Public Sector IT - Still the place to be

(By Richard Holway 7.00pm 18th March 09) Our friends and partners at PAC have just released their forecasts for UK Public Sector IT spending. These show a 3.7% increase in SITS spend in 2009 compared to a decline in overall UK SITS spending of 1% as we reported in our own MarketViews report last month. The contrast is even more marked for total IT spend (i.e. including hardware and personnel). Here UK Public Sector IT spend will rise 2.8% against a 1.8% contraction in UK IT spend as a whole.

One of the key growth engines will be investment in new outsourcing and shared services programs in local government as they respond to Central Government mandates to deliver improved levels of public service despite a reduction in tax income resulting from the recession.

PAC has identified more than £8.5bn worth of new outsourcing contracts that are set to be awarded in UK local government over the next two years. The largest single opportunity will come in Essex, where the council has short-listed consortia led by IBM and T-Systems to outsource 'any or all' public services as part of a deal potentially worth up to £5.4bn. The Essex deal will follow other recent large council outsourcing engagements, including South Tyneside (£300m deal with BT Global Services), Glasgow (£256m deal with Serco) and Birmingham, which is aiming to save £1bn over ten years through a deal with Capita.

In the Central Government area, IT spending will continue to be driven by the National Identity Scheme (NIS). Two contracts have already been awarded, with Thales winning the £18m interim National Identity Register contract, and IBM the £3m immigration casework management contract. However, the largest parts of the framework are all yet to be awarded. These include the £350-£400m Application and Enrolment contract, the £250-£350m Card Design and Production contract and the £200-£250m National Biometric Identity Service contract.

With all three of these contracts due to be awarded in 2009, the National Identity Scheme alone is set to drive considerable growth in IT expenditure this year. With other government IT programs such as FLIS, MIDAS and Ocean also in the pipeline, PAC expects many SITS suppliers to offset pressure in the commercial segment with an increased focus on public sector opportunities.