OVUM. John O`Brien
Our Public Sector team predicts that the total SITS market for shared services in the public sector will grow at a compound annual growth rate (CAGR) of 29% between 2005-2010, taking the market size from £351m in 2005 to £1.6bn in 2010.
Over this six-year period, a total of £6.6bn will be spent on shared services, outstripping IT spend on other major initiatives such as Building Schools for the Future, eBorders and even ID Cards through to the end of the decade.
With a CAGR of 56% and a market size of £4.2bn over the period, project services (excluding transformational consultancy) will be the biggest opportunity for SITS suppliers between 2005-2010. Transformational consultancy alone will account for a quarter of the total market opportunity between 2005-2010, or £1.6bn. However, outsourcing will be the smallest opportunity, accounting for just 13% of the total SITS opportunity between 2005-2010. This will change in the next decade as outsourcing spend accelerates. Comment: Although the total potential opportunity is extremely attractive for suppliers, gaining a share of the spoils won't be easy. Shared services will require a strategic response from suppliers, since they will need to take an active role and a pragmatic approach to Government and to the wider industry community to help shape the market.
Shared services is in its infancy, so there is a significant opportunity for both government and suppliers to work together collaboratively from the outset. However, this opportunity can only be realised if Government maintains its commitment to the shared services vision, if public sector organisations are receptive to shared services and innovative in their implementation, and if successful models for shared service delivery are developed and sustained.
In addition, suppliers must adapt and innovate to support this new market, and match capability to need throughout the strategy development, implementation and run phases of shared services projects.
If all of this falls into place, shared services will create a seismic shift in the shape of the public sector SITS market over the next few years - both in terms of the market itself, but also, and more significantly for suppliers, their position within it.
We can expect a spate of merger and acquisition activity among suppliers over the next few years as they converge to offer a unified proposition to this emerging marketplace. For further information on the report "Shared Services: Defining the opportunity", please refer to Ovum's PublicSector@Ovum service, or contact your Account Manager