Public sector continues to lead in IT spend

Analyst says outsourcing rise will help sector remain top IT spender for years

The public sector is still the biggest spender on IT and will continue to be for at least another four years, according to research by analyst Ovum.

The firm’s latest forecasts, seen exclusively by Computing, predict a growth in public sector technology spending of nine per cent per year until 2009, compared with less than four per cent in the private sector.

Public sector growth this year alone has outstripped expectations and is running at 13.5 per cent, compared with projections of about 11 per cent.

The market is estimated to be worth £7.6bn by the end of the current financial year, and £10.7bn by the end of the forecast period in 2009.

The biggest factor pushing up spending for 2005 is an increase in large-scale business process outsourcing (BPO) contracts in local government, says Ovum analyst Tola Sargeant.

‘We have seen more large transformational BPO deals coming through from local authorities than we envisaged in our last forecast earlier this year,’ she said.

‘Moving from internal provision by local authority IT teams to external provision by outsourcers releases new money into the market.

‘So there is a big impact on growth, but it is not inconsistent with pressure on budgets, funding issues and consideration of how to meet efficiency targets.’

A major factor driving future growth is central government plans, including multimillion-pound systems such as eBorders and ID cards.

But the biggest growth is in the education sector.

Procurement has already started for the technology element of the ‘Building Schools for the Future’ programme.

And while individual deals in the programme may be relatively small, the overall initiative will be worth about £4.5bn over the 15-year life of the programme, says Sargeant.

‘The public sector is still acting as lifebuoy for the UK software and services sector,’ she said.