Oxygen looks to Australia to achieve 20 per cent growth

By ADAM GIFFORD

Carter Holt Harvey IT services subsidiary Oxygen wants 20 per cent growth this year, which it expects to be fuelled by Australian companies contracting out management of their SAP business software.

The company has just taken on Rod Hirst, a former SAP Australia southern region manager, as its general manager of sales, based in Melbourne. After leaving SAP in 1998, Hirst was Australian manager for electronic procurement vendor Ariba and more recently has run his own consultancy.

Growing an Australian workforce will also protect Oxygen from accusations of stealing local jobs, a particularly sensitive issue in Australia which has felt the effects of low-cost Indian outsourcing companies.

Oxygen has 40 sales and support staff in Melbourne and Sydney, and a further 210 staff in Auckland.

Last year it had revenue of about $60 million, more than half of which came from contracts to run Carter Holt's IT infrastructure.

The turmoil in the consulting world in the past few years, especially among what were known as the "big five", has created openings for tier-two implementers such as Oxygen with lower cost structures.

Chief executive Mike Smith said Oxygen was adopting a two-pronged strategy of increasing its implementation, tuning and SAP support business, as well as securing large outsourcing contracts for either entire SAP infrastructures or just accounts payable processing.

"There are about 350 SAP clients in Australia and New Zealand, and 50 per cent have outsourced part or all of their systems, so there are 175 companies who haven't really looked at it yet," he said.

"There is $2.4 billion spent in this area in Australia and New Zealand, and from the survey we did last year we believe it is growing 20 per cent a year."

Present implementation projects for non-Carter Holt or International Paper customers included Cadbury Schweppes Australia's SAP roll-out and Fonterra's supply chain project, where Oxygen was subcontracted to SAP's services arm.

It was also working on an Ariba project for Lion Nathan in Australia.

The rationale behind outsourcing was that running large IT systems was not core businesses for most companies.

As Oxygen had already been through the process of separating itself from Carter Holt Harvey, it was now in a position to apply its skills, knowledge, intellectual property and competitive pricing to other companies.

"If we found an organisation with an IT shop of 150 people, they could team with us," said Smith.

"We could take cost out, add their scale to ours and give our pricing."

He said in a core business process such as accounts processing, Oxygen could increase the quality of output and speed with 75 per cent fewer staff by cutting the amount of paper, digitising invoices and automating processes.

Oxygen