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Public-sector IT spend predicted to fall

Published: 10 Sep 2007 16:08 BST

The UK public-sector software and IT services market will begin to wilt as big government IT programmes slow down, analyst house Ovum predicts.

The public-sector market is predicted to grow at a compound annual growth rate of 6.9 percent between 2007 and 2011, making it worth £11.7bn in 2011, according to Ovum.

But 2007 will see higher-than-average growth, with the UK public-sector software and IT services market predicted to grow by more than 11 percent this year. Last year spending was up by just under nine percent at £8.1bn.

Major public-sector projects, such as the NHS IT programme and Criminal Justice IT programme, have impacted the software and IT services spend over the past two years. But there will be a "significant slowdown" in growth between 2008 and 2011 as many of the existing IT projects slow sharply, according to Ovum.

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Georgina O'Toole, lead analyst for the research, said that, in the comparatively lower-growth environment, public-sector IT suppliers will need to shift their thinking to understanding the specific needs of potential customers rather than on winning the next "mega deal". That will mean more mid-sized deals focused on, for example, application development and maintenance, as well as systems integration and consulting.

O'Toole said suppliers fortunate enough to have landed themselves a "mega deal" in recent years have benefited most but, with fewer such deals on the horizon, the market is set to become relatively more attractive for second-tier suppliers, as the UK government puts greater emphasis on exploiting the infrastructure investment of the early part of the decade.