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Mid-size firms say VoIP low priority 2007-04-24
Medium-sized businesses rank IP telephony a low priority and are largely unconcerned by service level agreements in outsourced IT arrangements, a study has found.

The study, conducted by industry research group IDC on ehalf of Sydney-based communications and IT services group Brennan IT, found the average mid-market company was spending close to $300,000 (about 2.5 per cent of annual revenue) on IT and fixed-data telecommunications, with an average of $ 196,000 spent on IT and $ 102,000 on telecoms.

According to IDC, the mid-market sector represents around 26,000 businesses across Australia.

The study, which examined companies with 50 to 500 employees, found hardware accounted for approximately one-third of IT spending, but that hardware spending would decrease by 2.5 per cent per year until 2010, mainly due to falling prices.

Services represented 25 per cent of IT budgets and was growing at 5.8 per cent per year, IDC found. Software made up 10 per cent of IT spending, but was growing at 11 per cent a year.

But, overall, spending growth was flat.

IT is becoming increasingly strategic for Australia's mid-sized companies, evidenced by the increasing number of CIOs that now reported to the CEO, which is now running at 55 per cent, up from 25 per cent three years ago.

Systems infrastructure is the top IT priority, followed by customer relationship management and enterprise resource management, according to the study.

But voice over IP phone systems ranked as the lowest priority reported, rated as a priority in less than 5 per cent of cases. Wireless mobility and service-oriented architecture was also well down the list.

The ITIL service management scheme was also well off the radar of many mid-market IT managers, with 60 per cent saying they were unaware of the system or had no plans to implement it.

Thirty-five per cent of companies surveyed used outsourced IT services, with security management and systems integration among the most common types of work done by external providers.

But few companies rated service level agreements high among the benefits of outsourcing.

Brennan IT managing director Dave Stevens said mid-sized companies were more concerned with developing a good relationship with their suppliers than with strictly policing service level agreements.

"We have a general understanding that if either of us dust the contract off and open the cover, then things are pretty bad," he says.

Many mid-sized companies are also in the early stages of managing outsourced service contracts, Stevens says.

"Loss of control" was the most commonly perceived risk of outsourcing, followed by the risk of revealing internal processes.

But service providers such as Brennan still need to do better in assuring clients about the risks of outsourcing.

"We need to be a lot better at meeting that perceived risk for our clients," Stevens says.

Companies surveyed ranked the skills of professional staff as the most important factor in selecting an outsourced service provider, followed by financial stability and industry knowledge.

Service-level agreements ranked fifth, above relationship and cultural fit.

By Chris Jenkins
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