London 2012: Will IT be hit by credit crunch?

Funding for tech could fall short

London has a vision of using technology to deliver a successful 2012 Olympics. But, asks Ovum analyst John O'Brien, will the credit crunch stop the city from fulfilling its dreams?

The London 2012 Olympics Organising Committee (LOCOG) and Olympic Delivery Authority (ODA) face a unique and unenviable challenge over the next few years. Having set the wheels in motion, and made some good progress against their plans, they are now seeing some suppliers put on the breaks as the economic environment deteriorates.

ODA chairman John Armitt has admitted to more challenging times ahead, with difficulties in securing private sector funding for the £1.4bn Olympic village and media centre. It's possible the government will now need to dip into its £2bn contingency fund to help get these projects off the ground - leaving it with very little capital left unallocated.

So where does this leave the IT plans for the Olympics?

The good news is the vast majority of the IT and technology being invested in London 2012 will be done through private sector sponsorship. These are funds the LOCOG receives from its partners and sponsors - and most tier one sponsors (TOPs) are already on board. Likewise, the IT for the Games' venues is already secured by the contract between the International Olympic Committee (IOC) and worldwide Olympic IT partner Atos Origin.

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The bad news however is the ODA is already struggling to fund its side of things, and LOCOG could face similar challenges if it fails to secure more local sponsors because of the credit crunch.

Out of LOCOG's total target of £650m from its local sponsors, approximately £350m has so far been raised from TOPs including Adidas, BT, Lloyds TSB, EDF, British Airways, Nortel and BP, and one tier two supporter Deloitte.

Although this shows LOCOG has got off to a good start with TOPs sponsorship, it still leaves a current shortfall of £300m - of which much will have to be made up from tier two and three supporters.

The difficulty so far has been encouraging the tier two and three supporters to come on board - they do not receive anywhere near the same level of brand visibility as the TOPs, which get to use the Olympic rings in their promotions.

Consequently I suspect this problem will only get worse now because of the credit crunch, as potential tier two and three supporters pull back from committing funds altogether.

Should this happen it would leave LOCOG with a significant shortfall, which may in turn impact on some of the investments it hopes to make, notably in the IT sector.

My view is it is right for ODA and LOCOG to place an increased emphasis on delivering a technologically advanced Games.

Not only will this ensure it delivers something new to the Games' experience but, perhaps more importantly, if managed correctly, it should also help control the escalating costs.

At Ovum, we believe IT could help manage costs in areas such as transport, energy and communication as technology can be deployed to make systems run more efficiently, and with greater automation.

One of the areas IT could play a part in is the government's commitment to provide free public transport in London for every person buying a day ticket for the Games.

IT could play an integral part in managing this more efficiently across the existing ticketing, billing and transport systems. IT could also play an important role in helping people move through the network more quickly - for example, through the use of contactless payment technology that automatically pays for entry onto the transport network. A trial of this tech by O2 on the London transport network has already proved successful.

Similarly, technology will be integral in helping deliver on London's target to reduce carbon emissions from the Olympic park and village by 50 per cent by 2013. We suspect much of these lower emissions will be delivered through more efficient use of energy, which in turn will cost less to run.

Finally, improved communication is going to be at the heart of a successful Olympics. The ambition is to enable spectators to see multiple views of events, real-time Games updates and live travel information through their mobile devices - giving them access to the same information as commentators.

Web blogging and social networking is also intended for interaction between athletes, spectators and the media.

Balancing these aspirations against the cost implications is a big challenge facing the ODA and LOCOG over the next few years, as costs rise on the one hand and funding becomes tighter on the other.

So there is a real risk these new technology plans and innovations could become vulnerable should there be the need for cutbacks in the Olympics IT budget.

ODA and LOCOG will need to communicate to their suppliers the benefits of investing in such initiatives to ensure they remain high on the agenda. Additionally a shared understanding of the risks and rewards is going to be essential to move forward these plans over the next few years.

Now more than ever, government needs to be seen to be proactively stepping up to the plate to address these challenges and concerns.

John O'Brien is an analyst in Ovum's government practice.