As Ireland tackles its €15bn deficit over the next four years, the CEO of IT company Sogeti warns productivity, entrepreneurship and innovation will be key to growth. He said change in the public sector, with long-term ICT strategies, will have to begin.
Sogeti Ireland CEO Declan Kavanagh pointed to Datamonitor research that projected a CAGR growth of 3.7pc in the Irish IT services market from 2009-2014, with implementation and systems integration (SI) accounting for 40.5pc of the total IT services market.
“As with the overall economic outlook for Ireland, it is difficult to take comfort in this level of growth projection. However, it is useful to consider what the likely drivers might be that will cause demand.
“The focus on reducing the cost of the public sector means organisations in the sector will have incentives to leverage current systems and IT to improve service levels to citizens, improve productivity and reduce overall costs.
“Change in the public sector will have to be initiated; shared services and outsourcing have already been mentioned by some politicians in the media. (The year) 2011 is likely to be a year where longer-term ICT strategies and plans to address the required change are initiated with spending on advisers who have done this before.
“It is likely to be business as usual as regards to system enhancements to comply with local and EU directives/legislation,” Kavanagh said.
Kavanagh went on to say that consolidation and change in the financial services sector and delayed expenditure during the crisis means that system enhancements and changes will need to restart, especially those to do with risk analysis, regulatory reporting, and compliance improvements.
“In addition, restructuring of our banking system will accelerate systems activity. Divestments, M&A activity and improved profitability drivers will require IT suppliers who have experience in decoupling systems and data, merging/consolidating systems and data and integration skills,” he said.
Private-sector outlook for IT investments
In the private sector, both large and small companies face tough market conditions. As a result, Kavanagh believes the focus may be on extension of application life, rather than major replacements, planning for moves to new architectures, such as cloud-related SaaS (software as a service), PaaS (platform as a service) and IaaS (information as a service) and any improvements that reduce cost or improve productivity or competitive advantage.
“From our assessment of the IT services market domestically, there will be average growth greater than the GDP growth because of the drivers listed above and the fact that software systems can be at the core of reshaping the performance of organisations. The market growth will be insufficient to enable all service providers to prosper.
“This will result in more competition on service quality, and value for money will return as providers compete for market share. Buying behaviours are also changing from draconian lowest-cost service provider to quickest time-to-value type suppliers. Cost will still be one of the biggest weighting factors.
“Cost of procurement will also be a key consideration, particularly in the public sector. In recent years, we have seen a move to running open framework tenders to identify a small number of acceptable suppliers who each compete within the terms of the framework every time there is a need to buy a resource or a service.
“This has brought greater responsiveness to filling requirements and better value because of the need to compete for the regular mini-tenders under a larger framework contract,” Kavanagh said.