Should large IT suppliers worry about Gov't spending cuts?

Yes, to judge from the views of senior officials at the Cabinet Office who oversee IT in government. 

Officials are aggregating the value of contracts with  large suppliers, with a view to strengthening the government’s hand in renegotiating deals. It’s thought to be the first time government has taken such a holistic view of IT suppliers and the value of their contracts with departments and agencies.

Large suppliers stand to gain from the removal of constraints on contracts. They’ll have the freedom to, say, use their data centres that have been set aside for government work only,  for a  range of private clients.  
On the other hand, the Cabinet Office’s starting premise in the r enegotiation of IT contracts is that the products and services communities have prospered from the public sector over the last ten years, and it’s now time for the Government to maximise its purchasing power, though without harming the ongoing success of the ICT industry.
Suppliers will be able to ask government to change some of the ways it does business:  to standardise, simplify or think differently about the transfer of risk. Suppliers may ask for their teams to be structured in a way which lowers their costs. 
As projects are reviewed and renegotiated, the moratorium on IT spend will be removed by supplier, by department or overall.
But there’s no mistaking the government’s aim to cut costs. The Cabinet Office is telling permanent secretaries that in all circumstances any new contract or extension should be for the shortest time and the smallest amount of money that is possible. 
Departments that want their contracts to be exempted from the freeze on IT spending over £1m must initially contact the Cabinet Office’s  Efficiency Reform Group. The ERG will advise the Treasury on whether exceptions can be made. 
In any case, all exceptions must be approved by a Cabinet Office minister on a weekly basis.
Officials say they accept that the majority of projects caught in the moratorium will impact large ICT suppliers – and there may also be concerns within the ICT SME community that the freeze will affect their cash flow and liquidity. 
On the other hand the Cabinet Office, under its minister Francis Maude, says that the public sector spends £16bn a year on IT, from design, building projects, running them, and running and maintaining the live technology services. Savings arising from reviews are a potentially huge prize. 
Indeed officials are warning that even if suppliers threaten to go public on a breach of a contract, on the basis that government has refused to sign or extend a deal, suppliers will be told politely that the contract cannot be signed – unless it falls within the exception process.
After so many years of governments giving suppliers, in some cases, blank cheques, this new approach of the Cabinet Office, of bringing the cost of  contracts under firm control, is enormously   welcome.
Whitehall shake-up to drive efficiency – Cabinet Office