Market reports, business information and market research from Midnight Croquet. Key Note Market Report Computer Services

About market research company Midnight Croquet and our market report services

Read about how Key Note create their market reports

KN72004

KEY NOTE Market Report : Computer Services UK : August 2004

CLICK

TO BUY

This report covers: computer services

EXECUTIVE SUMMARY

The UK computer services market was worth £18.57bn at the end of 2003, a 3.2% rise on 2002. After rapid growth until 2001, the industry has seen a sharp fall since 2001, reflecting a decrease in IT budgets, with major clients becoming much more cost-conscious and difficult to penetrate. Today, major clients are only investing in new projects after careful evaluation of the return on investment.

The market consists of four sectors: systems building; support services; operational services; and planning and design. As IT budgets have been cut back, organisations have postponed new projects, which has led to reduced interest in ad hoc, single-project contracts. This has hit demand for systems building and planning and design services. Operational services and support services, which tend to be based on long-term contracts, have fared better, although support services tends to be a mature sector of the market.

Operational services have been the main growth segment of the market since 2001 and, over 2003/2004, some very large outsourcing contracts have been awarded. The nature of many of the largest contracts has changed. Large organisations, especially in the public sector, now use consortia on major IT contracts rather than a single supplier. Lead contractors build consortia using a range of companies, with companies chosen on the basis of their skills and reputation rather than size.

As market growth has slowed, since 2001, so there has been an intense scramble for market share. Competition has been aggressive in all areas of the market, which has led to consolidation as larger firms have acquired smaller players and as the largest players have merged to improve scale and margins. Recent mergers include IBM and PricewaterhouseCoopers (PwC), Logica and CMG, Capgemini and Ernst & Young, Schlumberger and Sema, and the subsequent takeover by Atos Origin of the merged SchlumbergerSema.

Among major organisational buyers, the Government has become an increasingly important client for the services, given large-scale plans to adopt e-Government and increased investment in the IT infrastructure for public bodies like the National Health Service (NHS).

The computer services market has experienced a change in its fortunes. High annual growth rates have given way to more modest annual increases in revenue. The market is now set on a mature phase of growth. Even after 2004, when Key Note predicts the fortunes of the industry will improve, annual market growth will be less than 10% in value terms. Key Note expects further consolidation in the industry and a growing convergence between computer telecommunications service providers. In the next 5 years, clients will be gaining the upper hand in the market and will be less willing to tolerate under-performance on contracts or projects.

TABLE OF CONTENTS

Executive Summary

1. Market Definition

REPORT COVERAGE

MARKET SECTORS

MARKET TRENDS

Back to the Future?

Shifts in IT Budgets

E-Business a Driver of Demand

Merger Mania

The Growth of Multisourcing

Offshore Outsourcing

Business Process Outsourcing

E-Government

ECONOMIC TRENDS

Inflation

Table 1: UK Rate of Inflation (%), 1999-2003

Unemployment

Table 2: Actual Number of Unemployed Persons (million), 1999-2003

Population

Table 3: UK Resident Population Estimates by Sex (000), Mid-Years 1999-2003

MARKET POSITION

The UK

Table 4: The UK Computer Services Market as a Share of The Total Computer Market (%), 2000-2004

Overseas

2. Market Size

THE TOTAL MARKET

Table 5: The Total UK Computer Services Market by Value (£m at rsp), 2000-2004

Market Shares

by market sector

Systems Building

Table 6: UK Expenditure on the Systems Building Sector by Value (£m at end user prices), 2000-2004

Support Services

Table 7: UK Expenditure on the Support Services Sector by Value (£m at end user prices), 2000-2004

Operational Services

Table 8: UK Expenditure on the Operational Services Sector by Value(£m at end user prices), 2000-2004

Planning and Design

Table 9: UK Expenditure on the Planning and Design Services Sector by Value (£m at end user prices), 2000-2004

3. Industry Background

RECENT HISTORY

INDUSTRY SYNOPSIS

Table 10: Average Financial Performance of Companies Engaged in Computers and Related Activities Companies by Turnover and Pre-Tax Profit ( £000, % and £), 2003

NUMBER OF COMPANIES

Table 11: Number of UK VAT-Based Enterprises Engaged in the Computer Services† Industry by Turnover Sizeband (£000, number and %), 2003

EMPLOYMENT

Table 12: The Structure of Employment in the Computer Market† and Related Industries in the UK (£000 and %), December 2002 and 2003

Table 13: The Number of UK Employees in the Computer Market† and Related Industries,(000), 1999-2003

HOW ROBUST IS THE MARKET?

LEGISLATION

General Legislation is Important

Transfer of Undertakings (Protection of Employment) Legislation

The Data Protection Act 1998

The Regulation of Investigatory Powers Act

IR35

The Conduct of Employment Agencies and Employment Business Regulations 2004

The EU Agency Workers Directive (AWD)

KEY TRADE ASSOCIATIONS

Intellect

4. Competitor Analysis

THE MARKETPLACE

MARKET LEADERS

Accenture

Company Structure