Terms like outsourcing and offshoring may have become synonymous with Australian job losses but as the new paradigm of selective sourcing emerges the potential for IT hiring looks brighter.

After 20 years of business, U.S. IT services company Covansys Corp. established its first local presence in February this year with the opening of a Sydney office from which it intends to capitalize on the potential break-up of monolithic outsourcing contracts.

Covansys manager for Australia, and sole local employee, Rakesh Kapoor, said total outsourcing is not the right IT services model.

"We believe in selective sourcing and will tell our customers what not to outsource," Kapoor said, adding that Covansys often recommends certain things be kept in-house. "A lot of companies think they have to go all outsourced and are unsure about the options."

With three development centers in both the U.S. and India, Covansys plans to open another in either Australia or China in the near term to support Asia-Pacific region customers.

Although, declining to speculate how many jobs Covansys" local presence is likely to create, Kapoor did say the local operations could have a couple of hundred people within three years depending on how quickly the market expands. Canberra and Melbourne offices are also earmarked for this year. Regardless of whether a full development center opens here, Covansys will be recruiting people for software testing, Java development, and business consulting, to service the local market.

"Our model does not force any customer to offshore [and] we only recommend it if the business benefit is there," he said. "We will still have developers here."

So far, Covansys has Ford and a "large, multinational financial institution" as local customers, but Kapoor said initial discussions with prospective clients have been positive.

IDC"s associate director of Asia Pacific services research, Phil Hassey welcomed Covansys" entrance into the local market, but said it will be a "massive challenge" to win business from the large incumbents.

"Covansys is not on its own [entering the market] and since the market is highly competitive, organizations won"t take risks with vendors it doesn"t know," Hassey said. "The medium enterprise market has the most opportunities, but they are limited because our IT market is small [so] finding them won"t be easy."

Hassey said large organizations tend to be consolidating the number of vendors they have.

"Selective sourcing means three or four heads to kick instead of one," he said. "The net effect on the economy is a bit of an each-way bet. It will create jobs in project management but won"t have a significant impact on the jobs market."

While Hassey does not think that Covansys has an impossible task, he said "to be honest", the odds are stacked against them.

"As ever, I would love to be proved wrong on this one," he said.