Which firms will benefit from Government spending cuts?

I'm as guilty as anyone of feeling a bit gloomy from time to time about the public sector spending cuts to come.  It's a real issue for the consulting, marketing and recruitment firms who have seen central Government business in particular slashed since May.

But looking slightly further ahead, what sort of firms might actually do well out of the public sector over the next couple of years?

There was speculation around election time that the outsourcing firms would be beneficiaries from a Government focused on cost savings.  However, Capita and Serco shares are down over 10% since May, perhaps driven by the much publicised desire of the government to negotiate immediate cost savings with top suppliers including such firms.  The other factor is the lead time; even if the Spending Review in October triggers a new round of large-scale  BPO outsourcing, by the time we have had consultation, procurement process, transition with TUPE discussions etc it will be close to two years before the outcomes start positively hitting successful suppliers'  P&L.

However, I can see potential for consultants and others to position themselves as 'outsourced service providers' in a  more niche and targeted manner, taking the pressure off stretched public organisations, but very much focused in areas where the work can itself generate savings - and that may well include procurement.

The major IT providers will have a tough time if the government is serious about breaking up large contracts, open source software and other ideas they have proposed. But the scope therefore for small, nimble, innovative technology providers should be better than ever.  Again, technology that focuses on reducing costs is going to be welcomed.  In our own area, I can see huge opportunities for firms that can offer cost effective software and solutions that really help reduce cost- both internal running costs and third party spend.  So perhaps we may see less focus on major ERP products and more on relatively low cost, flexible, rapidly implementable sourcing, tendering, auction and supplier management products?

Similarly, we might expect the drive for procurement efficiency to result in more spend going through the Government Procurement Card, so providers such as Barclays, American Express and RBS may benefit from this, perhaps also getting more traction for some of their other payment efficiency products.

Another opportunity may lie in firms that can make use of the flood of data emerging from the transparency initiatives; spend information and eventually entire contracts will be published.  On the positive side, we will see firms packaging up and selling data in a way that has value for firms or individuals. On the negative, I know some lawyers and consultants who are rubbing their hands together at the prospect of greater visibility of contract opportunities and actual contracts.  The potential to look for contracts that don't quite match the advertised requirement and therefore 'invalidate' the procurement process is considerable and potentially lucrative.

There are also actions at specific Departmental level that will spark opportunities; for Welfare to Work providers as the DWP moves more activity into the private and third sector; or in Health where some sort of market will emerge to support the GP Commissioners.

And finally, one bunch of firms who are getting very excited; the outplacement industry.

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