HM Revenue & Customshas struck a
deal to cut its IT spending with Capgemini by hundreds of millions
of pounds over the life of its outsourcing contract with the
supplier. The agreement compensates Capgemini with a three-year
contract extension worth more than £1bn.
The restructuring of the Revenue's
Aspire contract will enable the department to cut its annual IT
running costs - which are between £600m and £800m - by 10% by
2010/11. The cuts are needed to meet savings targets under the
government's
2007 Comprehensive Spending Review, which maps out spending for
three years.
The Revenue declined to release any figures, which it said were
commercially confidential, but officials have not denied that the
deal could leave Capgemini with more money over the life of the
contract than was assured beforehand. The supplier's existing
10-year contract was worth an estimated £8.5bn.
Computer Weekly's assessment of the deal is that the Revenue's
IT spend will fall by £50m to £80m a year between now and the end
of the original contract, which expires in 2014. This would cut the
department's annual spend with Capgemini by at least £300m by
2014.
However, this will be more than offset by the extension of
Capgemini's contract to 2017. This will be worth more than £1bn,
taking into account cuts in current levels of spending.
A June 2007 Public Accounts Committee report revealed that the
costs of the Aspire contract have grown from the original
estimates. It said the Revenue spent £539m with Capgemini in
2004/05, compared with an original estimate of £384m. Annual IT
spend rose to £767m in 2005/06 and was expected to increase to
£840m in 2006/07.
The committee said that if Capgemini's margins remained at 10%
to 13%, the overall profit on the contract - before the
restructuring - could be £1.1bn, compared with £300m initially
envisaged.
Capgemini said the restructuring was a positive development.
Group CEO Paul Hermelin said, "The unique nature of our strategic
collaboration with HMRC sets the benchmark for all outsourcing
partnerships."
Revenue CIO, Deepak Singh, said, "The IT
outsourcing
relationship between HMRC and Aspire has gone from strength to
strength over the past three years as we have seen significant
improvements in service quality and delivery capability.
"The restructuring of the Aspire contract balances the need for
HMRC to meet its commitments to cost reductions under the 2007
Comprehensive Spending Review without compromising our drive to
become a world-class IT function."