Over 30 IT, BPO govt. contracts face cancellation, renegotiation risks in the UK

Independent technology advisory firm Ovum has cautioned in a recent report that as many as 35 information technology and business process outsourcing deals awarded by the new coalition government headed by Prime Minister David Cameron in the UK those are valued above £100 million are in the jeopardy of cancellation or renegotiation owing to a new cap set up by the government.

Even as the British Home Office has already scrapped the agreement for e-borders, the tech advisory firm is of the view that the deals signed just prior to the elections in the UK are more likely to be affected by the introduction of the new £100 million cap. According to Ovum, the mega contract between Tata Consultancy Services (TCS), India’s largest software exporter, and the Pensions Administration and Delivery Agency (PADA) worth £600 million is among the first major contracts that would be renegotiated. In addition, it is anticipated that the contract between Serco and Her Majesty’s Revenue and Customs (HMRC) for business link worth over £100 million is would also come up for inquiry.

A news website quotes Ovum senior analyst and the author of the report John O’Brien as saying that there is no denying the fact that the new British coalition government has made it even more difficult for the IT sector to win government contracts. He forecasts that since this attitude is sure to make business and life more troublesome for many IT vendors for a number of years now, it is likely that a number of them will abandon the market and turn to new opportunities in other areas. Nevertheless, the report points out that IT firms that will be able to comprehend and respond to the latest demand and persist with the government vertical will stand to gain afterward.

Concluding his report, the Ovum analyst says that he does not believe that everything has come to an end for the £8.5 billion annual IT spend by the public sector in the UK. John O’Brien writes that contrary to the view held by many, the new coalition government has not waged a war against the IT industry. Instead, it is just trying to cut costs to meet the present economic crisis in Europe as well as by rejecting programs that are very risky and do not seem to be worth the value of money. Besides, the coalition partners in the government are also keen to fulfill their respective pre-poll announcements, he added. He further says that there are several IT services vendors who are still optimistic about the situation and feel that if they are able to pass through this phase successfully, they would be able to retain their growth in the government vertical.