TechMarketView: Bleak picture for UK public sector SITS

Software and IT services market in 2015 set to be worth £1bn less than it is now according to analyst, but windows of opportunity still exist

Spending in the UK public sector software and IT services (SITS) market is set to drop 0.6 per cent every year until 2015, making its worth £1bn less than it is now.

That is the claim from market watcher TechMarketView, in its latest UK Public Sector Software and IT Services (SITS) Market Trends and Forecasts report.

As economic pressure continues and the government is forced to further cut spending, IT suppliers are being forced to cut prices and become even more competitive, the report stated.

Throughout 2011, the size of the UK public sector SITS market shrank by 2.3 per cent to a value of £11.5bn, and all sub-segments, with the exception of police, fell into negative growth territory. The education sector declined by nine per cent.

Georgina O’Toole, research director and report author, said: “For suppliers, the UK public sector SITS market will remain a tough market in which to operate throughout our forecast period to 2015. With government organisations facing increasing pressure to cut budgets while continuing to transform public service delivery, suppliers face the challenge of convincing government organisations of the value that ICT can bring in terms of saving money from the broader budget. The risk remains that ICT budgets will be cut at the expense of innovation.”

TechMarketView predicts central government – consisting of Whitehall (pictured) departments and agencies – will suffer the greatest decline over the coming years, dropping 10.7 per cent this year, and by a compound annual rate of 2.4 per cent between 2011 and 2015.

A ray of light in the public sector is the police service, but even so, this will "only" generate a further £90m between 2011 and 2015, with forecasts hit by negative press surrounding G4S and the London Olympics.

Despite the negativity, there are still some common requirements that will drive IT demand, such as information management; mobilisation of the workforce; digital transformation; fraud, error and deb management; cybersecurity and information assurance; and shared services, the report suggested.

But the pressure on suppliers will continue, the analyst said. “Where once it was the case that all suppliers would grow in the public sector, now only the fittest will retain or grow market share,” O’Toole added. “Bringing innovation to targeted sub-sectors will be crucial to remain in the game, and will help suppliers prove their worth.

“Ultimately, the picture this report paints is not a rosy one by any means,” said O’Toole. “There are major challenges ahead and growth will not come easily. However, there are many opportunities that ICT and emerging technologies offer and suppliers need to remain committed to the UK public sector and its various sub-segments to help the UK government take advantage of the benefits these innovative technologies can add. Only then can the public sector be cost effective while continuing to deliver and transform public service delivery.”