UK Vertical Market Sizing Highlights

• The Government sector will overtake both Distribution and Manufacturing as the lead spender in 2010
• Spending in Manufacturing is expected to fall during the rest of this year
• Health is a small sector, peaked at the end of 2009 but will decline during the rest of the year as NHS spending is cut
• Small companies account for significant spending in the UK in comparison with other countries
• ‘Spend to Save’ projects are the most likely to succeed
• There is even more uncertainty about ITC spending than ever
• ITCandor has prepared detailed market sizing for all major world markets

I’ve been developing my market sizing apace here at ITCandor and wanted to share some top-level information by industry sector for the period of the recession and recovery. I’m publishing far more detailed information by quarter, vendor, offering for my clients – so please let me know if you’re interested in more. If you look at the About section of this site you’ll find a full description of ITCandor’s coverage, including similar coverage of the USA, Japan, Germany, France, China and other country markets.

The UK ITC Market Enters A Phase Of Remarkable Uncertainty

As with almost all ITC markets spending picked substantially in Q4 2009, following a period of steady decline, which began with the Credit Crunch in Q3 2008. The double-dip in 2010 is being caused partially because growth rates will lessen as they begin to be compared with less disastrous quarters a year before, but more importantly the downturn in the economy, airline and distribution problems from the random effects of Icelandic volcano ash and the promise of the new Coalition government to cut back government spending. My view however is that the latter will not halt the Government sector – made up here of local and central public spending – overtaking both Distribution (Retail and Wholesale trade) and Manufacturing for the first time in history to be the largest single ITC spending sector with £35 billion. Of course spending on technology can often be done to automate functions when jobs are made redundant.

Consumer Spending Will Remain Strong, But Manufacturing Spending Will Decline In 2010

I’ve shown a picture of the growth rates in ITC spending by vertical market in Figure 2. It demonstrates a number of key movements. In particular:

• Consumer spending has outstripped other areas throughout the recession; despite the downturn there’s been a massive amount of spending – especially on mobile handsets, PCs and everything Apple makes; spending has stayed strong because low interest rates have reduced mortgage repayments for the majority of British households
• Health saw a spike in growth at the end of 2009 and has been a stronger – although smaller – sector than many others over the last few years. I expect it to fall off as the cuts in spending on the NHS systems will become effective quickly
• Manufacturing has performed badly during the recession, despite the incredible growth in UK productivity brought about by the shrinking value of the Pound; I expect it to be the worst performing sector during the second half of 2010

Small Organisation Account For Significant ITC Spending In All Industry Sectors

I’ve included a cross-tabulation of key vertical markets and organisational size in Figure 3, excluding consumers. The chart covers 2009 – a year in which Government ITC spending was still behind Manufacturing and Distribution. ‘Other’ sectors, which include Agriculture/Construction/Mining, Transport/Communications/Utilities, Business Services and Education accounted for 10% of ITC spending last year and will lose another percentage point in 2010 according to my forecast.

Some Conclusions – Focus On ‘Spend To Save’ Projects

The ITC industry is entering an extremely uncertain phase – a time when accurate forecasts are difficult to find. Many market research companies can’t even do the basics in explaining growth in local currency – if you’re a business planner you should throw out anyone who can’t explain what the dramatic fall in the Pound has on statistics often only produced in $US.

The Government sector is still a growth sector, but largely from business already signed before the recent election. If you’re lucky enough to bid on new projects there you’ll have to be able to demonstrate a quick ‘spend to save’ ROI – often centring on automation, rather than productivity enhancement. For the first time Public organisations will follow Private ones in using technology to make up for redundant posts.

Small business already accounts for significant ITC spending in the UK – tis could be a boon for those with sensible strategies, but an unexpectedly competitive environment for the unprepared.

Please let me know if you find this analysis useful and if I can help you unlock new business opportunities.

Filed under: UK, Vertical Markets Tagged: | consumer, distribution, double-dip recession, Finance sector, Government sector, industry sector, IT, ITC, Manufacturing, spend-to-save, vertical market