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Comprehensive Spending Review: Suppliers brace for IT spending plunge

The simple thought of next week's announcement of the Comprehensive Spending Review (CSR) is certainly sending shivers down the spine of IT suppliers.

The key government IT providers have been asked to help out and several have already signed memoranda of understanding with the government as Cabinet Office minister Francis Maude presses ahead with his plan to cut costs.

Despite the fact that many suppliers had already seen a lot of change even before the election, a senior executive at a large IT firm told Computer Weekly there will be further developments ahead.

"The previous government was reviewing outsourcing and procurement routes. They have spotted that a lot of contracts were not value for money and I know that some of out competitors use very low margins and don't add any innovation. Long-term outsourcing contracts will be terminated and the government will go out to non-traditional vendors," said the source, who requested anonymity.

The public sector has for some time been the single largest vertical within the UK IT market so the current circumstances will inevitably have some impact on the overall market as the latest growth statistics reveal, according to Charles Ward, chief operating officer at industry group Intellect.

Ward pointed out statistics from the European Information Technology Observatory (EITO), which predict shrinkage for software and IT services of approximately 1% in 2010, as opposed to an expectation of modest positive growth of a similar amount.

"Forecast growth for 2011 has been dampened by the expectation of public sector spending reductions resulting in a decrease from 3.8% to around 1.0%. Beyond this the picture is unclear until details of the CSR are known," said Ward.

"The IT industry has a major role in supporting the public sector in realising efficiencies and it is hoped that the CSR will also contain some positive news for the industry depending on the government's investment priorities."


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