Squaring the circle on social care

Tola Sargeant, Senior Analyst, and Eric Woods, Government Practice Director

An ageing population is increasing demand for health and social care services in the UK, but CSR07 and the Efficiency Agenda are putting budgets under increasing pressure. Technology and business process change have a significant role to play in improving the efficiency of social care provision in the UK as social services departments struggle to balance rising demand against limited resources and funding. Tola Sargeant and Eric Woods highlight some of the key findings from Ovum's recently completed report on the UK social care market for software and IT services.

Structural changes in social care provision

In order to understand the drivers, challenges and opportunities in the social care market it is increasingly important to recognise the increasing divergence between Adults' and Children's Services (in England at least).

Adult Services: the demographic challenge

The adult market is fairly well-defined and is similar to the 'old' social services market although it is strengthening its links with healthcare. This market is driven by two primary forces: demographics and budget. An ageing population is increasing demand for health and social care services while available resources and funding are set to come under increasing pressure. According to Sir Derek Wanless, in his March 2006 review of social care for the King's Fund, 1 million older people (aged 65 and over) currently use publicly funded social care services in England. But in the next 20 years, the number of people aged 85 and over in England is set to increase by two-thirds, from 1.18 million in 2006 (Office for National Statistics), to just under 2 million.

This will put considerable extra burden on the social care sector, and increase costs considerably. But the expected increase in costs is not being matched by increases in funding. Rather the government-wide efficiency programme, and the Comprehensive Spending Review 2007 (CSR07), look set to add to pressure on budgets. The Department of Health's care services efficiency programme, for example, seeks to make savings of £228 million in 2005/6 rising to £684 million in 2007/8.

Technology and business process change have a clear role to play in improving the efficiency of social care provision for older people in the UK as social services departments struggle to balance rising demand against limited resources and funding.

Children's Services: new challenges and opportunities

Children's Services is a relatively nascent market. In addition to children's social services it includes education, the Connexions Service for 13-19 year-olds, the Sure Start programme and Young Offending services. These diverse segments of the market are coming together under one roof and it's not yet clear exactly how the market will be structured and which software and IT services players will benefit.

The primary driver in the children's social services market is the desire to better protect children in need in order to prevent another tragedy like the death of Victoria Climbié. Lord Laming's report into the circumstances surrounding Victoria's death found the failure to intervene earlier in her case was a result, amongst other things, of poor co-ordination between different agencies, a failure to share information between agencies and across borders and the absence of anyone with a strong sense of accountability.

In the context of the software and IT services market, the desire to protect children is fuelling demand for information sharing between organisations and agencies and for integrated systems that make this easier.

Sizing the market

Social care as a whole is big business. According to the Government's Green Paper, Independence, Well-being and Choice, approximately £14.4 billion of public funds were invested in social care in England alone in 2004/5. Some £10.6 billion of this was for Adults services. By 2007/8 investment in personal social services will be £1.8 billion higher, representing an annual average increase of 2.7% in real terms above 2004/5.

Proportionately, however, very little has traditionally been spent on IT and related services. According to Ovum's estimates, the UK social care software and IT services market was worth approximately £50m in 2005. In other words, just a fraction of one percent of the total social care budget is spent on IT. By comparison, in the health sector spending on IT has historically been just over 1% of the total NHS budget and the government is aiming to increase this to 4% in line with recommendations from Sir Derek Wanless.

As a result, social care departments are expected to do highly complex things with their IT at very low cost. In addition, every new government initiative or change in legislation requires systems to be refreshed and government grants supplied for this purpose are, suppliers maintain, woefully inadequate.

This low level of spending on IT affects how suppliers approach the market, making it difficult for them to take the necessary risks and do the right level of R&D. It also makes further consolidation in the market inevitable.

If the government is to balance its books as the population continues to age, more needs to be spent on S/ITS and assistive technology in order to improve efficiency. Only by harnessing IT to improve business processes can social services departments hope to provide the appropriate level of care to a growing number of adults within a limited budget.

Prospects for growth

In the near term, growth will continue to be driven by short-term government initiatives and changes in legislation, but checked by budget constraints and CSR07. As a result, we expect S/ITS spending by Adults Services departments to be fairly flat over the next few years.

Children's Services offers better prospects for growth in S/ITS spending in the short term as these departments gradually take shape within local authorities. Bringing together various different elements including social services and education will drive spending on software, systems integration and business process transformation.

In the medium to long term, the closer integration of health and social services in the adult sector is likely to drive growth. Initially the involvement of NHS CFH in the sector could prompt some investment in software as suppliers develop their systems to become compliant with the NHS 'data spine'. We would also expect to see increased investment in areas such as mobility and telecare in the drive to improve efficiency.

It would take a more concerted programme of investment backed by central funding, however, along the lines of the National Programme for IT in the NHS, to fuel any significant growth in the sector.

For more information see the report The UK social care software and IT services market.

Tola Sargeant is lead health analyst with the PublicSector@Ovum advisory service and a senior analyst within the Government Practice at Ovum. Her areas of expertise include the UK public sector market for software and IT services and, in particular, the fast changing healthcare IT market.

Eric Woods is Director of Ovum's Government Practice. In this role, Eric is responsible for directing Ovum's research into government IT issues, providing advice to Ovum's government and public sector clients, and supporting our services to software and IT services companies targeting the government market.