TechMarketView in the Press

Another frenetic period for TechMarketView in the press.

Richard Holway had an interview with Ian Grant at Computer Weekly which resulted a long article – Media to replace IT as hot growth sector.

TechMarketView’’s report on the UK Public Sector SITS supplier landscape 2010 got wide coverage. See HP’s public sector IT dominance ‘vulnerable in new era in InformationAge.

Georgina O'Toole also got quoted extensively over how the recently announced Government cuts would effect the UK IT sector. See IT Industry hit hard in eWeek or IT industry questions sense of Chancellor’s cuts in NetworkWorld.

Posted by HotViews Editor at '06:15'

IndustryViews M&A quarterly review

In the latest edition of IndustryViews M&A, there’s some good news on valuation multiples for the SITS sector, which continued their march upwards as European tech sector valuations weakened again.  You can also enjoy a ‘back to the future’ moment, reading about a long-established privately held UK player ‘snapped up’ by an American giant 5 years ago, and returned to private hands earlier this year for one-tenth of the original price. Which only goes to show that ‘big buys small’ can cause just as much value destruction as ‘small buys big’.

The latest issue of our quarterly series of IndustryViews notes on the UK software and IT services M&A scene is now available for download here for TechMarketView Foundation Service clients.

Posted by HotViews Editor at '17:37'

UK Government spends close to £11b with Top 20 SITS suppliers

UK Government spends close to £11b per annum with the top 20 SITS suppliers to the sector. The supplier landscape has been led by the same few names for some time and the ‘usual suspects’ continue to dominate the market. However, as the Conservative-Liberal Democrat coalition government settles in, it is becoming clear that the now inevitable spending cuts have the potential to change the fortunes of the leading players.

Market trends – such as the move away from end-to-end outsourcing mega deals, the desire to give more control to local organisations, and the slow acceptance of the offshore players – will be accelerated as a result of the new government’s plans. The ‘next tier’ of suppliers is in an excellent position to benefit. The redistribution of revenues amongst suppliers, as major IT contracts are re-let (often in a very different form), will have a significant impact on the competitive landscape.

In our latest PublicSectorViews report – UK public sector SITS supplier landscape 2010 – we reveal the leading top twenty SITS suppliers to the UK public sector SITS market, analyse their strengths, weaknesses and strategic positioning, and provide our opinion on what lies ahead. The report also highlights other suppliers we think are well worth watching. 

PublicSectorViews clients can download the report today. For more information on how to subscribe to our PublicSectorViews service, please contact Puni Rajah.

Posted by Georgina O'Toole at '07:43' - Tagged: publicsector  

Intellect ‘cautiously optimistic’ for UK tech

In its just published annual president’s report, The State of the UK Technology Sector 2010, Intellect president John Higgins struck a note of cautious optimism for the sector this year. He surmised: “As a whole, we are seeing a return to growth, albeit slight, across the sector over the next 12 months.  However, we also anticipate changes across the industry as customer markets change and sectors are structurally changed through new business models.” Higgins noted that continuing investment in R&D could provide ‘exciting opportunities’ for tech companies in 2010.

TechMarketView, along with our European research partners, PAC, were proud to have played an important part in compiling this report, which includes our definitive growth forecasts for the UK software and IT services market. TechMarketView is hugely supportive of the work that Intellect does for the UK tech industry and we will continue to play our part to help promote the health of the sector its many highly innovative UK software and IT services companies. Indeed TechMarketView is working with Intellect to organise a major chief executive event towards the end of the year around the sustainability of UK IT skills, very much in line with the Making BrITain Great Again IT manifesto with which we were also deeply involved (see here). You’ll hear more from TechMarketView and Intellect about this soon.

Posted by HotViews Editor at '07:07'

IndustryViews Quoted Sector quarterly review

The latest edition of our quarterly series of IndustryViews notes on the UK software and IT services quoted sector is now available for download here for TechMarketView Foundation Service clients.

You’ll be able to see who were the Top 20 – and Bottom 20 – stocks among the 125 UK SITS companies listed on the London markets, and compare key UK players with peers in Continental Europe, the US and India. And of course there’s our regular Dearly Departed column on recent exits. It's jolly good reading, we think!

Posted by HotViews Editor at '10:15'

Tory-Lib Dem alliance will agree on most tech issues

As David Cameron is named as the new Prime Minister and he commits to forming a “proper and full coalition” with the Liberal Democrats, it’s worth considering where the two parties agree (and disagree) in terms of their Technology Manifestos. The headlines of the last few days have concentrated on deal makers or breakers such as electoral reform, deficit reduction, banking reform, and environmental issues, as well as civil liberties. The last issue – civil liberties – will impact decisions made over IT projects such as the National Identity Scheme and the DNA Database.

One thing that all both parties agree on (and indeed, Labour also agreed on), is that they will be looking for major cuts in IT spending. Sir Peter Gershon advised the Tories that cuts in IT spending of between £2b and £4b p.a. could be made by renegotiating contracts with suppliers. The Liberal Democrats have gone into more detail, stating that, by scrapping ICT schemes, they would be able to save £3.37b over five years (they’ve stated that scrapping fingerprint passports would save £1.83b, scrapping ID cards would save £550m, scrapping the Interception Modernisation Programme (IMP) would save £800m and scrapping ContactPoint would save £190m).

As always, when it comes to the approach to IT procurement, the devil is (and will be) in the detail. On some issues there seems to be broad cross-party agreement – opening the way for increased adoption of open source software, moving towards software-as-a-service where possible, the consolidation and rationalisation of IT infrastructure, and opening up the Government IT market to smaller providers. Where the parties differ is in their approach to achieving these goals – and that will raise its head when dealing with the practicalities begins and procurement reform is put under the spotlight. For example, while the Liberal Democrats (and Labour) have been vague on the ‘how’ (with the Lib Dems simply saying that they would conduct a full IT procurement review), the Tories have been a little more forthright in stating pledges such as a £100m limit on IT projects. Such pledges will now be under scrutiny as Clegg and Cameron attempt to find common ground.

The IT ‘elephants in the room’ in the weeks and months ahead will be: 1. Some of the existing IT programmes, and 2. The use of business process outsourcing. However, the good news is that the Tories and Lib Dems are far more closely aligned with each other than they are with Labour when it comes to their views on surveillance, data transparency and civil liberties.  And as a result, it looks likely that we will have certainty on the future of some programmes, such as the National Identity Scheme, DNA Database, ContactPoint, CCTV and the Interception Modernisation Programme, sooner rather than later. Cameron and Clegg also agree on the future for the NHS National Programme for IT. The Lib Dems' opinion on Building Schools for the Future is unclear, but it appears that both the Tories and the Lib Dems would support investment in education and in the IT to support education (in some shape or form). Labour has been poles apart from both the Lib Dems and the Tories on most of these big IT project issues.

• NHS Programme for IT - Labour pledged to scale down the programme saving “hundreds of millions of pounds” over the next four years (as an aside, Labour Health Minister, Mike O’Brien, lost his seat in the election), whereas the Tories have said they will “halt and renegotiate” contracts and have also talked about dismantling ‘The Spine’ as decision-making is moved to the local level. The Lib Dems are supportive of the Conservative view. A Con-Lib Dem coalition would probably result in BT and CSC’s NHS NPfIT LSP contracts being further renegotiated. BT is also the prime contractor on the ‘Spine’ contract.
• Interception Modernisation Programme (to extend capabilities for intercepting and storing communications data) – Labour had no plans to change the programme. However, the Tories plan to review the programme, and the Lib Dems have proposed an alternative approach based on targeting, warrants from law enforcement agencies and other safeguards. The supplier(s) on this Programme have never been revealed.
• Building Schools for the Future – Labour promised to increase spending on the programme but Tories favour Academies. The Liberal Democrats have not made their views clear on BSF, however, they have pledged a £2.5b ‘Pupil Premium’ and it is unclear how that would be funded.  Existing BSF contract should be safe (as the Tories pledged to go ahead with contracts that had reached financial close and the procurements have been expensive), but those targeting future deals, such as Capita and RM, will be keen to understand what shape future investment in IT will take.
• National Identity Scheme – Labour pledged to increase spending on the premise that the programme would be self-financing as it cut benefits fraud etc, while the Tories and Lib Dems both oppose the scheme (and would scrap both the National Identity Register and ID cards). The Liberal Democrats would go one step further and also “scrap plans for expensive unnecessary new passports with additional biometric data”. They have also said that the money saved would be used for 3,000 more police officers as well as investment in better mobile technology for use on the beat. IBM’s contract to build and run the National Biometric Information Service (NBIS) database and Thales’ contract to design, build, test and operate the technology for the NIR will be most at risk. CSC’s contract to improve the application and enrolment contract for the Passport Service should be relatively safe (although is also likely to be subject to scrutiny).
• ContactPoint childrens’ database – Labour continue to support the programme, but the Tories have pledged to scrap the database in favour of something smaller and more targeted. The Lib Dems support the Conservative view. Capgemini built the database and hosts it under a £40m contract awarded in 2007.
• DNA Database – Labour planned to maintain the current stance on storing DNA data while both the Tories and the Lib Dems support the scaling back of the database by putting an end to the indefinite retention of the DNA of innocent people.
• CCTV – Labour would have invested more but both the Tories and Lib Dems favour regulation.

So when it comes to investment in major IT programmes, we can expect far greater cuts under a Conservative-Liberal Democrat coalition than we would have had with any coalition involving Labour. This is likely to be bad news for some of the big IT services suppliers as highlighted above. However, let’s not forget that the government is likely to find that it’s a costly business trying to reduce the value of a contract midway through its term (there’ll be all sorts of penalties to pay) – cutting costs on existing IT projects won’t be as simple as just turning off the tap.

So, then we come to the use of business process outsourcing (of course closely linked, though not synonymous to shared services). When it comes to the use of business process outsourcing, the Tories pledge to outsource all UK Government back office functions, while Labour had pledged to create business service companies to handle back office functions, and the Lib Dems' stance remains unclear. The Liberal Democrats had previously supported the Labour view that spending cuts should be made starting next year (rather than immediately). However, Vince Cable, Liberal Democrat’s main economic spokesperson, today conceded that making cuts sooner rather than later would be a good idea, provided stimulus in the British economy is maintained by other means. A strong agreed stance on immediate cost cutting will be good news for the business services companies – the likes of Capita and Serco – and IT services players with UK Government BPO experience (see Yet another Election update).

Overall, when it comes to IT, a Tory-Lib Dem alliance will agree on a lot more issues. However, their policies will have a mixed impact on the IT industry – bad news for the major IT services companies whose existing IT contracts are at risk of cancellation, curtailment or renegotiation, but good news for those with strength in business process outsourcing.

Posted by Georgina O'Toole at '21:35' - Tagged: publicsector  

Value for money still key driver for UK IT services

Despite supplier confidence that IT spending is recovering, ‘value for money’ will remain the key driver for the UK IT services market, according to the latest TechMarketView report published today.

The new report, UK IT Services Market Trends and Forecasts 2010, highlights four key customer trends driving suppliers’ services strategies: Value for money; Rapid response; Business exploitation; and Business control. Value for money – which the report describes as being a polite way of saying ‘more for less’ – remains the top challenge for CIOs, and is driving keener pricing and smaller deals. This is the proverbial ‘double-whammy’ for IT services suppliers. Not only does it depress revenues but, more insidiously, it resets customer expectations as to how much ‘flesh’ they can pare from their IT budgets before ‘hitting bone’.

As such, TechMarketView is forecasting another year of decline for the UK IT services market, with spend shrinking by 2% in real terms in 2010. Growth is not expected to return till 2011. Project services – the so-called discretionary side of the IT services market – will not return to growth until 2012, with recent signs that spending on consulting – a lead indicator for the project services market – is only just starting to recover. Outsourcing remains the most resilient service line, with business process outsourcing (BPO) performing strongly and application outsourcing (including SaaS) heading for double-digit growth.

The report also points to four ‘elephants in the room’ which are fundamentally reshaping the UK IT services market: cloud computing; mobile internet; social media; and consumer IT. According to TechMarketView, these trends are yet to affect the market in material terms, although suppliers have been quick to jump on the cloud bandwagon. TechMarketView sees current supplier cloud initiatives mainly as a repackaging of existing services under a ‘flag of convenience’, but says this will change as the market matures.

The report also comments on the current wave of industry consolidation as suppliers use acquisitions to supplement top-line growth. While TechMarketView questions the strategy of some recent mega-acquisitions, such as that recently announced between HP and Palm (see HP to buy Palm. But why?),  many other players are taking advantage of lower valuations to fill in the gaps in their services portfolio.

UK IT Services Market Trends and Forecasts 2010 complements TechMarketView’s recently published review of the UK software market, UK Software MarketViews. TechMarketView Foundation Service clients can download these reports (and indeed all our in-depth UK SITS research) from our website.

Posted by HotViews Editor at '07:35'