No “Green Shoots” Yet For IT Spending

Spending on IT services and software is declining faster than some analysts predicted earlier this year but there are hopes that there won’t be further drops in the future, according to a new report.

A report from analysts Pierre Audoin Consultants (PAC) in partnership with TechMarketView (TMV) have stated that spending on software and IT services in the UK could fall 1.3 percent to £39.5bn in 2009 – worse than than the 1.0 percent drop predicted earlier this year.

However, the analysts claim the sector may look better in 2010 and even return to slight growth.

“At the beginning of the year we said it was going to get worse before it got better”, explained TechMarketView managing partner, Anthony Miller. “While it’s still too early to talk about ‘green shoots of recovery’, our reading of the market indicates that the worst may well be behind us.”

According to the analysts, many UK companies have cut or frozen their IT budgets. “This will drive a 3.9 percent drop in software investment and a 5.5 percent decrease in project serv-ices spending. However, the decline will be partially offset by a 3.1 percent rise in outsourcing spend, as businesses aim to reduce their IT operating costs, and focus on core, strategic activities,” the analyst said.

Spending on IT services and software is being strongly supported by the public sector which accounted for around 25 percent of the UK market according to the analysts. “Public sector SITS spending will grow by 4.3 percent this year as local and central government departments drive cost efficiencies, as well as invest in new programmes such as to support border control and defence initiatives,” the analyst said.

The retail, services and manufacturing sectors will cut software and IT services investment the most this year, according to the analysts.

Miller added that the general election will also impact public sector IT spending. “There may well be a hiatus in kicking off new government IT projects pending the election”, Miller said. “But whichever colour of party we see in government next year, we expect that the pace of outsourcing – and, dare we say, offshoring – will undoubtedly increase, more so with the Tories.”