IT contractors could take business from big firms

Tuesday 2 July 2013

IT contractors are likely to be among the small businesses which one report says will be perfectly placed to snatch business from larger competition.

According to TechMarketView’s latest report, The UK Software Market: Trends and Forecasts, markets are set to get tough in the next few years. But the smallest firms will be best placed to implement changes to adapt.

By 2016, the report predicts that the UK Software and IT Services (SITS) market will be worth £44.3 billion. Although this would make it appear that the market had grown by eight per cent compared to 2011, TechMarketView says that this will conceal a five per cent contraction in real terms once inflation has been factored in. But the report adds that in a difficult market environment success will be a product of effective management.

Richard Holway, TechMarketView chairman, says that sluggish economic growth coupled with huge changes to technology and the way businesses work makes running established firms particularly difficult.

“The challenge facing many larger businesses is how to correct course without destroying the core business, which is under pressure due to the economy,” he says.

But established companies have more deeply entrenched structures and ways of working that are often cumbersome when it comes to changing with the times, the report claims. As a result it is much harder for larger firms to adapt and be agile in the marketplace, while Mr Holway argues this presents an “enormous opportunity” for small businesses and start-ups. Self-employed professionals and other independent workers could therefore stand to gain considerably.

Opportunities are more likely to be found in the private sector than the public sector, the report suggests. While public sector SITS spending exceeded expectations last year, 2013 is expected to be a low point for the market, declining by 1.3 per cent to £11.2 billion and 26 per cent of the UK market. Nevertheless, by 2016 it is anticipated that the sector will have buoyed to 2010 levels, accounting for 27 per cent of the total market.

In contrast, the private sector SITS market is expected to continue growing all the way through into 2016. Growth will slow this year but remain at 2.3 per cent, taking the total value of the private sector market to £30.6 billion.

Even though the UK market has grown or contracted by less than two per cent each year for around a decade, changes in the market are already apparent. TechMarketView’s UK SITS Rankings report shows that over the same period, the fastest-growing companies expanded by as much as 30 per cent or even more. But this is likely to have come at the expense of some of the country’s biggest technology firms, some of which declined by a similar margin and some of which collapsed altogether.

This year, the Trends and Forecasts Report says that the SITS market was worth £41.2 billion. But £30.4 billion was accounted for by the top 30 IT companies, with HP retaining its number one spot despite the fact that the report claims revenues fell by five per cent. IBM, Capita and BT all stayed in second, third and fourth place respectively.

By Victoria McDonnell

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