The public sector will soon cease to be the engine of growth for the software and IT services market, according to projections by analysts TechMarketView.
With a huge squeeze expected on public spending regardless of who is in power after the coming general election, the end is in sight for a decade in which public spending on information technology has been rising much faster than private spending, the report says.
Nonetheless, even as spending by departments is cut, the need for greater efficiency is likely to generate some growth as more services are outsourced to the private sector. In addition, more IT-enabled public sector work is likely to go offshore to India and elsewhere under the pressure to cut costs.
“Things that were unthinkable a few years ago become a possibility,” said Tola Sargeant, research director at the recently established technology analysis group.
Growth rates in public sector spending on software and IT have outstripped those in the private sector every year for the past decade, according to Richard Holway, the company’s chairman.
The public sector share of the market has grown from 19 per cent to nearly 30 per cent, with some leading suppliers taking more than 50 per cent of their revenues from the public sector.
“All that is about to change,” said Mr Holway. “Companies that have complacently relied on the public sector [are] in for a shock.” Existing contracts will be relet at higher prices and often with different suppliers, as has just happened at the Department for Work and Pensions.
And the days of the mega-IT project in central government look to be over, with cuts likely even in the big NHS and schools IT programmes, whose budgets appear likely to enjoy more protection than those of most departments.
However, the report warns that “cuts to IT spending, if not done sensibly, could have a significant impact on the delivery of public services”. In healthcare, for example, the development of an electronic patient record is becoming crucial for safety as patients move more between different healthcare settings and providers.
The report, however, says it is “not all doom and gloom” as IT spending is still likely to grow slowly. Spending on outsourcing and greater use of shared services in both central and local government are likely to grow in order to cut costs.
Source:http://www.ft.com/cms/s/0/5852773e-1cc0-11df-8d8e-00144feab49a.html
