Kinetic IT set to score $45m Qantas deal

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Kinetic IT set to score $45m Qantas deal

Kinetic IT is in the final stages of negotiations to take on an IT service desk contract for Qantas, a package of work worth more than $45 million if it goes to the full five-year term.

The likely contract win was revealed in Kinetic IT's most recent financial results, for the year to 30 June 2014, in which the Perth-based solution provider hit revenues of $120.3 million, an increase of $17.1 million, or 16.5 percent, over its 2013 revenues.

However, Kinetic's net profit actually fell, hitting $11.1 million, a slight decrease from $11.9 million in 2013. The company's biggest increase in costs was staffing, with employee expenses up more than $5 million to $17.3 million.

The revenue number in the annual report does not include the pending Qantas contract, nor some of Kinetic IT's other massive hauls, including a contract signed in early January with Victoria Police worth up to $233.7 million over a potential eight-year term and a renewal of its Northern Territory IT support contract, worth up to $36.2 million.

Combined, the Qantas, Vic Police and NT contracts could be worth more than $60 million per year, roughly a 50 percent increase in sales over Kinetic's 2014 financial results.

Yet the sales uplift from these deals may take time to hit the IT company's books, given how long it takes for contracts of this magnitude to fully ramp up.

Qantas contract

According to the document lodged with corporate regulator ASIC, Kinetic IT expects to provide Qantas with service desk, ServiceNow management and SIAM (service integration and management) services.

The contract would be for an initial three-year term with two years of additional options, estimated to be worth $7 million in the first year, $27.2 million over three years and $45.6 million over five years.

A Qantas spokesperson said: "I can confirm that we’re in discussions with Kinetic IT about ways we could work together on service desk and integration services, but no agreement has been reached."

Kinetic IT would not comment when contacted by CRN.

It is unclear whether this will be a new contract or replacement. It remains relatively small given the size of the airline's IT spend.

Qantas awarded a seven-year contract to Fujitsu in 2009, worth hundreds of millions of dollars, covering the national carrier's entire desktop and peripherals infrastructure, email, storage and collaboration requirements, service desk, on-site and remote support, both in Australia and overseas.

A separate outsourcing deal with IBM, also inked in 2009, was understood to be worth north of $200 million over seven years.

Australian success story

Kinetic has been making a name for itself by rattling the cages of global outsourcers for plum Australian contracts.

The homegrown company, which is headquartered in Perth with offices around the country, knocked out IBM and Fujitsu to score the Vic Police deal. It was also the only privately owned Australian firm on a list of 10 companies invited to participate in a pre-tender round of consultations to provide Victorian government work previously supplied by CenITex, joining CSC, Dimension Data, Datacom, Fujistu, HCL, NEC, IBM, Telstra and Hitachi.

Kinetic IT chief executive Terry North has previously told CRN that the company is proud of growing the skillset of the Australian IT sector and is keen to bring work back from overseas.

"We invest very heavily into development and training of our staff within Australia and that includes everything from step-up programs where we take people from school age and uni graduates, and we continue to train and develop many people through the ranks of Kinetic IT to become seasoned, professional IT experts," he said earlier this year.

The company is on a massive recruitment drive. Between its 2013 and 2014 financial year, headcount increased by 70 people, but North has tipped a much bigger intake following its contract wins, previously telling CRN that Kinetic expected to hire 400 new heads by July.

"Also, the best part is that a big portion of those staff will be new jobs for Australians working in Australia.

"The offshoring trend of five to six years ago is dying, in my opinion, as clients now have a real alternative and are prepared to pay a little more for quality and getting it done right first time, meeting the budgets and outcomes that they signed up for."

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