Inland Revenue gets its DNA in a twist

Asked what he thinks are the strengths of the various companies bidding for the biggest outsourcing contract ever to be granted in Europe, and Bill Thomas, the vice president of Europe for EDS, becomes generous, perhaps even a little disingenuous.

It is, he says, all about the DNA of the bidding companies. The DNA of BT, “a fine company”, is telecommunications, he says; Cap Gemini Ernst and Young, another bidder, is, he suggests, a “fine” systems development company. But EDS, he says, has 40 years of experience in IT services. It has great IT operations skills. It is “what we are about”.

For this reason alone, EDS, along with its consortium partner Accenture, might be considered the favourite to win the ten year Aspire competition – valued at between £2.4 billion and £4 billion – to run all the UK Inland Revenue’s IT systems when the contract comes up for renewal in 2004.

But there is another, much stronger, reason why, half-way through the two year bidding process, EDS and Accenture are odds-on to win: EDS and Accenture are the incumbents, having run the systems successfully for the past decade. And that gives them enormous advantages.

This has set the politicians clucking and has IT directors everywhere watching with interest. To many observers, in fact, EDS and Accenture have become part of the Inland Revenue’s DNA. Even if it wanted to, some argue, the Revenue could not switch suppliers – a concern that the National Audit Office and the Public Accounts Committee raised long before the Aspire competition began.

Clearly, the Inland Revenue and its two suppliers are deeply intertwined. Their experts – about 85 key people – run all the systems and manage new development; their 2000 odd managers, programmers, operators and administrators know the systems intimately, having designed and built many of them. Key managers and strategists from both sides are on good, sometimes excellent, terms.

In fact, such is the advantage that EDS and Accenture enjoy that two global outsourcing giants, IBM and CSC, both declined to get involved – in spite of an Inland Revenue commitment to reimburse the bidding and any one-off transition costs. Inland Revenue officials even toured the US trying to persuade companies to bid.

The government is adamant that the contract, which is categorised as a risk sharing public-private-partnership deal, is genuinely open, and it has set aside an area on the Inland Revenue site explaining this. It appears, at least, to have convinced the new bidders, Syntegra and BT, as well as the incumbents, that it is not a foregone conclusion. “It’s not a one horse race. I only wish it were true,” says Bill Thomas of EDS.

Even Thomas, however, concedes that it will be “very difficult” for another supplier to take on the contract. EDS and Accenture manage over 120 major systems, thousands of computers, and 207 suppliers, ranging from telecoms operators, mainframe suppliers and desktop software suppliers. Teams run complex, inter-related applications to support National Insurance, PAYE, the working families tax credit system, self-assessment and student loans. Even the tender documents themselves are gargantuan – 55,000 pages.

According to some estimates, switching suppliers would cost the Inland Revenue – or the new suppliers – some £5 million. Such is the complexity that the handover might take five years to complete.

A further consideration: the UK government has been plagued by a long and embarrassing list of IT project failures. Inland Revenue, however, has suffered relatively few problems and has even been praised by the National Audit Office for improvements in productivity. Appointing new operators will dramatically increase the risk of failures while they learn the new systems and the culture.

In spite of this, EDS and Accenture have mounted an aggressive bid, knowing that to lose would be disastrous. EDS, in particular, has suffered recent financial losses and cannot afford to cede the contract.

It is backing this up with a PR campaign to promote its merits and competency. This, it seems, is not just about the winning the contract. As Thomas admits, suggestions of a lock-in could damage future business elsewhere. “We will be damned if we do [win], and damned if we don’t,” he says.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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