HP’s public sector IT dominance ‘vulnerable’ in new era

Hewlett-Packard receives significantly more UK government software and IT services spending than any other supplier, according to a new report by IT analyst company TechMarketView, thanks mainly to its 2008 acquisition of EDS.

In the 2009 financial year, HP received over £2 billion from UK government contracts. The next largest recipient was Capita, with £1.2 billion, followed by Fujitsu.

But HP’s dominance of the market is “vulnerable”, according to the report’s author Georgina O’Toole, due to its over-reliance on a few large central government contracts.

Before the election, the Conservative party said that it would limit new government IT contracts to a maximum value of £100 million. That may not be feasible, O’Toole said, especially given the party’s plan to establish shared services for use across government – “I think that was a bit of political rhetoric”, she told Information Age this morning – but there is nevertheless a move to split ‘mega deals’ into smaller constituent contracts.

This is a trend that does not favour HP, which has to date engaged in very large contracts. “HP has a huge proportion of its income coming from just two clients: the Department of Work and Pensions and the Ministry of Defence,” O’Toole said. “We consider that to be quite dangerous for them.”

She added, however, that HP’s financing arm may counterbalance this effect, as government departments seek ways to spread out payments for software and IT services.

The move to smaller, more specialised contracts may benefit the likes of Capgemini, Logica and Atos Origin, who have strong reputations for particular kinds of project, O’Toole remarked.

Other trends identified in the report include an increasing appetite for business process outsourcing among government organisations, and stronger growth in local government spending than in central government.

Another pledge made by the Conservative party before the election was to make all government contracts worth over £25,000 openly available to the public. O’Toole questioned the benefit of this policy: “It’s good for the government to be more open, but who is this going to benefit?” she asked. “I’m not sure.”

O’Toole did commend some of the Conservatives’ plans to reform government IT procurement, such as imposing tighter terms and conditions and stricter controls on change management, and increasing ministerial involvement. “These are good ideas,” she said. “But I think somebody in government needs to be given more of a mandate to do these things.”

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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