Half of the top 20 software and IT services (SITS) suppliers to UK.gov saw their public sector biz decline last year as Cabinet Office Minister Francis Maude and his merry band of axemen waged war on the oligopoly.
The names on the list collated by TechMarketView remains unchanged on a year ago but the proportion of revenues these firms derive from the taxpayer fell again to 44 per cent, from 46 per cent in '12 and 65 per cent in '09.
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That said, government is still too important a customer for these companies to walk away from - something some hardware players have threatened - accounting for 26 per cent of the total UK SITS market.
Overall revenues among the top score went up one per cent to £10.3bn but this was largely due to acquisitions made by the integrators, some of which grew sales in the year.
Market leader HP – which, as we revealed last year, pocketed £21 from each man, woman and child in Blighty - was hit hard by Maude's belt tightening, as revenues fell nine per cent to £1.51bn.
SITS still accounted for 51 per cent of HP's revenues but TMV said the firm "faced an uphill struggle as it tried to defend and maintain existing business, exploit its footprint in existing clients and pursue new name opportunities".
Central government and defence spending accounted for 90 per cent of HP's revenues, with the shift to the tower model - splitting up contracts with the intention of boosting competitio - having an impact.
Among the notable contract losses was the Foreign & Commonwealth desktop services gig. New wins proved "elusive" said TMV, as HP was pipped at the post in the DfT's Independent Shared Services Centre contract and National Savings and Investments' BPO deal.
"Unfortunately there is no prize for being a runner," said TMV,
"With an acceptance that its central government revenues will decline, the company has invested in pursuing opportunities in areas of local government including local authorities, education and the health sector".
This is the fourth year of declines for HP's sales army and UK public sector head Stuart Balden, appointed at the end of last year, will need to start talking the same language as Cabinet Office, the analyst reckons.
TMV said many of the larger tech firms with US-based HQs had "given the nod" to the Cabinet Office to alter their approach to government, "few are seen as truly changing".
"Those remaining... slow to change are predominantly those associated with 'under performing contracts', the view [from government] is that the way they have handled the relationships on such high profile contracts reflects more broadly on the company," it said.
"Other companies are viewed as doing more to meet the Cabinet Office's requirements - but few are considered to have got it entirely right. Importantly though, the Cabinet Office believes that its relationships with all the IT services companies are salvageable over time," added TMV.
A cocktail of organic growth and acquisitions helped Crapita Capita to push up turnover in the gov SITS space by 16 per cent to £1.436bn, narrowing HP's lead from £400m a year ago to just £72m.
Public sector accounted for half (51 per cent) of Capita's overall UK revenues, with acquisitions of Fortek and Reliance Secure Task Management beefing up sales in education, while it also reported wins in defence and the police.
"Capita has continued to secure small to medium-sized acquisitions enabling it to enter new markets and 'evolve and enhance' its sales proposition," said the analyst.
But Capita, like rival integrators, didn't exit the year "entirely unscathed", with outgoing CEO Paul Pinder hauled in front of a Parliamentary Accounts Committee, along with Serco, G4S and Atos over failing contracts.
In the specific case of Capita, it was singled out over the issues concerning the court translation service.
TMV pointed out that Capita's own figures show it does not expect "material" contracts to be rebid in the next half decade, and even if it loses some relatively smaller deals it has sales momentum to replace lost revenues.
Of the other major players in government, Capgemini - third in the pecking order - declined two per cent, largely based on declining sales in the HMRC Aspire contract.
Fujitsu, BT, IBM and Oracle all reported single digit declines in gov SITS biz during 2013, though integrators did well, with Atos (up 13 per cent), Serco (up 33 per cent), and Accenture (up one per cent) growing.
CGI, which previously bemoaned government's new found hard edge when negotiating with suppliers, reported declines (minus seven per cent) as did CSC and and Mouchel.
TMV said a new wave of suppliers outside of the top 20, including service-based reseller giant Computacenter, won business as large contracts are split into towers, as seems to be de rigeur.
"They are at something of an advantage in the current climate - they aren't the 'big guys' that are battling against a history of problem contracts and the perception they've 'ripped off' government over the last decade or so.
"But they are big enough to bid for contracts that are too big or risky for the SME community," TMV added.
Cloud; o wondrous cloud!
The G-Cloud, though very small in comparison, is also "spreading the spoils across a broader supplier base", and the contracts for bespoke software developed by the large SIs is being replaced by smaller specialists.
Use of the CloudStore e-catalogue is still comparatively limited, with the Cabinet Office admitting recently that 90 per cent of public sector buyers still haven't heard of its portal two years after launch, but it is very gradually growing.
James Rigby, CEO at reseller titan SCC, told us the government had to make G-Cloud framework strategy work given the "financial pressures" certain areas of the public sector face.
"Convincing public sector to move into the cloud is hard going, we've had some successes, but I see continuing determination to make it work. Do I think they'll [government] will get there? Yes," he said.
Microsoft - which is having its own problems with public sector at present as Cabinet Office reviews software licences in central gov - grew business in the sector by one per cent to £400m, according to TMV figures.
Crown Commercial Services rep Rob Wilmott is leading the evaluation and government has asked businesses and suppliers to have their say by 26 February on proposals to mandate open standards.
In a partner blog yesterday, Microsoft said this was likely to "increase costs, cause dissatisfaction amongst citizens and businesses, add complexity to the process of dealing with government and negatively impact some suppliers to government.”
"It also sets a worrying precedent because government is, in effect, refusing to support another internationally recognised open standard and may do so for other similar popular standards in the future, potentially impacting anyone who wishes to sell to government," the blog added.
TMV noted in the report, that the "shock and awe" methods to slash tech spending in the first phase of government strategy, had evolved and the current stage involves "getting the balance right with industry". ®