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| CURRENT SECTION :: News | UK's most visited IT Contractor Site - 250k unique visitors March 2008 |
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Grim economic conditions will put the brakes on growth in the UK software market, as jittery businesses decide to reduce, shelve or cancel their major projects and upgrades. Analysts say software sales to the UK’s commercial and non-profit outfits will still grow in 2008, but the economic woes will force new buying decisions to be delayed, where practical. In their analysis, Ovum said growth in software will drop to 6.2%, compared to 9.4% in 2007, representing the sharpest annual dip in growth of any other market in the UK IT industry. For IT contractors, the economic pressures equate to fewer software jobs imminently as, unlike IT services, the costs of software projects are instantly visible to belt-tightening businesses. Across both public and private sectors, the pressures will also mean clients will increasingly demand business applications are installed quickly, with minimal customisation. Reducing time and cost will be paramount to the end-users of information management software, who will want basic functionality almost instantly, over a fit tailored to their needs. The same ‘bottom line’ fears will hit software upgrades, Ovum said pointing to Microsoft Vista and Office 2007 as the most obvious casualties. Not only does upgrading to MS Vista force other software upgrades, but user organisations “remain unconvinced” of the claimed boost to productivity. And where are these bottom line fears festering? The private sector will see software spending fall much sharply than in the state sector, which last year accounted for 26% of the market. Corporate spending on applications will grow 5.9% in 2008, appearing positive on the surface but less so when compared to growth last year of 10.6%. The public sector, in contrast, will peak this year at 7% growth. But similar to the outlook for public sector IT consultants , the flow of work for public software workers will be only short-term, and spending will fall (to 4.5% in 2011) as projects by the Home Office, HMRC and Department of Health near their ends. The cooling economy, which the consensus says will not force a recession, in the UK at least, will not drag all areas of the software market – broadly business applications, systems management and information management. Thanks to broadband uptake, global workforces and perception of costs, Software as a Service providers appear not only immune to the economic woes, but may actually benefit from them. “Even if SaaS adoption rates were to fall off,” Ovum said, “SaaS revenue does not decline like licence revenue because the SaaS business model spreads revenue and its recognition over the lifetime of the usage of the software. “We expect that SaaS will become even more popular with vendors during the downturn ahead.” The conditions, although tougher than 2007, are also ripe for financers to invest in software in certain business areas: risk, governance, compliance, portfolio analysis, system modernisation and, thanks to mergers and acquisitions, system consolidation. Yet the benefits for workers and vendors in these sectors are against a wider back drop in Financial Services of some institutions postponing or cancelling initiatives led by technology. Of course there will always be areas of business where new software spending is not discretionary, but rather is brought about by changes in business practices, markets or government regulation. Mobile operators for example are increasingly obliged to buy the best analytical-based marketing software, because the cost of the software (even including the overall project costs) is dwarfed by what they spend on incentives to attract customers. As a result, even when IT budgets are “reduced towards the levels needed to keep the lights on, there will always be some spending on new software,” Ovum said. However the overall climate for the software market in 2008 will be one characterised by stunted growth. “We expect a large dip in growth in 2008,” predicted the firm’s David Bradshaw. “Economic consensus is that the UK will see a soft landing in 2008 and that we will see a return to stronger growth in 2009. Our forecast takes this into account and predicts increased growth …in 2009 and then steady growth…in 2010 and 2011. “In summary, we expect better times once the immediate reduction in [economic] growth is over. Obviously, if the economy does not deliver this could be very different.” Mar 5, 2008 Email this article Printer friendly page Previous Page
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