Capita hoovers up 1 in every 5 pounds of outsourced IT spending

'Popular' firm tightens its grip on public cash firehose

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Capita has increased its share of the public sector IT market by one quarter since 2012, despite overall government IT outsourcing spending remaining flat over that period.

In 2014, Capita hoovered up £905m in public sector IT spending, up from £671m in 2012. At the same time, overall spend over the last three years across central and local government remained flat at around £4.6bn, according to data analysis firm Spend Network.

The data analysed spending across 50 IT suppliers in the largest central and local government bodies, but not including the NHS and blue light services.

That means nearly one in every five pounds of public sector IT spending currently goes to Capita.

The outsourcer is doing particularly well in the local government, taking a £1.3bn slice of spend in that market over the last three years – nearly 15 times more than its nearest outsourcing rival Capgemini.

However, Capgemini still has the largest overall share of the public sector market – mainly due to its mega Aspire deal with HMRC which will have been worth £10.7bn to the outsourcer by the time it finally expires in 2017. Currently, 98 per cent of HMRC's entire IT spend goes on this project, according to the Spend Network's analysis of the government's transparency data sets.

Ian Makgill, chief exec of Spend Network, said: "It is extraordinary how that Aspire contract has grown. It will be interesting to see what happens to the public sector market after that contract ends."

He added: "Something has to change. If you look at what Cabinet Office minister Matt Hancock is saying, there is a feeling large deals are not the answer."

He added that it is unlikely the big outsourcing names will disappear from public sector IT procurement anytime soon, just the way government does business with them will change.

"I'm not sure we will see different names on there in the next few years and I do not necessarily think that is a bad thing. With the exception of HMRC, overall it is a relatively healthy supply chain. Who else is going to run the benefits system apart from someone like HP, for example?"

On the subject of Capita's success, he said the outsourcer was winning deals as more local authorities do not feel they can salami slice budgets anymore and can only cut costs with outside help.

"What we see is a bidding machine. But people do generally stay with Capita and renew contracts. Even if you take a cynical view that they are the best of a bad bunch, they must be doing something right." ®


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