Green shoots? What green shoots? No let up in IT spending freeze

The green shoots of recovery may have been spotted but UK businesses and public sector bodies have no plans to increase their IT services and software spending.

According to a forecast by analysts Pierre Audoin Consultants (PAC) and TechMarketView (TMV), spending on software and IT services will fall to £39.5bn this year, a drop of 1.5 per cent on 2008.

UK organisations will cut their spending on IT services and software in 2009
(Image credit: Pierre Audoin Consultants & TechMarketView)

The fall will be driven by many UK organisations' decision to freeze or cut their discretionary IT budgets, the report says.

The biggest cuts are expected in software spending, which will fall by 3.9 per cent compared to 2008 levels, and project services, which will fall by 5.5 per cent year-on-year. This reduction will be partially offset by a 3.1 per cent rise in outsourcing spend as businesses aim to reduce their IT and business operating costs, the analysts said.

The public sector remains the biggest spender on software and IT services in the UK to date, accounting for almost a quarter of the value of the UK market, according to PAC/TMV.

The research predicts that this figure will grow 4.3 per cent this year, as government departments invest in IT services that can provide future cost savings, and in new programmes to support border control and defence initiatives.

The research also forecasts an increase in government IT outsourcing and even offshoring in 2009, echoing recent indications from Whitehall insiders that central government may be softening in its opposition to sending IT work offshore.

Meanwhile, the sectors that will cut their software and IT services investment the most severely this year will be retail, services and manufacturing, according to the report.

Separate research by IT services provider Fujitsu found that many retailers are freezing their IT spend. Almost half (43 per cent) of the 150 European and UK retailers questioned - including names such as Marks & Spencer and Royal Mail - said they have slashed their IT budgets to date.

The Fujitsu research found some signs of encouragement, with the majority of retailers questioned having no plans to cut IT budgets any further and one fifth saying they will increase IT spending this year, investing in tech to help reduce business operating costs.