IT contracts on the increase

After a slow start to 2010, the number of deals announced in the IT services sector bounced back in Q2, with an increase of 14 percent on Q1, according to Ovum. However public sector cuts and private sector woes meant times were still tough, the independent technology analyst finds.
                
In a new report, Ovum reveals that the second quarter of 2010 was the best for 12 months for the sector in terms of the number of deals announced. This was after it fell to its lowest level since 2007 in the first three months of the year, the report states.
 
Ovum’s IT Services Contracts Analytics tracked a total of 457 deals in the second quarter of 2010, an increase of 56 on Q1. However, despite the number of contracts announced increasing, the total contract value (TCV) recorded in Q2 actually fell 14 per cent to $30.8bn.
 
Says Ed Thomas, Ovum analyst and report author: “While the surge in the number of contracts announced for IT services in Q2 is good news for the sector, concerns remain about the scale of outsourcing in the private sector, where TCV for Q2 slipped to only $10bn as clients shied away from signing large deals.

Public sector
“Public sector demand remained steady, particularly in the US, which accounted for more than 90 percent of the market’s quarterly TVC. This was good news for vendors with a major focus on the US government sector, notably General Dynamics, Lockheed Martin and SAIC.
 
“However, analysis of both IT services deal signings and TCV in the first six months of 2010 reveals an extremely difficult start to the year for vendors. A total of 858 deals have been announced, down 13 percent on the same period of the previous year and the lowest figure since the first half of 2007 when only 778 deals were tracked.
 
“Interestingly, it seems that the drop in TCV between H1 2009 and H2 2010 is not solely due to the poor performance of the private sector, but is also the result a decrease in spending by the public sector,” explains Thomas. “In fact, a 20 percent drop in TCV was recorded in the public sector in the first half of 2010, compared to the same period last year.”