The UK software and IT services market is set to shrink for the second year in a row, making competitiveness even more crucial, industry experts have warned.
According to analyst Ovum Holway, total revenues in the sector will decline to £22bn this year, down three per cent from last year in real terms (excluding inflation).
The researcher found that the market had shrunk by just over four per cent in 2002.
Ovum Holway's latest study, Market Trends 2003, predicts that the growth rate for the UK software and IT services will remain below that of gross domestic product until 2006 at least.
"These results are very much in line with a trend we identified last year," said Anthony Miller, research director for Ovum Holway and lead author of the report.
"Last year we warned the industry that it was in denial when talking about 'when market conditions improve'. For us, things will get better when they stop getting worse - and we think that won't be until next year."
The study found that money currently being earmarked for IT is primarily for use on existing systems, while fresh IT projects have had to be able to demonstrate a sound return in the same financial year.
The analyst predicted that with no new "big thing" in sight, the current situation is not likely to change radically.
"It's not as bleak as it sounds, though," Miller added. "Those suppliers that concentrate on gaining market share at the expense of their competitors are the ones that will grow.
"But first they must make sure they are profitable and generate cash or else they won't survive".
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