The UK software and services market faces a second year of decline in 2003, according to a report by Ovum Holway. It forecasts a decline of 3% in real terms (excluding inflation) to £22 billion in 2003, following a fall of 4% in 2002. These figures reflect the fact that many organisations are using their IT budgets to improve and prolong the life of their existing systems, rather than invest in new ones.

The hard times look set to continue. “Last year we warned the industry that it was in denial when talking about ‘when market conditions improve’,” says Anthony Miller, research director at Ovum Holway. “Things will get better when they stop getting worse – and we think that won’t be until next year.” The company expects software and services industry growth rates to remain below GDP growth until 2006 or later.