This morning saw BPO specialist arvato beat off rival bidders Capita and HP to be confirmed as the chosen partner to acquire and operate the former Department for Transport (DfT) shared services centre, now known as Independent Shared Service Centre 1 (ISSC1).
This is a landmark development for the UK public sector software and IT services (SITS) market in two ways. On one hand, it shows that the government’s Civil Service Reform Plan has begun to take shape. On the other, it sees arvato (and its software partner on the contract, UNIT4) catapulted out of the shadows and into the limelight.
Arvato and UNIT4, although by no means small companies, are not market leaders in the UK public sector, and certainly not in central government, both firms having cut their teeth in local government. But arvato has managed to out-gun Capita and HP, the two big beasts of the central and local government sectors respectively, while UNIT4 will replace SAP on the DfT deal.
So how is it that these two underdogs have won such a landmark deal? For a start, both firms are highly ambitious and are developing a strong pedigree of helping UK public sector clients to reduce operating costs and improve service delivery. This is demonstrated by the satisfaction of arvato clients such as Chesterfield Borough Council, and the fact that UNIT4 has ousted SAP and Oracle from incumbent positions at a number of local government accounts over the past year on the basis of cost reduction and increased flexibility. These are messages that chime with the needs of government agencies tackling intensifying budget cuts while maintaining or expanding public services.
PAC believes that part of their success story at the DfT is due to a shift in government procurement mind-set. Two or three years ago Capita or HP would be a shoo-in for the ISSC1 contract, based on their long-standing track records for delivering public sector engagements on a large scale. However, the Government is increasingly looking beyond the relatively small group of ‘usual suspects’ that tend to win these deals, and is developing a broader base of supply. Gemalto’s recent ousting of IBM on a major deal with the DVLA is a further example of this trend.
This is all part of a drive to introduce greater competition and more innovation into public sector procurement, targeting improved public service delivery at lower cost. It is clear that the big guns need to step up their game and introduce innovative new approaches of their own to defend their position.
As part of its engagement with the Cabinet Office to provide training to civil servants under the Civil Service Learning engagement, Capita is acting as a ‘broker’ as much as a provider. While it will conduct 51% of the work itself, it will act as a programme manager to bring in smaller suppliers to conduct the remaining 49%.
With some major procurement programmes at the Ministry of Justice and Department for Energy and Climate Change in 2013, it will be interesting to see if the Government continues to go for more left-field providers.