Spend on IT services in the UK is to shrink by two percent in 2010, according to a new report from TechMarketView.

The report, UK IT Services Market Trends and Forecasts 2010, predicted that the market would see another year of decline this year because ‘value for money’ continues to be a key driver for IT services spend.

TechMarketView said that the market decreased by just over one percent last year, while Gartner's latest study on IT services showed that worldwide revenue for the sector had fallen 5.3 percent from $805 billion (£530 billion) in 2008 to $763 billion (£503 billion) in 2009. According to the analyst house, this was driven by "strategies designed to simply maintain revenue levels, keep a handle on costs and manage profitability".

Value for money, which TechMarketView said is driving “keener pricing and smaller deals”, was one of four key customer trends driving suppliers’ services strategies. The other three were rapid response (fast deployment of systems), business exploitation (using IT to expand the business and make it more efficient), and business control (which covers security and governance, risk and compliance services).

According to the report, growth in the IT services market is not expected to return until 2011, while project services is not expected to return to growth until 2012. Furthermore, consultancy spend has only recently started to recover.

Nonetheless, cloud computing, mobile internet, social media and consumer IT, are the four “elephants in the room” that will fundamentally reshape the UK IT services market, according to TechMarketView. Yet, despite cloud being the buzzword for suppliers this year, the report said that these trends are yet to have a material effect on the market.

TechMarketView said that outsourcing, which represents 45 per cent of the £39 billion UK software and IT services market, will become an even larger proportion in the future as more organisations outsource their IT infrastructure and business processes. In particular, the report said that business process outsourcing (BPO) and application outsourcing, including SaaS, are heading for “double-digit growth”.

With the general election due on Thursday, TechMarketView predicted that if the Conservative Party wins power, public sector IT will feel the full effect of planned spending cutbacks in 2011, driving a two percent decline in the SITS market. However, it did say that public sector IT procurement will be severely impacted regardless of the party in power, and that some areas of public sector spending, such as data security and mobility, will remain “buoyant” despite the overall outlook.