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Capita has beaten off competition from rival BT to reach preferred bidder status at London Borough of Barnet for a first generation IT/BP deal worth £320m over 10 years. Capita will now wait for final approval from the council’s Cabinet, before the deal is due to start in spring 2013.
Once given the green light, Capita will take on some 514 council staff and become responsible for setting up and delivering Barnet’s new support and customer service organisation (NSCSO), which will provide a range of services such as customer services, estates, finance and payroll, HR, IT infrastructure and support, procurement, revenues and benefits and commercial services.
Barnet said the deal is expected to save at least 11% of the cost of running these services in house, or £41m over ten years. Meanwhile, Capita has guaranteed Barnet savings of £125m over the lifetime of the deal, which Barnet said would be directed back to front line services. These savings are to be split £70m for core services, £47m in procurement, and another guarantee of £8.4m on collection of council tax and other debts. Capita has also committed an upfront investment of £8m in new technology and telephone support for the customer services operation, including an ‘Amazon’ style account for residents to pay online for a range of services, from parking permits to allotment fees. There is also a contractually guaranteed level of support for schools.
Capita has clearly put significant ‘skin in the game’ here to secure the deal. This no doubt increases the risks if it fails to deliver against any of these guarantees and commitments, and puts pressure on deal profitability. It shows the level of competition that suppliers face in the local government market, and particularly in those few remaining first generation deals, which are prized by suppliers for offering new business revenue and potential long-term customer relationships.
As we pointed out in our recent BusinessProcessViews report, IT-enabled support services: opportunities in a converging space, IT/BP suppliers are also seeking first generation opportunities in adjacent local government markets like health and Police, where support services are increasingly in demand. This requires new partnering models, platforms and technology enablement. We can therefore expect more competition and collaboration ahead.