A 'sea change' in IT services spend in 2009?

(by Richard Holway) We are in the process of producing our first subscriber report – MarketViews which has occasioned interviews with most of the CEOs of the leading IT Services players operating the UK market. There was a surprising amount of optimism for 2009. I think I could accept that from the major BPO and ITO players – like Capita and CSC. Afterall, 2009 is already pretty ‘visible’ from contracts already in the bag. But too much optimism outside of that elite group seems misplaced.

Illustrating this, I received an email from Cobalt today. They had surveyed over 100 UK mid-market businesses in the Technology, Media and Telecoms industries. Amazingly “sales are forecast to increase in almost 60% of businesses, a statistic more typically associated with an economy in good health”. “Supporting this expression of confidence, 50% of businesses claim no material impact from the credit crunch”. This sounds like a continuing case of ‘Living in Denial’ to me!

Indeed, I’d refer these businesses to the Lex column in today’s FT Lex on IT services. I quote “Citigroup reports that the prospects for corporate spending on technology have changed rapidly in recent months. Whereas in September chief information officers were looking at unchanged, or even slightly bigger budgets in 2009, they now seem likely to shrink by up to a fifth. That is a sea change for an industry used to stable spending even in bad years.”

A sea change indeed.