IT suppliers have welcomed the Budget as a sales opportunity, homing in on the £7.2 billion efficiency savings being targeted in Whitehall.
Yesterday the Chancellor confirmed in the Budget that the government would seek £15 billion per year of ‘efficiency savings’ across the public sector by 2013 to 2014, including some significant back-office and IT savings.
The efficiency drives will have a significant impact, both good and bad, for the ICT industry, according to Ovum analyst group.
Suppliers will be expected to "feel some of the 'pain'" of departments and agencies. ICT outsourcing contracts will be scrutinised for potential savings and renegotiated.
"The days of substantial expenditure over and above the initial contract value could be coming to an end. Suppliers with existing major outsourcing contracts should be preparing themselves for delivering more for less revenues and lower margins going forward," wrote Ovum analysts Peter Clarke and Georgina O’ Toole.
But there is also potential for more outsourcing as departments and agencies look to shift from internal spend to external suppliers. Ovum estimates that the UK public sector software and IT services market was worth just over £7 billion in 2008, with a further £1.7 billion spent on business process outsourcing. Most of this potential is in local government, including police forces and educational bodies.
Suppliers also saw the potential for public sector spending.
The Budget could drive a public sector migration towards cloud computing environments to cut out the costs of application purchase, maintenance, management and infrastructure, according to Andy Jacques, senior VP at Salesforce.com.