A total of 35 IT and business business process outsourcing (BPO) contracts in UK central government are valued in excess of the £100 million cap introduced by the new Conservative - Lib Dem coalition and are in risk of being scrapped or renegotiated warned independent technology analyst Ovum today.

The Home Office has already cancelled the contract for e-borders and Ovum suggests that contracts that were signed just before the election such as the record £600 million contract won by TCS with he  the Pensions Administration and Delivery Agency (PADA) would be the first ones to be renegotiated. Serco's £100 million + deal with HMRC for Business Link would also come under scrutiny suggested the Analyst group.

“There is no getting away from the fact that the new government has made winning new IT business more difficult”, conceded John O’ Brien, senior analyst at Ovum and report author. “This is going to make life far tougher for many suppliers over the next few years. Some will undoubtedly turn away from the market, and look to sources of opportunity in other verticals."

However, the report concludes that those who stick with the government vertical significant new opportunties do remain. However, suppliers need to be able to understand and respond to the new demards.

“A key message to IT services suppliers is that it is not all doom and gloom. The government has not waged war with the IT industry – just with programs that are perceived to be poor value for money, too risky, and which do not meet its political aims. Therefore, we do not believe these new policies will spell an end to the £8.5 billion a year public sector IT service market. In fact there is quite a lot for IT service suppliers to be quietly optimistic about if they are able to successfully navigate this difficult period, and look to the medium to long term,”  concludes John O' Brien.