Major contract wins spark optimism in IT services market

Some $7.2bn of new contracts signed in first five months of 2013, claims Ovum

A flurry of major contract wins has sparked optimism in the IT services market, according to analyst Ovum, which claims some $7.2bn (£4.7bn) worth of new deals were sealed at the start of 2013.

In its State of the Nation: The UK IT Services Industry in 2013 report, Ovum claims that the UK IT services market is set to surpass the forecasted total contract value of $12.8bn "with relative ease".

The first five months of the year saw more than half that figure ($7.2bn) achieved, with three of the deals included in the total topping $1bn alone, earning themselves the title of "megadeals".

Ovum claimed that the strong start to the year is cause for celebration as the market has remained flat for the past few years - growing only 1.5 per cent and two per cent in 2011 and 2012 respectively. It added the activity has given the UK's industry a much-needed boost.

The research firm's IT services analyst Ed Thomas called for cautious optimism in the market.

"Despite the optimism engendered by the string of large deals announced so far in 2013, market conditions in the UK continue to be challenging," he said.

"The slow rate of economic recovery means that many enterprises will still be wary of investing in IT projects. However, the recession has also ensured that cost cutting remains one of the top priorities for the majority of companies. This should provide opportunities for IT services vendors, although they will need to offer more than just a cheap service in order to win business in the mature UK market."

Ovum added that the market is becoming fairer for smaller IT services firms thanks for the government's efforts to level the playing field and make it easier to compete with the likes of Capita, for example.

"It remains to be seen how effective these changes will be, but there are early signs that government procurement is indeed becoming more open," the analyst said.