‘Interesting times’ for the UK public sector

(By Tola Sargeant, 9.00am Monday 14 Sept. 09) I’m delighted to be joining TechMarketView at such an ‘interesting’ time for the UK public sector SITS (software and IT services) market. If nothing else, I can be sure I will not be short of material to write about over the coming months.

The backdrop is familiar to us all. After years of rising investment and big-budget IT programmes, government purse strings simply have to tighten to combat the effects of recession and a ballooning national debt. Whichever party is in power after the next election will have to make spending cuts in an attempt to balance the national books. All public sector suppliers can be sure their contracts will be scrutinised intently at renewal time and margins will be squeezed as their customers look to get even more for even less.

Add to the mix the prospect of a General Election before next June, with a very good chance of a change of government, and the drivers for change in the public sector SITS market get even stronger. Both the Conservatives and the Liberal Democrats are eager to scrap, or severely curtail, the more notorious Government IT programmes, including elements of the National Programme for IT in the NHS (NPfIT) and the National Identity Scheme (see The Effect of a Conservative Government: Part One). Whether these plans are workable; how much they would actually save the taxpayer; and whether suppliers to those programmes should already be packing their bags, are no doubt topics I will be returning to at length.

But, thankfully, it is not all doom and gloom. ‘Austerity’ might be the new buzzword but there are nevertheless exciting opportunities for SITS suppliers in the UK public sector. Larger outsourcers and SIs could be among the early winners: The Conservatives are promoting outsourcing as a means to achieve savings (see UKHotViews UK Outsourcing, 10 Sept. 09). Greater use of Shared Services, both in-sourced and outsourced, will be vital if the government is to meet its new efficiency targets. I also see areas of opportunity for some small and mid-sized players. The increased localisation of NPfIT, for example, opens the UK healthcare market to a wider range of suppliers and there are niches with potential for significant growth despite tighter public budgets.

The new era of public sector austerity could be the catalyst for broader change within the UK government and healthcare IT markets. For example, I expect a greater openness to the use of offshore (albeit still largely ‘under the covers’ initially); an emphasis on innovation in procurement and a greater willingness to at least talk about things like Open Source, SaaS, Virtualisation and Web 2.0, where they have the potential to reduce costs.

So, I would encourage all SITS suppliers to the UK public sector to put a positive spin on the ‘interesting’ in my opening paragraph – adapt, innovate to meet customer needs, and seize the opportunities presented by changing market conditions.