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Computer Services Market Report 2010
Key Note Publications Ltd, Sep 2010, Pages: 112
The UK computer services market was worth £25.21bn in 2009, representing a fall of 4.2% from its 2008 value. Following a period of steady growth, the sharp reduction in industry value reflects the effects of the UK recession, with many major clients having slashed their information technology (IT) budgets in response. However, the outlook for computer services is largely positive, despite concerns about the impact of the new Government’s plan to reduce public spending budgets.
The market for computer services is relatively broad and encompasses IT consulting, implementation, operations management and support services. Key client sectors include private industry (particularly banking), insurance, communications, retail business, and central and local government, which account for more than half of the computer services market. A small number of large international players dominate the market, commanding major outsourcing contracts in the public and private sectors. These are complemented by a much greater number of small and medium-sized enterprises (SMEs).
The computer services industry continues to be one of the more dynamic UK market sectors, although the global recession has effected a downturn in the 2008 and 2009 market value. Traditionally, outsourcing contracts are sustained during slow economic periods as client companies strive to cut costs and improve cash-flow. However, negative effects have been exaggerated by the extent of the recession, creating a long time-lag for new contracts to be agreed and take effect. A major client sector, the finance industry, was severely affected. Across a variety of industries, plans to replace legacy systems have been postponed and clients have opted for more cost-effective solutions. The Government is also making significant cuts to public sector project budgets, which will affect the computer services market.
Computer services firms have been quick to respond to changing customer needs, increasing technological alternatives such as cloud computing. Offshore outsourcing has increased, a valuable cost saving option. More offshore suppliers have also invested specifically in the UK market, and now compete head-on with the established computer services firms they also work for.
The heyday of ‘super-large’ sized deals appears to be ending, with more clients (particularly government), opting for smaller piece-meal contracts with multi-sourcing in order to make projects more manageable from the client-side. The market is also moving away from using outsourcing purely for lower level processes, such as computer maintenance and basic system running, and towards strategic uses in marketing and business operations.
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