FSN: IT suppliers need to adapt to a slower growing UK public sector market

IT suppliers need to adapt to a slower growing UK public sector market

17th September 2007
The UK public sector software and IT services (S/ITS) market grew by just short of 9% in 2006 to be worth £8.1 billion, and will return to double-digit growth in 2007 (at just over 11%), according to Ovum the research and advisory firm.

Ovum expects a compound annual growth rate of 6.9% in the UK public sector S/ITS market between 2007 and 2011, making the market worth just over £11.7 billion in 2011. That's still a higher growth rate than the total UK S/ITS market however, which is set to grow at 5.8% over the same period.

2006 and 2007 continue to be predominantly impacted by the pace of major ICT projects such as the NHS National Programme for IT, the MoD's Defence Information Infrastructure (Future), the Criminal Justice IT programme ('Joined Up Justice') and local government mega-deals.

Ovum continues to expect a significant slowdown in growth from 2008 to 2011 as many of the existing major ICT projects slow sharply. Departments and their suppliers will start to feel the impact of the budget constraints from the new Comprehensive Spending Review 2007 and initiatives such as the CIO Council's Strategic Supply Board.

Georgina O'Toole, lead analyst for the research, says, "From 2008, the dynamics of the UK public sector S/ITS market are likely to change significantly."

O'Toole says: "Suppliers fortunate enough to have landed themselves a 'mega-deal' in recent years have benefited most. However, with fewer mega-deals on the horizon, the underlying S/ITS market is set to become relatively more attractive, particularly for second-tier suppliers, as UK Government puts greater emphasis on exploiting the infrastructure investment of the early part of the decade."

That will mean more mid-sized deals focused on, for example, application development and maintenance, as well as systems integration and consulting.

O'Toole warns: "In this comparatively lower-growth environment, suppliers will need to shift their modus operandi in the UK public sector. Account teams will need to be far more adept at understanding the specific needs of customers and potential customers rather than on winning the next mega-deal." She states: "The winners will be those companies that change their approach to suit the new shape of the market."

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