The market in Britain for software and IT services will shrink over the next two years as the economy continues to contract, according to a bleak report published this week by technology experts.
Businesses will be looking at more innovative technologies to cut costs as well as prepare for the end of the recession, according to a report from newly formed analyst house TechMarketView.
But the recession could be good news for new technology as more companies adapt innovative ideas during economic downturns, claimed TechMarketView, which was formed by technology researchers Richard Holway and Anthony Miller.
Alternative technologies such as cloud computing, software-as-a-service (SaaS), open-source software and mobile broadband will change the way business services are delivered.
The report states that the sector contracted last year for the first time since 2003, as the recession sank in. This year, according to the analysts, would bring an even steeper decline with an average business spending fall of up to five percent in size.
Businesses are “reining back ‘discretionary’ IT spending, driving down the demand for new software licences and related project services”, the report stated. The pervading attitude among firms was “make do and mend”.
But businesses would continue to outsource, particularly application outsourcing, in a bid to cut costs, TechMarketView predicted. Business process outsourcing grew eight percent last year.
Miller, one of the report's authors, told Computerworld UK: "It was no surprise to us to find that there was going to be a very deep drop in the market and that it was going to be prolonged."
"CIOs have told us they have a business of two halves, often having to reduce strategic projects but maintain investment in outsourcing."
A recovery was likely to take place in 2011, it said. But if the economy worsens, the software and services arena will struggle for even longer and private sector contracts will dry up, the analyst house warned.
Yet emerging technologies will be given a boost by the downturn. "The explosive growth of mobile internet devices (MIDs), from smartphones though to netbooks, will drive an insatiable demand for a huge variety of ‘rich’ content anytime, anywhere, on any device and at lightning speed.
Cloud will be an increasingly important part of the equation. This will change the way that business solutions are delivered – with associated changes to the revenue and profit models of the main players," said the report.
"Far from being downbeat about the IT industry’s prospects, we think this is the most exciting time to be part of the scene!" the report concludes.
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