Australia IT Services Market Size, Share and Forecast Trends - Growth Analysis and Outlook Report (2026-2035)

Market Overview

The Australia IT services market is shifting from large, open-ended outsourcing towards narrower contracts tied to cloud, data and AI outcomes. Buyers are consolidating suppliers, bringing some delivery back in-house and asking providers to bring automation and AI tooling into every engagement.

Three forces are shaping demand: federal and state agencies modernising legacy platforms under tighter scrutiny of contractor spend; banks, utilities and health bodies replacing ageing core systems; and cyber and sovereignty requirements that favour locally resourced teams and Australian-hosted infrastructure.

In January 2025 the Digital Transformation Agency signed a three-year whole-of-government cloud arrangement with Amazon Web Services, in August 2025 Infosys agreed to buy a majority of Versent, in November 2025 the government released its public service AI plan, and in June 2026 five agencies signed contracts worth AUD 4.92 billion.

Key Market Trends and Insights

• Cloud arrangement scale: The January 2025 whole-of-government arrangement with Amazon Web Services gives agencies access to more than 240 services, and over 140 Commonwealth, state and territory bodies already use the platform.
• Consolidation by acquisition: Infosys agreed in August 2025 to buy 75% of Versent for AUD 153 million, taking over a cloud consultancy of about 650 engineers, advisers and strategists.
• End-of-year contract rush: Five federal agencies signed contracts worth AUD 4.92 billion in June 2026, up 13% on June 2025, with the Tax Office alone adding AUD 375 million.
• Sovereign and applied research: NTT DATA opened an Innovation Centre Australia in Sydney in July 2026 covering six technology areas, from cybersecurity and quantum cryptography to digital twin simulation.

Australia IT Services Market Size and Forecast

The market is moving from labour-based outsourcing towards platform-led, outcome-oriented contracts as cloud, data and AI work absorbs a growing share of enterprise and government budgets. Managed services and outsourcing still lead because long-running infrastructure and application support contracts form the installed base, while cloud and AI engineering services, consumption and outcome-based engagements, health and life sciences buyers and Victoria advance fastest. New South Wales remains the largest base through Sydney's concentration of banks and head offices, and federal spending in the Australian Capital Territory grows more slowly as agencies shift work in-house. Government AI plans, cloud arrangements and provider investment disclosures underpin a durable outlook shaped by modernisation backlogs rather than a cyclical uplift.

Key Takeaways: Australia IT Services Market

Modernisation Backlogs Sustain Spending

Revenue is set to rise from AUD 38.50 billion in 2025 to AUD 80.09 billion in 2035 at a 7.6% CAGR, as agencies and enterprises replace ageing platforms and add AI capability.

Cloud and AI Engineering Leads Growth

Managed services remain the largest segment, but cloud and AI engineering grows at an estimated 12.4% CAGR and consumption and outcome-based contracts at 10.3% through 2035.

Public Sector Scrutiny Reshapes Contracts

Federal pressure to curb contractor spend and the November 2025 AI plan are changing how providers price, staff and prove value on government work.

• Contract variations drawing audit attention
• Agencies building in-house AI capability
• Providers adding sovereign and local delivery

Australia IT Services Market Report Summary

Key Insight

Cloud and artificial intelligence programs, public sector modernisation and legacy system replacement shape spending. Cloud and AI engineering advances fastest while managed services remain the largest base.

Key Trends in the Australia IT Services Market

The Australia IT services market is being reshaped by scrutiny of large government technology contracts, end-of-year agency spending, carrier retreat from cloud services and provider investment in local innovation capacity.

October 2026 - Accenture Federal Contracts Draw Scrutiny

• Press coverage on 4 October 2026 reported that the value of Accenture's enterprise operations contract with the Tax Office had risen to AUD 165.2 million through contract variations.
• The same coverage said an audit found a health record contract had grown to AUD 746 million through extensions and amendments.
• Accenture also won a new AUD 161.6 million application support and maintenance contract with the Australian Digital Health Agency through an open tender.

September 2026 - Agencies Sign AUD 4.92 Billion in June Contracts

• Reporting on 28 September 2026 said five agencies, led by the Defence acquisition group, signed AUD 4.92 billion of contracts in June 2026.
• The Tax Office added AUD 375 million, covering software licensing, mainframe services and specialist ICT expertise, including an IBM Australia software extension signed on 29 June.
• Spending fell at Home Affairs, Social Services and Services Australia, as the government kept pressing agencies to reduce private sector spend.

August 2026 - Telstra Reshapes Its Enterprise Business

• Telstra lodged its annual report on 13 August 2026, showing Telstra Enterprise income down 5.2% to AUD 4,255 million.
• Fixed enterprise earnings before interest, tax, depreciation and amortisation fell 16.7% as Telstra reshaped that business.
• Telstra said its AI Assistant, launched in March 2026, was handling 34% of total customer enquiries.

July 2026 - NTT DATA Opens Innovation Centre in Sydney

• NTT DATA launched its Innovation Centre Australia in Sydney on 23 July 2026 as a research and development hub for Australia and New Zealand.
• The centre targets six areas, including cybersecurity and quantum cryptography, satellite and Earth observation, physical AI and digital twin simulation.
• It aims to help organisations move from proof-of-concept trials to full enterprise implementation, working with public agencies, universities and start-ups.

Key Insight

Scrutiny of large federal contracts, uneven agency spending and carrier retreat from cloud services are pushing buyers towards tighter scopes, while providers invest in local research capacity to win trust.

Recent Market Developments in the Australia IT Services Market

Recent developments, presented from the most recent, show the Australia IT services market moving through divestments, acquisitions, national AI policy and cloud purchasing frameworks.

July 2026 - Fujitsu Agrees to Sell Australian Data Centre Business

• Fujitsu signed an agreement on 20 July 2026 to sell its Australian data centre business to Next Capital, with closing expected later in the year.
• Customer contracts and existing data centre staff will move to the new owner at completion.
• Fujitsu said the sale frees investment for cyber resilience, sovereign AI and high-performance and quantum computing services.

November 2025 - Government Releases Public Service AI Plan

• The AI Plan for the Australian Public Service, released in November 2025, commits to foundational training for every public servant.
• It also promises access to generative AI tools through GovAI and the appointment of Chief AI Officers in agencies.
• The plan raises demand for data, platform and change services, while favouring capability built inside agencies.

September 2025 - Kyndryl Appoints New Australia and New Zealand Head

• Kyndryl named Graeme Beardsell managing director for Australia and New Zealand on 9 September 2025, based in Melbourne.
• He previously led Fujitsu in Asia Pacific and will focus on public sector, banking, energy and utilities customers.
• His remit includes expanding a University of Technology Sydney partnership that has trained 397 students and not-for-profit workers in cybersecurity.

August 2025 - Infosys Agrees to Buy 75% of Versent

• Infosys and Telstra announced on 18 August 2025 a joint venture in which Infosys acquires 75% of Versent Group for about AUD 153 million.
• Versent, Telstra's cloud arm with about 650 staff, serves government, education, finance, energy and utilities clients.
• Telstra keeps a 25% minority stake and steps back from providing cloud services directly.

Key Insight

Recent events show providers selling infrastructure assets, buying cloud consultancies and rebuilding leadership for public sector and financial customers, while government policy sets expectations for artificial intelligence adoption.

Australia IT Services Industry Segmentation

The Expert Market Research’s report on the Australia IT Services Market offers a detailed analysis of the market based on the following segments.

Market Breakup by Service Type

• IT Consulting and Advisory
• Application Development and Modernisation
• Managed Services and Outsourcing
• Cloud and AI Engineering Services
• Cybersecurity Services
• Others

Managed Services and Outsourcing lead because long-running infrastructure and application support contracts form the installed base, as shown by the Tax Office's June 2026 mainframe services spending. Cloud and AI Engineering Services grow fastest at an estimated 12.4% CAGR, with Infosys agreeing in August 2025 to buy Versent and the Digital Transformation Agency extending cloud access to over 140 agencies. Application Development and Modernisation follows legacy replacement, including the AUD 161.6 million health agency application support contract reported in October 2026. IT Consulting and Advisory is cyclical and exposed to contractor cuts. Cybersecurity Services expand through training and resilience programs such as Kyndryl's university partnership.

Market Breakup by Engagement Model

• Project-Based Contracts
• Multi-Year Managed Contracts
• Contractor and Staff Augmentation
• Consumption and Outcome-Based Contracts
• Others

Multi-Year Managed Contracts lead because large agencies and banks still buy operations under long terms, although Accenture's enterprise operations contract with the Tax Office reached AUD 165.2 million only through repeated variations. Consumption and Outcome-Based Contracts grow fastest at an estimated 10.3% CAGR, as cloud purchasing under the January 2025 Amazon Web Services arrangement links fees to usage. Project-Based Contracts follow modernisation budgets and rise with the November 2025 AI plan. Contractor and Staff Augmentation is the slowest, since Services Australia, Home Affairs and Social Services cut end-of-year contractor spending in June 2026.

Market Breakup by End User

• Government and Public Sector
• Banking, Financial Services and Insurance
• Energy, Resources and Utilities
• Health and Life Sciences
• Telecommunications, Retail and Others
• Others

Government and Public Sector leads because five agencies alone signed AUD 4.92 billion of contracts in June 2026, and its growth is moderated by pressure to cut private sector spend. Health and Life Sciences grows fastest at an estimated 9.8% CAGR, supported by the Australian Digital Health Agency's new application support contract and a My Aged Care training contract that Accenture extended in June 2025. Banking, Financial Services and Insurance and Energy, Resources and Utilities are named priority sectors for Kyndryl's new Australian head. Telecommunications, Retail and Others is shaped by Telstra's reshaped enterprise business and its AI Assistant, launched in March 2026.

Market Breakup by Region

• New South Wales
• Victoria
• Queensland
• Australian Capital Territory
• Others

New South Wales dominates, as Sydney hosts the largest concentration of banks, head offices and global integrators, including NTT DATA's Innovation Centre Australia opened in July 2026, and it grows at an estimated 7.2% CAGR from that large base. Victoria is fastest at an estimated 8.6%, with Kyndryl's Australia and New Zealand head based in Melbourne from September 2025 and Telstra headquartered there. Queensland grows at 7.9% on state government and resources demand. The Australian Capital Territory grows slowest at 6.1% as federal agencies reduce contractor spend. Others, grouping Western Australia, South Australia, Tasmania and the Northern Territory, grows at 7.4%.

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If you choose to purchase the full report at a later stage, the amount already paid will be adjusted, and you will only need to pay the remaining balance.

Competitive Landscape in the Australia IT Services Market

Competition combines global integrators, Indian offshore specialists, Japanese and New Zealand-founded providers and local specialists. Entry barriers include security clearances, panel and whole-of-government arrangements, proven cloud and AI references, local delivery capacity and the ability to price on outcomes rather than hours.

Accenture

Accenture is headquartered in Dublin, Ireland, and delivers consulting, technology and managed operations to Australian federal, state and private clients. Press coverage in October 2026 reported that its enterprise operations contract with the Tax Office had reached AUD 165.2 million. It also won a new AUD 161.6 million application support and maintenance contract with the Australian Digital Health Agency through an open tender, and extended a My Aged Care training contract in June 2025.

Infosys

Infosys is headquartered in Bengaluru, India, and provides consulting, application and cloud services to Australian banks, telecommunications carriers and public bodies. In August 2025 it agreed with Telstra to acquire 75% of Versent Group for about AUD 153 million, adding roughly 650 engineers, advisers and strategists. Versent reported revenue of about AUD 397 million, and the venture gives Infosys a larger local cloud and AI delivery base.

Datacom

Datacom is headquartered in Auckland, New Zealand, and supplies managed services, cloud, cybersecurity and contact centre services to Australian government and enterprise customers. In July 2026 it reported results for the year ended March 2026, with higher group revenue and lower profit as it invested in infrastructure and pre-purchased hardware to lock in pricing amid tight supply. It also added a New Zealand data centre for AI-ready, high-density compute.

Kyndryl

Kyndryl is headquartered in New York and runs infrastructure services, mainframe, cloud and security operations for Australian banks, energy companies and public bodies. In September 2025 it appointed Graeme Beardsell, formerly Asia Pacific chief executive at Fujitsu, as managing director for Australia and New Zealand, based in Melbourne. Its University of Technology Sydney partnership has trained 397 learners in cybersecurity, with funded places planned for up to 1,412 by June 2027.

Other players operating in the Australia IT services market include Fujitsu, NTT DATA, Tata Consultancy Services, Capgemini, and Cognizant, alongside Telstra and its Versent venture, local specialists, boutique consultancies and offshore delivery firms supporting Australian organisations.

Key Insight

Competition turns on public sector credentials, local delivery capacity and proven cloud and artificial intelligence references, favouring providers able to price on outcomes and withstand contract scrutiny.