Software Development

 

  A key feature of the Australian software market is that there are many small-sized

  Australian developers, who compete in the local market with foreign developers

  and products.  This is particularly true in smaller niche markets. In comparison

  to the local hardware market, which is dominated by large multinational firms with

  industry standardized products, the software market is not very dominant mainly

  due to the lack of local venture capital sources.

  Australia has developed software niches in the IT services areas. Key drivers of

  this sector are Application Service Providers (ASPs), Customer Relationship

  Management services (CRM), E-commerce applications and Knowledge

  Management (KM) services. The Customer Relationship Management (CRM)

  software and Knowledge Management (KM) software markets are growing in

  excess of 40 percent annually. The CRM market is very young in Australia; in

  1998 the sector was valued at US$20 million and in 1999 US$38 million.

  Observers are predicting that there will be approximately 44 percent compound

  growth over the next five years, given that most companies have yet to implement

  a CRM solution.6

  With regard to packaged software, Australia seems to have missed the boat

  when it comes to developing its own software industry and lags behind Israel, India

  and Ireland in this area. A recent Boston Consulting Report highlights Australia's $3

  billion trade deficit in sales of packaged software.

  7The report prepared for the Business Council of Australia, revealed that Australia

  purchased packaged software worth $4.2 billion last year, but actually produced less

  than $1 billion in software locally.

  There has been a great emphasis on IT outsourcing in Australia with both government

  and private companies engaging in large contracts. The familiarity of IT outsourcing

  has been attributed to many reasons such as increased focus on core skills, access

  to skills and technology, costs savings, flexibility and efficient accounting. Revenue from

   the Australian outsourcing market was $1.3 billion in 1997, and projections to 2004

  will push it up to $5.3 billion, or an average growth rate of 16 per cent. This growth

  has been boosted by large outsourcing contracts, from both government and private

  companies, which had a kick-start in 1998 when revenue from outsourcing rocketed

  by 70 per cent, to $2.2 billion. On the downside, these contracts were so colossal

  that only the large global firms could tackle them, leaving Australia’s smaller IT firms

  to play second fiddle to the large firms as subcontractors and specialist providers.

  Australian companies must now market through prime contractors, thus losing direct

  customer contacts and making it harder for them to be an outsourcing systems integrator.

  Further, major outsource companies tend to work with a limited number of local vendors

  thereby stifling competition and making it even harder for new suppliers to break in.

 

  DATA TABLE (million in US$)

                                                                        2000

 

TOTAL MARKET SIZE                                        4,000

TOTAL LOCAL PRODUCTION                             2,300

TOTAL EXPORTS                                              300

TOTAL IMPORTS                                               2,000