It appears as though there is some positivity surfacing in the IT services sector. After a slow start to the year, the number of deals announced bounced back in Q2, rising 14% from Q1, according to new report from Ovum, a part of the Datamonitor group. But despite the growth, the technology analyst firm finds that the combination of public sector cuts and private sector woes meant times were still tough.

Ovum reveals in the report that Q2 of 2010 was the best for 12 months for the sector in terms of the number of deals announced, which is noteworthy after that number fell to its lowest level since 2007 in the first three months of the year.

The report, "IT Services Contracts Analytics," tracked a total of 457 deals in Q2 2010, which Ovum says is an increase of 56 from Q1. However, despite the number of contracts announced increasing, the total contract value (TCV) recorded in Q2 actually fell 14% to $30.8 billion.

“While the surge in the number of contracts announced for IT services in Q2 is good news for the sector, concerns remain about the scale of outsourcing in the private sector, where TCV for Q2 slipped to only $10 billion as clients shied away from signing large deals," says Ed Thomas, Ovum analyst and author of the report.

Thomas also notes that public sector demand remained steady, especially in the United States, which accounted for more than 90% of the market’s quarterly TVC.

“However," he adds, "analysis of both IT services deal signings and TCV in the first six months of 2010 reveals an extremely difficult start to the year for vendors. A total of 858 deals have been announced, down 13% on the same period of the previous year and the lowest figure since the first half of 2007 when only 778 deals were tracked.

The drop in TCV between H1 2009 and H2 2010 is not solely due to the poor performance of the private sector, but is also the result a decrease in spending by the public sector, the report finds. Thomas says a 20% drop in TCV was recorded in the public sector in the first half of 2010, compared to the same period last year.

 This story originally appeared on the Insurance Networking News web site.

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