BREAKING NEWS… the UK ITO market is going strong. The Bulldog that it is, according to Ovum, has been more resilient to the downturn during the first half of 2009 than previously expected. The report from Ovum titled UK ITO: opportunities in a recession, provides a promising outlook for the United Kingdom.

It seems this conclusion has been reached as a result of the mega ITO deals that have been signed since January 2009. These include deals signed by HP-EDS (Aviva and the Ministry of Defence), BT (National Health Service), CSC and IBM (UK Identity and Passport Service), and Fujitsu Services (Marks & Spencer) which will add over an impressive £2 billion of new ITO spend into the market over the lifetime of the deals – which range between six and ten years.

However, the broader picture of the IT services market in the UK is a little less optimistic. Most suppliers, particularly the tier-2 and tier-3 players, are finding life very tough in the current climate, while those at the top end are clearly benefitting from significant contract wins. That’s always the way isn’t it? Oh to be big…

A quick Round-Up round up of the report is as follows;

• The ten biggest UK ITO providers saw their total contract value of ITO deals signed grow 31 percent.

• The vertical sectors that are actively investing in ITO in the UK in 2009 are the public sector, retail and insurance sectors.

• Public sector is by far the biggest opportunity.

• Polarisation of the UK ITO market is accelerating between large providers and smaller ones. [ed. It is just so unfair!]

There is some food for thought. The large will get larger and the small will get smaller. Sounds like capitalism to me…

Although we would all like to think this increase is a result of the impressive services available through IT outsourcing, it’s fair to assume that a huge motivation for this surge is due to cost effectiveness. Interestingly Gartner has forecasted that prices in all areas of IT services will fall by between five and 20 percent. This may inadvertently cause a steeper rise in ITO service. Gartner predicts that there will be an average fall of 10 percent in the coming year because of the uncertain economic climate and IT budget constraints.

"This fall in prices will occur due to increasing competition in the market between traditional and new providers, as more providers compete aggressively to keep revenue growth on target," Claudio Da Rold, an analyst at Gartner, said in a statement. So it seems it is a tough market out there for IT outsourcing. I suppose there is nothing wrong with a bit of healthy competition.

Another piece of interesting research to flag up this week is from GFT Technologies AG (GFT). In correlation with the Ovum report, it focuses on the economic downturn (what doesn’t?) and reveals that large retail banks expect more innovation from IT in this time of economic crisis. I wonder if more innovation calls for more IT outsourcing… Vendors – are you up for it?!

The research, carried out by Pierre Audoin Consultants (PAC) into the impact of IT in shaping business success in the financial industry, calls for IT to move from an operational to an innovative role within the bank.

Sorry to all those outside the IT industry, we really have been swept along on the ITO wave this week. See you again next week, same time, same place.