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Media to replace IT as hot growth sector, says analyst

The UK IT sector is unlikely to grow faster than the national gross domestic product for the second decade in a row, says market analyst Richard Holway of Tech Market View.

Holway said sales values were likely to remain static or decline, but innovation would continue to help firms drive down IT costs while improving productivity. He called this a "cold tech" industry.

Holway said the IT sector's market growth in the 2000s had been below GDP growth, due largely to outsourcing and offshoring and to the sale of British companies to foreign firms. Holway said 20% of the revenue and 40% of the people employed in the sector now went to overseas suppliers.

In 1985, nine of the top 10 IT services companies were UK-owned; now most IT firms were foreign-owned, and the largest UK-owned IT firm, Logica, was only 12th largest globally, he said.

A greater danger to the industry was that school leavers did not have access to entry level IT jobs, said Holway. This meant they could not develop the skills and experience needed to become middle managers and experts, or for their employers to grow into global giants on the scale of SAP or Microsoft.

Holway said open source software was a cold tech driver. It helped hold down costs. He expected consumer electronics to drive enterprise IT. He said within 10 years most companies would expect staff to use their own equipment to log on to company information via a secure cloud access point.

Similarly, a highly flexible, component-driven style of doing IT would increase, especially in the public sector, to save costs and to exploit the innovations created from the open source environment.

Holway said there was little wrong with the UK's capacity to innovate. This was evident from the number of UK IT firms that had attracted foreign buyers, from the number of British executives in firms such as Sony and Fujitsu, and from the media and entertainment sector, he said.

He predicted the media sector would displace IT as a bigger component of UK GDP. Consumption habits were already changing to reflect this shift, he said. And the UK was very good at digital design, he said, pointing to the computer games sector and the computer graphics firms of Soho, which he described as "world-class".

Holway said Microsoft had dominated the world's desktop units and Google was dominating the world's "webtop". But no one yet dominated the world's "me-top" - currently the personal mobile device used by individuals. This was where British ingenuity and creativity could create a firm as successful as Microsoft or Google, he said.


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