Key staff stay with EDS as Revenue transfers to Cap

UK's biggest ever transfer of government IT staff takes place this week

UK's biggest ever transfer of government IT staff takes place this week.

The government's biggest ever transfer of IT staff will happen over the next two days, when approximately 3,000 people leave US-based services supplier EDS and join the smaller European outsourcing and consulting group Capgemini.

The transfer follows the award last December of a £300m-a-year contract to Capgemini, in alliance with Fujitsu, to take over the running of the Revenue's mainframe, Unix and desktop systems and infrastructure for 10 to 18 years.

But dozens of top people at incumbent supplier EDS - including US specialists who have been working on the company's contract with the Inland Revenue - have decided not to be part of the move. This has left Capgemini seeking to fill gaps in key skills and knowledge.

The Revenue has complex infrastructure which includes more than 70,000 desktops, 127 business systems, 20 ICL mainframes and more than 170 IBM and Hewlett-Packard Unix servers.

Computer Weekly has also learned that 240 of EDS' subcontractors have agreed to transfer or "novate" their agreements to Capgemini on equivalent terms, but a small number of others - up to 18 - have so far failed to agree the same discounts for the new service provider.

This raises the possibility that the Inland Revenue will have to pay tens of millions of pounds more over the life of the contract than would be the case if the same discounts and terms were given to both suppliers.

Last week Capgemini said it was "totally confident" that the 18 remaining suppliers would be successfully transferred. A spokeswoman at Capgemini said, "Of all the contracts novated to date, which is most, there have been no cost issues."

Far from costing the taxpayer millions of pounds, Capgemini's "excellent relationship with suppliers" will save the taxpayer millions of pounds, she added.

But Phil Morris, consulting director of outsourcing consultancy Morgan Chambers, said the commercial risk of paying some higher costs remains with the Inland Revenue, although Capgemini will take the delivery risks if the quality of IT services falls below the levels contracted for.

He said there are a small number of suppliers that are notorious for not easily allowing their contracts to transfer to different customers without cost penalties.

A further complication is that some suppliers may refuse to give Capgemini the same discounts as EDS because it does not always have the same buying power as the US firm. EDS employs 120,000 staff against Capgemini's 50,000.

"There are clear indications that the industry is still maturing," said Morris. "Large outsourcing contracts are by no means perfectly portable."

To reduce uncertainties over the transition, Capgemini has asked the Inland Revenue to invoke an unusual provision in its contract with EDS. This requires specific, key individuals at EDS to remain behind after the formal transfer, even though they have chosen not to join Capgemini.

The Inland Revenue has agreed to call back 19 key individuals from EDS to work for Capgemini, but only for about three to four weeks. The cost will be met by the Inland Revenue, which has promised to meet the "unique costs of transition".

Also, to help the Revenue cope through the introduction of a major new release of tax credits software in April, 1,300 new staff have been recruited in call centres and contingency plans written to deal with very high workloads.

It is in the commercial interests of Capgemini and EDS that the transition is as trouble-free as possible, as they hope success will prove their marketing assertions that companies are not locked into one supplier when they contract out a large number of staff.

A Capgemini spokeswoman said, "We have been successful in retaining more than 95% of all in-scope staff, including top managers. There are no skills shortages or gaps. External reviews by Gartner and the Office of Government Commerce have commended ourselves, the department and EDS on the success of the transition.

"We are retaining only 19 individuals, who made up their minds late about what they wanted to do."

But uncertainties remain over the transition. Up to 100 people, including top IT engineers, have decided to remain at EDS, which raises questions about how well Capgemini will manage any crises.

Last year a compressed testing timetable led to technical problems and a backlog of work after the introduction of new tax credits. This triggered a need for EDS to draft in its technical experts from around the world to identify and solve problems that were slowing down systems.

EDS declined to comment on the transfer. An Inland Revenue spokeswoman said EDS had behaved "professionally and constructively" over the handover.

The Inland Revenue has developed a three-strand transition programme to ensure its suppliers - EDS and Capgemini - maintain the performance of existing systems and continue the development of individual projects:

  • Commercial - involving governance, contract management and performance monitoring, third-party contracts, accommodation, engagement management, quality management and finance
  • Delivery - involving the transition of live IT systems and "in-flight" programmes and projects
  • Human resources - the transfer of staff between suppliers.

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