The UK IT industry could see a renewed interest in outsourcing services as firms seek to save capital spending and avoid costs including hardware freshes or new data centres during a possible second recession.
Peter Sondegaard, head of research at IT research and advisory company Gartner predicts cloud services in EMEA (Europe, the Middle East and Africa) to be worth €20bn next year. Meanwhile the sector will grow at 10 times the rate of overall enterprise IT spending, he told a recent analysts' European conference in Spain last week.
The industry is also likely to see shared services and service consolidation, and an even greater demand for "low cost cloud apps".
Experts have warned that the UK could be dragged into a second recession by the current Eurozone crisis, and Sondegaard has warned CIOs that they should be prepared to cut budgets over the next few years.
He suggested that spending in EMEA on IT will drop by 1.4 per cent this year, and grow in the region of 2.3 per cent in 2012. Spending in Western Europe, which accounts for 80 per cent of all EMEA enterprise IT spending, will fare even worse. It’s likely to see a 1.8 per cent reduction this year and a recovery of just 1.5 per cent next year.
Government spending in Western Europe will be down 4.8 per cent this year, and will continue to decrease in 2012. Public sector IT budgets are not expected to recover for three years.
IT costs, including staffing and premises, are likely to increase as a result.
The difficulty for CIOs, though, is to balance the inevitable calls for cuts in IT spending – both from the capital and operating budgets – with the need to protect the capabilities of the business.
One CIO recently warned that an efficient IT department "doesn't have much fat to trim".
According to recent separate research a contraction in the services sector, which makes up three-quarters of the UK's output, could cause the wider economy to slow as early as the current quarter, or the first quarter of 2012.
Despite the grim news, it’s likely that the UK will not be affected like others, especially with more IT jobs UK being created due to raised security concerns in cyber security and the 2012 Olympics.
In 2008, in the lead-up to the previous economic doom and gloom, IT careers were repeatedly described as being “recession-proof”.
The safest areas are likely to be software design and development, GIS jobs, networking and systems administration, software implementation analysis and database administration.
As one industry insider pointed out last time, IT is an essential sector that every firm needs.