A powerful group of around 50 professionals packed into the swish City headquarters of UKtech, the industry association, to discuss the current situation and prospects for technology. Following several very good years, explained Christoph Châlons, UK growth has significantly slowed in sync with the GDP growth rate. The UK remains by far the biggest markets: at 70 billion pounds, it’s ten billion more than Germany because of foreign currency movements, out of a total of 198.3 billion pounds in Western Europe as a whole. That also reflects much faster growth of the UK market over the last 20 years, especially in BPO. The adoption of cloud and offshoring (itself more than a quarter of the UK spend, higher than in the USA because of the role of defence spending in the USA) has been a strong pressure on the UK market, but the market continues to grow around 3%. Indian firms have been especially successful in the UK (unlike, for example, France where the only significant firm is TCS, and even that through an acquisition). That shows the openness of the UK to offshoring, and Indian firms can offshore more for UK clients (80% versus perhaps 60% of client’s work in Germany or 40% in France).
Today, IT decision-makers are concerned about Agility, security, internet of things, digital transformation (ux, cx, data-drive business models, front-office and back office), cloud, GRC,and other issues. UK market will stay at 3% growth in 2016, and on average Western Europe will catch up to that level, with France lagging behind. In most Europe countries, 85% of SITS services are still being bought by IT rather than the LoBs. Power ebbs backwards and forwards between IT and LoBs, but Châlons finds that LoBs are investing in pressing needs rather than strategically in integrated and orchestrated investments which tend to require partnership with IT. IT, however, wants to hold on to its power and aims to become more agile in order to better deliver value than (perhaps short-sighted) LoB investments.
Nick Mayes gave a whistle-spot tour of some of the best examples of digital transformation, such as Jaguar Land Rover. Now 44% of major deals in Europe over 1m euro are “digital” transformations. The PAC deal tracker service shows several huge deals not only in government deals but also in commercial deals as organisations want to become more agile, with a mix of onshore and nearshore experts. Market drivers include CX, regulation, cost control. These are reflected in tech initiatives around cx, mobile services, automated investment platforms, branch modernisation, digital payments and blockchain exploration.The UK digital transformation will grow from 1.3bn in 2015 to 2bn pounds in 2019.
Challenger banks are important players. They face a high cost of regulatory compliance which drives Metro Bank and others to grow very aggressively as they scale up. Automated advisors are popular with cost-conscious, younger clients. Numbers of personal advisors are being cut by some banks. Nutmeg and Money on Toast reflect some of the new players. Blockchain is important. PAC France and Kiplinger Kole ran a joint event to explore the implications of consortia that are exploring initiatives.
Insurance has been cautious: the dominant insurers are often hundreds years old. Hasting Direct’s telemetry-based car insurance offer hasn’t convinced people that there are real savings available, but as technology develops this is will shift. The AA in Austria and the Netherlands is looking at usage based services connected into their recovery services. Lloyds Market is going into a huge transformation, though the Tom programme. It’s still a paper-based, slow organisation that struggles to engage with international plays. It is starting from scratch and will set the tone for future years.
UK manufacturing represents 14% of UK IT spending. The construction market is an important part of that. The UK has more than 15 firms with over a billion-pounds in revenue. They are weighing up environmental, project management, analytical and other support.
The public sector is normally cautious but in the UK the imperative to cut costs makes it a real initiative-maker. Test-beds around IoT are looking at wearables in the healthcare sector are very interesting. Land Registry will soon be privatised and its database will be very valuable.
As these businesses change, the whole ecosystem shifts as well. At the PAC event, the discussion drilled down especially on IoT, which Klaus Holzhauser leads from Munich.