In September Dell announced that it had signed Harris Technology as its major reseller partner for the SME channel . Deborah Harrigan, general manager at Dell SMB A/NZ told CRN both companies came together because they had “excellent synergy” in terms of business models, customer focus and delivering value to the SMB market. Given the key role of Small to Medium Enterprises (SME) in the Australian market the announcement was of particular interest to Longhaus. While it appears that the deal might be good for Dell, in our mind it still perpetuates a retail mentality within the SME sector which must change. That may sound strange given that the formal agreement sits within the commercial side of Dell’s channel program and not the retail side.

Considerable structural transformation is required by both the Queensland ICT industry and the Queensland Government to affect significant and sustainable change within the ICT contracting and consulting market. While the proposed industry alternative model developed by ITCRA does not address all the implications and consequences raised in the previous reports of this study, it does provide a more complete approach to industry and supplier rationalisation supported by clear precedents available in the Queensland public sector for similar industry self-regulation models and procurement arrangements. Without implementing either the government’s proposed or industry’s alternative models theQueensland Government could generate immediate once-off savings in the order of $30 million through improved benchmarking of resources against currently available data from within other public sector jurisdictions across Australia. However, with the precedent for industry segmentation and self-regulation in Queensland, such as the Building and Construction industry, the ICT industry’s alternative model supported by a limited supply pool offers a sustainable and co-operative approach to ICT contingent labour management with less industry impact than the QGCPO proposed model. Based on Longhaus’ analysis of the Queensland Government ICT contractor and consultant market Longhaus has calculated that within a year of implementation of the alternative model, the potential economic impact through recruitment industry redistribution of revenue in Queensland would approach $113 million. Further, based on a Limited Supplier Pool of 56 companies (representing the top 7% of current suppliers), 700 SME suppliers would be forced to leave the market or re-accredit themselves as qualified and credible suppliers to the Queensland Government through access as subcontractors to the Limited Supplier Pool and its associated KPIs and terms and conditions. This report is the third of three reports commissioned by the Information Technology and Contractors Association (ITCRA) with the support of the AIIA and ICT Industry Work Group to address the planned or unintential consequences of the Queensland Government’s proposed labour-hire model. Before reading this report, Longhaus would encourage interested stakeholders to review both Queensland Government ICT Contractor and Consultants Market Overview, and Downstream economic consequences of the Queensland Government’s proposed ICT contractor procurement model.

The Queensland Government is proposing a new procurement and recruitment model for the engagement of ICT contractors. The proposed model is for the replacement of individual departmental and agency panel arrangements, and direct contracts, for ICT recruitment and agency managed ICT contingent labour with a single consolidated procurement arrangement. This new arrangement will be based on a single Master Vendor or Broker that will be responsible for sourcing and contracting all agency managed ICT contingent labour. The objectives of the new model are to help the Queensland Government reduce cost of ICT contractors by at least 5-10%, improve the transparency of performance of ICT contractors, provide governance of agency use of ICT contractors and build a single talent pool of ICT contractors for more flexible deployment across multiple departments or agencies. The Queensland Government has also flagged that this proposal if successful will be extended to other ICT contract labour sourced from ICT consultants and ICT service providers. Savings achieved by the Queensland Government through this arrangement are proposed to be directed to other priority areas as determined by the Government. To date the working hypothesis of the Queensland Government is that no negative impact will be generated for the Queensland economy on the basis of the proposed model. Although, there has been acknowledgment that some recruitment agencies may be affected if they have developed an unhealthy dependency on Queensland Government business, as their primary client. Based on Longhaus’ analysis of the Queensland Government ICT contractor and consultant market Longhaus have calculated that within a year of implementation of the proposed model, the potential economic impact through recruitment industry revenue losses in Queensland would approach $220 million. Further, the model would directly compel the loss of 700 support staff jobs within Queensland (or almost 1% of the Premier's election job creation pledge), equate to average company revenue write-downs of 37%, and the cessation of up to 354 companies.

The Australian ICT industry, like its equivalents within the United Kingdom, Europe and the United States, relies heavily on the use of contingent labour or contractors for the delivery of ICT-enabled outcomes for public and private enterprise. In 2007, Longhaus found that the ICT contractor market in Australia was AUD$18.3 billion per annum or 23% of the total ICT sector activity and comprised of just over 100,000 individuals. The Queensland Government, like any large enterprise, is heavily reliant on ICT contractors for the successful delivery of ICT-enabled outcomes. However, lack of consistent internal and industry reporting of contingent labour has meant that the true scale and investment in ICT contractors has been difficult for the Government to quantify. In August 2009, Longhaus undertook a study sponsored by the Information Technology Contractors and Recruiters Association (ITCRA) to quantify the Queensland Government ICT Contractor and Consultant market. This supply-side study provides a strong statistical foundation with 210 responses drawn from over 1,600 Government Information Technology Contract (GITC) registered ICT firms. The results show that the Queensland Government engages an estimated 2,419 individuals from the ICT industry within a total public sector ICT workforce of 6,158. These individuals are currently being supplied to government by over 800 companies at an average daily rate of AUD$857. This currently equates to approximately 20% of annual Queensland Government ICT spending. Of the 800 companies currently used by the Queensland Government for ICT contractor recruitment, smaller companies with less than 25 staff placements, or FTE equivalents provide more than 50% of all resources. These firms cost the government an extra 13-15% in real dollar terms over and above large companies, with similarly definable productivity on-cost premiums.

In an ABC News Radio interview in August 2009 the Federal Opposition spokesperson for Industry Eric Abetz was discussing the need for greater transparency in relation to the Rudd Government’s $3.4 billion in “transformation funding” for the Australian car industry. The call by the Opposition for the fund to be subject to the provision of a parliamentary report, which the Rudd Government claimed was unnecessary given the budget estimates hearing process, brought to mind a particular US political phenomenon with clear implications for the ICT industry.