Shared Services in the UK Public Sector

• Posted: Saturday, November 15, 2008
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• Author: pradhana
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• Filed under: Business Analysis

A challenging market for software and IT services suppliers

The software and IT services (S/ITS) supplier opportunity for shared services in the UK public sector will be £3,910m between 2007 and 2012, according to a new report from global advisory and consulting firm Ovum, and it will grow at a compound annual growth rate (CAGR) of 8%, from £489m in 2007 to £729m in 2012.

John O’Brien, author of the report “UK public sector shared services: a market emerging”, says: “We remain convinced of the opportunities for S/ITS suppliers delivering shared services to the UK public sector over the long term, although we believe the market will evolve at a slower pace than previously expected.” He says: “This plays to the benefit of pragmatic suppliers who have already engaged the market and are prepared to further shape the opportunity over the next few years.”

Suppliers are currently benefiting from major internal programmes in central government such as those at the Department for Work and Pensions, Home Office, HM Revenue and Customs and Department for Transport, as well as a growing number of outsourced programmes among local authorities such as Somerset and Taunton Deane, Suffolk, Liverpool, Glasgow and Worcestershire councils.

O’Brien says: “Suppliers that have been lucky enough to be involved in these programmes have got a head start. However the market is shifting as more innovation is brought in to the contractual process. The growing use of frameworks could drive both further internal provision and also more outsourcing activity.”

This means multiple organisations will be able to club together and share in the benefits of new technology and lower costs of delivery in areas such as desktop services, ICT and corporate services. And at the local level, this will help bring in other locally-governed organisations such as emergency services, NHS trusts and education institutions.

O’Brien continues, “There is a real sense that momentum has been established, and this will be embedded in project services work such as systems integration, training and maintenance over the next few years.”

Project services will be the biggest area of opportunity for S/ITS suppliers between 2007 and 2012, according to Ovum, to account for £1.82bn of spend. Transformational consultancy spend will decline by a CAGR of 8% during the period as most early programmes complete their design and strategy phases. The smallest, but fastest growing opportunity however will be in outsourcing as the market accelerates at a CAGR of 24%, albeit from a low base.

O’Brien concludes that new drivers could emerge as Government enters a new spending cycle towards the end of the period: “By 2012, Government will be looking at where it can drive further efficiencies from these shared service programmes. This should mark the next phase in the evolution of the market. One outcome of this next phase could be a shift from internal to outsourced shared services models, and a renewed growth in transformational consulting.” /PR

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