Big systems integrators have been urged to begin courting the commercial world, with governmental IT spend projected to plummet and overarching public projects going out of favour.
Figures from analyst TechMarketView revealed the public sector dished out £10.9bn worth of IT contracts last year. Government spending on software and IT services (SITS) currently represents almost 30 per cent of the UK total, up from 19 per cent at the turn of the century.
But the research house has claimed growth will be restricted in the coming years, regardless of which party wins the election. In the more likely scenario that the Conservatives triumph, public sector SITS spending is projected to decline until 2012.
Under a Labour government, SITS spending would enjoy compound annual growth of 2.9 per cent until 2013. With a Tory government in power, central government and police spending on SITS are both expected to post compound annual declines of almost one per cent. Spending in the defence sector is predicted to drop 0.2 per cent per annum.
TechMarketView research director Tola Sargeant explained that frontline investments were better protected in other areas.
“It looks as if health (spending) is going to fare best, closely followed by education and local government,” she said. “There will always be successful niches where there is potential for growth.”
Sargeant singled out business intelligence and information assurance as two technologies that would remain priorities for investment. She added that outsourcing and managed services would also continue to gain popularity.
But she claimed big, overarching projects such as the NHS National Programme for IT and Building Schools for the Future, would fall out of favour. Hefty contracts with systems integrators will be replaced by more localised deals, Sargeant explained.
“Regardless of who wins the election, we expect there to be more opportunity for small to medium players with good references and financials,” she said. “We have already seen a trend towards decentralisation.”
Spending on project services currently represents 30 per cent of the total UK government SITS spend, but this is projected to drop to 14 per cent by 2013. Outsourcing is set to rise from 48 to 58 per cent of the overall spend during that time. TechMarketView claims initiatives focused on cost-cutting, green IT and shared services will still enjoy popularity.
Guy Rafferty, business development director of software vendor Micro Focus claimed it was about time the public sector focused on efficiency. He added that large “rip out and replace” licensing and hardware deals would begin to dry up.
“Larger-scale projects introducing commercial, off-the-shelf software tend to be expensive and risky and quite a few fail,” he said.
“Police forces are faced with having to cut expenditure across the board, not just IT,” he said. “We will have to prove clear return on investment.”
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