The Register broke the news on Friday that Capita is planning to offshore IT services roles to India. However it came as no surprise to us to read this. In our new research note Capita: a new force in UK IT services? following discussions with Capita’s IT services executive director Mark Wyllie and MD Mark Quartermaine, we underlined how Capita needs a lower cost IT services delivery model if it is to grow market share in the UK.
Capita’s IT services business is struggling to achieve organic growth and its margins are on the decline, so something needs to be done. Capita’s current IT services model is heavily UK centric, while market leaders like HP, Capgemini and Accenture, have far greater offshore resources that they deploy in the UK to increase their cost competitiveness, and delivery flexibility.
Capita has since stated that its plans could lead to approximately 400 redundancies, which equates to c6% of its current UK IT-related workforce. It will of course need to hire significant numbers in India to scale up its offshore capability. This move inevitably adds more fuel to the 'offshoring UK jobs' fire. But Capita has been very late in following the offshoring trend, at least for IT services. Having decided to pursue its IT services ambitions with greater vigour, Capita arguably has no real choice.