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Nowhere will the fall in spending on software and IT services (SITS) in Britain be more noticeable in 2009 than in its beleaguered retail sector. Faced with a credit dearth and shaken consumer confidence, retailers will cut such IT budgets by 5.9 per cent, compared with a 1 per cent dip for the SITS market as a whole. This means that while there will be some exceptions, most retailers will slash or freeze their budgets for new applications and IT project services in the coming months. Cost control in the IT department is therefore retailers’ order of the day at the expense of business expansion, said the forecasters Pierre Audoin Consultants and Tech Market View. Giant retailers, notably Marks & Spencer and Morrisons, will however implement critical IT modernisation programs, while other groups, like Phones4U, are eyeing outsourcing deals. But these isolated pockets of IT activity will not be enough to stop the retail sector becoming “one of the toughest for UK software and IT services players in the medium term,” PAC said. In contrast, they said the most robust SITS buyer will be the public sector, where local government outsourcing programs and national security schemes will help spike SITS budgets by 3.7 per cent in 2009. Over the same period, the public sector’s total IT spend, including hardware and staff, will rise by 2.8 per cent, compared with a fall of 1.8 per cent in UK IT spending as a whole. “One of the key growth engines will be investment in new outsourcing and shared services programs in local government”, said the respected IT analyst Richard Holway, of Tech Market View. He said local governments will invest in IT as a response to central government mandates to deliver improved levels of public service, despite tax receipts falling sharply from the recession. PAC added that over the next two years, its research has found that local government is in line to be awarded new outsourcing contracts worth more than £8.5bn. “The largest single opportunity will come in Essex, where the council has short-listed consortia led by IBM and T-Systems to outsource 'any or all' public services as part of a deal potentially worth up to £5.4bn,” Holway said. “The Essex deal will follow other recent large council outsourcing engagements, including South Tyneside (£300m deal with BT Global Services), Glasgow (£256m deal with Serco) and Birmingham, which is aiming to save £1bn over ten years through a deal with Capita.” Meanwhile, central government IT spending will be driven by the National Identity Scheme, of which two contracts are already in place – one with Thales for £18m and the other with IBM for £3m. The most lucrative parts of the scheme – the application and enrolment contract (up to £400m), the card design and production contract (up to £250m) and the biometric identity service contract (up to £250m) - are yet to be awarded. ”With all three of these contracts due to be awarded in 2009, the National Identity Scheme alone is set to drive considerable growth in IT expenditure this year,” PAC said. “With other government IT programs such as FLIS, MIDAS and Ocean also in the pipe-line, PAC expects many SITS suppliers to offset pressure in the commercial segment with an increased focus on public sector opportunities.” Mar 31, 2009 Email this article Printer friendly page Previous Page
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