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14 July 2009 | Published by Ovum
New Ovum research highlights opportunities for IT services providers in the UK IT outsourcing market
London – The UK IT outsourcing (ITO) market continues to present opportunities for large providers at the top end of the market, according to new research from global advisory and consulting firm Ovum. However smaller and niche suppliers are facing the toughest of conditions as opportunities fall into the hands of the largest players.
Ovum’s report titled, “UK IT outsourcing: opportunities in a recession”,shows that the ten biggest UK ITO providers have boosted their total contract value (TCV) of ITO deals signed in the first six months of the year by an impressive 31%. This is due to a combination of some new megadeals entering the market (BT’s £500m contract at the National Health Service, IBM and CSC’s c£300m deals at the Government’s Identity and Passport Service, and a £685m deal for HP-EDS at insurance giant Aviva) as well as many smaller sized deals that are increasingly encompassing a broader range of services.
John O’Brien, senior analyst and author of the report says: “The UK public sector in particular continues to let significant contracts such as for ID cards, with others such as the Environment Agency still to come. However this is more a culmination of existing procurements than new initiatives.”
Other vertical sectors such as financial services, pharmaceuticals/life sciences, retail and travel are showing active interest in ITO too. They are also under heavy financial pressure as a result of the recession. Recent £20m+ ITO deals with IBM at the Carphone Warehouse, CSC at Virgin Atlantic, and with Xerox at nationalised bank Northern Rock, are encouraging signs of such activity coming to market.
O’Brien continues: “The UK ITO market has some residual opportunities that are reaching sign-off in 2009 – hence the continued buoyant demand in the first half of the year. But beyond that demand is holding up well as outsourcing becomes a top priority for many end users grappling with the impact of recession.”
While this is all good news for the top tier, the second and third tier players are struggling. Amid an increasingly consolidating supplier landscape (HP/EDS, Fujitsu/Fujitsu Siemens) the available deals are falling into the hands of fewer and fewer players, which have immense spending power and reach.
To succeed in the current market, suppliers are going to need to have deep pockets and resilience. Offering more for less by restructuring contracts, offering new technologies such as virtualisation and cloud computing, and providing innovative approaches to drive out further cost for their customers are key to winning and retaining business. This will require significant time and financial investment on the part of suppliers, and will be a challenge to even the most financially stable vendors.
Without a clear understanding of, and a strategic response to the challenges faced, this has the potential to spell the end for the second and third tier UK ITO market.
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Notes to editors
Related Research
“UK IT outsourcing: opportunities in a recession” is the second report in an ongoing series of short reports providing in-depth analysis of specific opportunity areas within the UK IT services market. The first report titled,“The UK systems integration market: trends and opportunities” and published in March 2009, looks at the UK systems integration market, while this second examines the opportunities for suppliers of IT outsourcing services in the UK.
These reports should be read in conjunction with Ovum’s annual- “UK Market Trends” set of reports that present a headline view and market size and forecasts across the UK IT services market.
Further Information
John O’Brien, senior analyst and author of the report, is available for comment.
More information is available from the Datamonitor Group Media Team. Please contact Maria Di Martino on +44 20 7675 7529 or maria.dimartino@ovum.com.
For US, please contact Alan Sott on +1 570 687 9315.
For Asia-Pacific, please contact Denis Mason on +61 2 8705 6903.
About Ovum
Ovum is a telecoms, IT services and software company that analyses changes, threats and opportunities ahead for our clients including small companies, Fortune 500 corporations, and governments around the world. Together, Ovum and Datamonitor provide leading European business information in the technology, information, communications and telecoms sectors.
Ovum is part of the Datamonitor Group.
About Datamonitor
Datamonitor is a leading provider of online database and analysis services for key industry sectors. We help our clients, 5000 of the world's leading companies, to address complex strategic issues. Through our proprietary databases and wealth of expertise, we provide clients with unbiased expert analysis and in-depth forecasts for seven industry sectors: Automotive, Consumer Markets, Energy, Financial Services, Pharmaceuticals and Healthcare, Technology, Transport and Logistics.
