2010 is a record low year for IT services, says analyst

Ovum has stated that the first half of 2010 has seen a record low number of IT services deals

European IT services deals are down, says Ovum

There were 276 IT services deals in Europe in the first half of 2010, the lowest number since 2002, according to IT analyst Ovum.

The figure compares unfavourably with with the first half of 2009, which stood at 308 deals.

However, while fewer deals are being signed, the total value of those deals has increased year on year.

"The total contract value of those deals is up on the first half of 2009," said Ed Thomas, senior analyst at Ovum.

"There have been some big deals out there, mainly in the public sector in the UK. We've seen big deals such as Desktop 21 [a £4.5bn framework deal for IT equipment and services] awarded by the UK government to Fujitsu Atos and HP Enterprise Services. This drives that value up across the region."

At a time when the government is attempting to cut costs wherever possible, it is surprising to hear that the UK is responsible for driving up figures across the continent. But Thomas does not believe this reflects a lack of financial prudence at the top level.

"The UK has the most mature outsourcing market in Europe, and probably the second most mature in the world behind the US," Thomas said.

"Companies in the UK are in the second and third generation of outsourcing deals. They are more able to ride out the downturn and the inevitable reduction in deals."

Analysts expect other large economies in the region, particularly France and Germany, to start ramping up their outsourcing activity to match the UK. But France is still some way behind, both in terms of number of deals and total contract value.

"There have been some big deals in Germany, but in France in the first half of 2010, we tracked only 13 deals with a total value beneath $200m (£128m). It seems organisations in France are still wary of offshore business models, and the downturn has only exacerbated that," said Thomas.

Future IT contracts are unlikely to be as large as those seen in recent years, according to Thomas.

"The coalition government has imposed a limit of £100m on future ICT contracts. This is an end to public sector mega deals in the UK. Whether this means we will see more smaller deals remains to be seen, " he said.

While France struggles to trust outsourcing, outside the UK the Nordic region is considered to be a market to watch.

"There's quite a lot of activity there, not just from local vendors, but Indian companies and international vendors. It's a very technologically advanced region. Besides Nokia, there are some large utilities vendors in the region and powerful local vendors such as [IT R&D and consultancy firm] Tieto, " Thomas said.