Birmingham City council has named Capita as preferred supplier for a 10-year £420m-plus joint venture.
Capita beat IBM in the final round of the tendering process. The deal includes seconding 450 council staff to a joint venture organisation to complete the IT work.
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The council says it is aiming to save £1bn as a result of a projected 15% increase in productivity through the partnership.
Capita has promised to create hundreds of new jobs in the city as a result of the contract.
While the council has calculated a basic £420m-plus spend on IT services over 10 years, it is expected that this figure will rise as IT plays a growing role in the business transformation of the council.
Capita will start work on the contract next April. Negotiations with trade unions at the council are on-going.
The council hopes to avoid the type of industrial dispute which took place at Swansea council last year, as a result of a big outsourcing deal with Capgemini.
The joint venture company has provisionally been called Service Birmingham. The deal has to be ratified by the council’s cabinet later this month.
Meanwhile, North Lanarkshire council has signed a four-year £5m outsourcing contract with Steria. The deal covers network, telecoms, desktop and server management, and is designed to deliver “guaranteed savings” to the council.
Winchester City Council is also planning to spend £2.5m on a five-year outsourcing contract with Digica for desktop, server, infrastructure and applications support.