Forecasts by independent technology analyst Ovum reveal that growth will slow to just 2% in 2011, down from 2.4% in 2010. Once inflation is taken into account then the market will actually shrink.

Jessica Hawkins, Ovum analyst, said: “The IT services market was severely affected by the global financial crisis with growth dropping to just 1.6% in 2009, but the sector’s woes are far from over. The slow recovery and drastic public sector cuts have crushed any hopes of a return to better days and 2011 will be extremely tough for the industry.”

Public sector IT spend has already been affected by the moratorium on £1 million+ IT projects and earlier this month the National Programme for IT was effectively scrapped. Hawkins said: “A reduction in IT spend will be accelerated further following the spending review on 20 October, which is expected to deliver cuts of anywhere between 25% and 40%. The public sector faces its toughest year for a decade and will only grow by 2% in 2011. Suppliers should only expect single digit growth for the next few years.”

Although in general the picture for IT services companies looks bleak in 2011, according to Hawkins, providers of business process outsourcing (BPO) stand to benefit significantly from the new age of austerity. She said: “We expect BPO to be largely resilient to this tough environment as public sector departments try to deal with the cuts. It will therefore remain the fastest-growing sector of the UK IT services market through to 2015, growing at a compound annual growth rate (CAGR) of 6.5 per cent.”

Source: http://www.ovumkc.com/