Public sector decline hits UK software and services market


Public sector decline hits UK software and services market

Simon Quicke

The performance of the top software and services companies in the UK remains relatively flat in growth terms as the impact of the challenging economic conditions continues to be played out.

According to the latest survey of the UK software and IT services market by analysts TechMarketView the main source of growth in revenues has been driven by M&A activity and in real terms the organic growth in the UK was down at -3%.

Georgina O'Toole, director at TechMarketView, said that inflation, M&A activity and the general economic conditions had caused problems but there were also issues with the public sector.

"The public sector has dragged down the numbers for the top players, with seven in the top ten experiencing declines in their public sector business," she said.

But she pointed out that those declines had been partly off-set with a decent performance from the private sector.

"They have been able to grow their private sector business. The financial services sector in particular has bounced back quickly," she said.

The winners in the market are the larger players that not only could lean on a large portfolio of products but often had a wide spread of operations enabling them to maintain revenue levels close to those achieved in 2009.

"The top players have these large deals that form the foundation of their business that helps them keep their heads above water in tough times," she said.

The other trend was the emergence of the Indian-headquarted players in the service space which were able to gain market share in 2010.

The challenging conditions in the UK are also being experienced elsewhere with Gartner yesterday warning that the European enterprise software market was heading into a strong headwind.

According to research director Fabrizio Biscotti, the pace of growth in the region is slowing due to "recent currency appreciation, fiscal tightening, higher commodity prices and concerns about debt in countries such as Greece, Ireland, Portugal and Spain".

O'Toole at TechMarketView said that the conditions that had produced a flat market in the UK in 2010 were set to continue with the impact of public sector cuts continuing to filter through over the course of this year.

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