Big software and services contracts dry up

Shore thing: the public sector is set to award more contracts to offshore services specialists

UK software and IT services (SITS) providers face a torrid 2010 as customers slash up to 40 per cent from contract values and government deals go offshore.

Preliminary figures from TechMarketView reveal 2009 SITS revenue for the top 25 UK providers was up one per cent. But managing partner Anthony Miller explained this represented a decline in real terms.

“If the top 25 declined, ima­gine how tough it must have been for the rest,” he said.
Miller predicted another real-terms decline in 2010, claiming some major firms’ customers were demanding price cuts of up to 40 per cent on contract renewals.

“If they have something unique, they can fight their ground, but that is not often the case,” he said. “They have to try to add more content and deliver at a lower cost.”

The top 25 UK SITS provi­ders last year included eight US and four Indian firms among 19 foreign companies.

Mumbai-based TCS recently won contracts with Cardiff Council and the Child Maintenance and Enforce­ment Commission. Miller claimed, after corporate success, “the leading Indian players are beginning to be accepted on similar terms” in the public sector.

“With pressure on budgets, there is a sense of inevitability that government IT work will go offshore,” he added.

Northgate and Computa­center placed 17th and 22nd in the SITS rankings, posting sales spikes of four and eight per cent respectively.

Northgate chief executive Chris Stone said intellectual property and staff were the cornerstones of its success.

“We invest in both and will continue to develop scale and expertise in the UK,” he said.