It was sold as a “strategic partnership” to “unlock” value, but Telstra’s new joint venture with services giant Infosys is just the latest example of offshoring by stealth – and a reminder that building viable Australian IT services firms is now harder than ever.
The joint venture will see Telstra “divest” itself of its control of services arm Versent Group by ceding Infosys a controlling 75 per cent stake that will give the Indian company what it called “operational control” of the business.
The move – part of the ‘Connected Future 30’ strategy that is seeing Telstra “radically innovate in the core of [its] business” – comes just weeks after it announced it would cut 550 jobs and is, CEO Vicki Brady said, a way of “sharpening our focus”.
The services business has “very different margin dynamics,” she said in presenting the company’s full year results this month, flagging rationalisation of the Network Applications and Services (NAS) business partly owned by Versent.
The deal means customers “can continue to benefit from Telstra’s leading connectivity and the local agility and specialised engineering of Versent Group”, she said, calling it a “partnership” that “reflects our confidence in the value we can unlock together”.
Yet the agreement sees Telstra, at a disadvantage, relinquish control of Versent – whose 650 highly skilled Australian ICT service specialists came from Telstra’s combination of Versent, Epicon, Telstra Purple Digital, and other entities.
Infosys’s $233 million investment values Versent at $310.6 million – only slightly more than the $267.5 million Telstra paid two years ago when it purchased the firm to expand its Telstra Purple consulting arm, and only three-quarters will be paid up front.
Those terms suggest Telstra was eager to offload a services arm that was already showing signs of trouble just seven months after the Versent acquisition, with Telstra Purple savaged last year as Telstra cut 2,800 jobs in a strategic “reset”.
Those cuts came just days after negotiations with the Communications Workers Union (CWU), whose newly appointed national secretary Shane Murphy recently warned “we are in the middle of serious change across our industries.”
Referencing “serious technological advancement, automation, outsourcing, policy shifts, and corporate restructure”, Murphy said, “none of it makes our jobs easier, and none of it makes our working conditions more secure without a fight”.
Death of an industry, by a thousand cuts
Despite the spin Telstra and Infosys put on the deal, it was yet another example of Australian services expertise sacrificed to overseas interests.
Australian professional services firms frequently sell out to regional and global interests: in March, for example, Singaporean corporate governance firm Acclime bought the 200 specialists of Sydney-based advisors Bedford.
Earlier this month, cybersecurity firm CyberCX – a services giant created in 2019 with a promise to “recruit, develop and grow the best talent in the country” – sold to US consulting giant Accenture for $1 billion.
Similarly, the Commonwealth Bank was recently caught hiring Indian software engineers to fill the same roles it had recently cut in Australia.
Telstra says its deal with Infosys will help the telco "sharpen" its focus. Images: Shutterstock
Such regular changes are creating uncertainty for Australia’s ICT jobs pipeline, with government and industry wooing ambivalent and disillusioned students with promises of long-term careers and guaranteed employment in ICT and cybersecurity.
Gartner analyst Jaideep Thyagarajan told Information Age Australia faced “a structural deficit in cyber, cloud, and AI talent” and demand was “outstripping supply by multiples”, despite university and training institutions’ best efforts.
Tapping into global talent pools, therefore, “is less about undercutting local jobs and more about avoiding bottlenecks”, he said, “but the real challenge is ensuring that these global arrangements still upskill Australians, rather than bypassing them”.
Is there no such thing as sovereignty anymore?
If two of Australia’s largest, supposedly sovereign ICT consulting firms can’t sustain themselves as sovereign entities, what hope is there for building and maintaining sovereign AI, cloud, cybersecurity, or other skills?
That’s the wrong question, Thyagarajan said, because the global nature of today’s ICT and cybersecurity industries meant building and maintaining a viable business necessarily required international engagement.
These threats “are not within the walls of our country”, he explained, adding that “this is a great opportunity to establish synergy, capture lessons from best practices globally, and bring them to the local market”.
Deals could give Australian firms “access to capital, global platforms, and innovation ecosystems”, he said, yet “we can’t be naïve either … these deals have the potential to transfer operational control outside”.
Indeed, “operational control” was exactly how Infosys described what it got from the Telstra deal, revealing its take on the arrangement even as CEO Salil Parekh heralded “our trusted collaboration with Telstra … to further accelerate the innovation agenda”.
Whether it’s a partnership for AI innovation or a backdoor way for Telstra to offshore services capabilities in a strategic U-turn remains to be seen, but Thyagarajan urged vigilance as similar deals reshaped sovereign control over critical infrastructure.
“We need to more actively define those red lines around critical infrastructure, data, and sovereignty,” he said, urging policy to “[protect] core national interests while leveraging global capital and knowhow to push Australia’s ICT sector up the value curve.”
“It’s not a binary choice and Australia’s future will not be built by shutting the gates, nor by opening them wide.”
