Contractors' Questions: Where’s the potential for public IT suppliers?
Contractor’s Question: Where will some of the supposedly “rare” opportunities in the public sector Software and IT Services market be in the near future, whether I’m a small ICT supplier or on the team at one of the government’s primary IT contractor companies?
Expert’s Answer: 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.
The central government market – consisting of Whitehall departments and agencies – will suffer the most drastic decline in market size over the four year forecast period. The market will decline by 10.7% in 2012 (worse than 2011) and by a compound annual rate of 2.4% between 2011 and 2015.
However, other subsectors hold more promise for suppliers. For example, growth is predicted in local government and in the police sector. While 2011 was a tough year for local government suppliers, the forecast is for even single digit percentage growth through to 2015 making for a pretty steady market. Certain contracts that have already been signed will help the market to remain in positive growth territory, although many authorities will remain cautious over outsourcing service delivery.
The police sector will be the fastest growing sector in percentage growth terms, and was the only sub-segment to not fall into negative growth territory in 2011. However, it will ultimately only generate £90 million being added to the market size between 2011 and 2015 and forecasts remain subdued for the potential of this sector, as negative press around G4S and the London Olympics leads to additional caution and delays in contracts being signed off.
Regardless of subsector, though, there are common requirements that will drive demand for ICT in areas like information management, mobilisation of the workforce, digital transformation, fraud, error & debt management, cyber security and information assurance, and shared services. Even in the worst performing sectors, suppliers that can tailor their offerings to meet demand in these areas, have the potential to prosper.
Lastly, consider that Business Process-as-a-Service (BPaaS) is the fastest growing part of the UK BPS market. From a very low base today, we estimate that revenue for suppliers will more than double every year over the next four years, and be worth in excess of £100m per annum by 2015. Effectively ‘BPS on-demand’, BPaaS is being enabled by the growing availability of cloud-based business process platforms, and driven by client expectations for BP services delivered on a flexible pay-per-use basis.
Although it is very early days, different BPaaS models are emerging as suppliers like Fujitsu, Capita, BT, Liberata, NorthgateArinso, Accenture and India-based players TCS, Genpact, Wipro, Infosys and Cognizant are testing the water with some real-life examples.
The expert was TechMarketView, the UK’s leading IT market analyst house.