UK Software And Services Appear To Be On The Decline

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Channel faces troubled times ahead but it’s not all bad news

The UK Software and IT Services (Sits) market is set to decline by five percent from its 2011 levels by 2016, according to a report.

The UK Software Market: Trends and Forecasts report by analyst firm TechMarketView said that the market in the UK will reach £44.3 billion. This will give the market an appearance of eight percent growth since 2011 while masking a real terms decline of five percent, according to analysts. While this figure is 1.3 percent on 2012’s figure of £41.9 billion, it disguises a real terms decline of 1.6 percent excluding inflation.

Figuratively speaking

HP is top dog in the market with revenues of £3.2 billion, even though, according to TechMarketView, its UK software and IT services revenues declined by five percent. HP leads IBM, Capita and BT, which retain their respective second, third and fourth places.

Richard Holway, chairman of TechMarketView, said that the initial view of the figures might provide the impression that the market was struggling: “A first look at the Market Trends and Forecasts might suggest that the UK Sits market is pretty uninspiring. 10 years of plus or minus two percent growth does seem quite uneventful on the surface. But if you look at its sister report, UK Sits Rankings, there’s another story to tell entirely. The biggest growth companies in the UK SITS market grew by 30 percent or more. Meanwhile some very established competitors declined by similar amounts. Indeed, some like 2e2 are not even around for us to measure any more.”

Analysts highlighted the difference between public and private spending on software and services with private company spending expected to fall over the next three years with the public sector returning to 2010 values with around 27 percent of the market by 2016.

The UK private sector SITS market was worth £30.6bn, 3.1 percent higher than in 2011 at the headline level and 2.7 percent higher in real terms. However, analysts reckon that growth will fall this year to 2.3 percent (£31.3bn) will continue downwards to about 1.1-1.2 percent in 2015/2016.

“Running an established company during sluggish economic growth at the same time as huge changes in the way that software and IT services are delivered is a huge task. The challenge facing many larger businesses is how to correct course without destroying the core business, which is under pressure due to the economy. The baggage of established businesses makes it a lot harder for them to be agile in today’s market, which presents an enormous opportunity for SMEs and start-ups. Just look at the success of and many other new businesses that have pulled the rug out from under major suppliers by snatching away their customers,” added Holway.

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