and Datacom’s selection as one of three preferred vendors for the government's infrastructure as a service (IaaS) work and its successful leverage of cross Tasman relationships and resources.
IT Servicer provider market share, first half 2012
2. Datacom 10.2%
3. Hewlett-Packard 10.0%
4 IBM 7.4%
5 Dimension Data 3.2%
Source: IDC New Zealand IT Services Tracker, 1H 2012
"These results demonstrate how dynamic the market is in terms of customer churn and reinforces the need for service providers to be vigilant in maintaining their branding and staying close to their customers," says Louise Francis, senior market analyst, IDC New Zealand.
"Even large entrenched service providers are not immune to customer churn. Satisfaction is no longer a determinant of loyalty – instead the focus is on added value above and beyond contracted service level agreements."
IDC's semi-annual IT Services Tracker details the revenues per service provider and provides a forecast update every six months, with the most recent tracker covering the six months ending June 2012. The tracker provides a detailed analysis of the IT services by market sub-segments as well as providing historical information to shed light on the changing market dynamics and who is best positioned in the market.