Public sector gravy train running into the buffers

As the FT headline in the FT today (24th Jan 08) announced "Companies abandon ID card project", Accenture and BAE Systems have withdrawn from the bidding process for the ID card project. This leaves Fujitsu Services, CSC, EDS, IBM, Steria and Thales still in contention.

At one time ID cards was the biggest Public Sector IT project yet to be awarded. But both the scale of the scheme and its delivery dates have been under question for some time. Only last week news of another two year delay in the roll out was 'leaked'.

Of course, the biggest Public Sector IT project was/is the NHS IT Project (it's gone through too many name changes for me to remember its current nomenclature). We have already seen Accenture quitting the project. Now Computer Weekly suggests on its latest front page that Fujitsu Services is ready to quit in the South. (Personally I think this is probably more sabre rattling by Fujitsu as several regions are currently going through a project 'reset' with associated renegotiation of contracts and prices) This comes a week after 'leaked' news of CSC being fined £5m for delays to the rollout of NHS patient administration systems in the North Midlands and East.

Also, last week, the C-Nomis system at the Ministry of Justice was 'scaled down'. I could go on with further examples of Public Sector contracts also being 'scaled down' and quietly abandoned.

My friends at Ovum's excellent Public Sector practice (well, several of the senior analysts are 'ex-Holway') have growth of 11.2% in 2007 reducing to 8.4% in 2008 and down to 4.4% in 2011. Even that is going to seem like a massive slowdown to companies well used to the high double digit growth rates of the first part of this decade. On top of that HM Government is demanding much more "bang for their buck" - putting considerable pressure on prices. But with Government finances in an increasingly perilous state - as the economic slowdown hits tax revenues - perhaps even these significantly reduced growth rates for UK Public Sector IT spend are now looking too high?