Taxman trialling app development in India
The taxman has begun an 18-month pilot project to assess whether the department should carry out more IT work offshore.
HM Revenue and Customs (HMRC), Whitehall's third largest spender on IT, today announced that it has asked its supplier Capgemini to use workers based in India to carry out application development work for Chief - the computer system that oversees imports and exports to and from the UK.
The work will take place over the next 18 months, at the end of which HMRC will assess the value and quality of the work provided in India and decide whether app-development work for other systems used by the department should be carried out offshore.
This will be the first piece of IT work that has been carried out offshore for the HMRC and is the latest example of a gradual acceptance of IT offshoring within central government, which to date has not embraced the practice as enthusiastically as the private sector.
An HMRC spokesman said: "We see this as an opportunity to dip our toe in the water and have a look at what sort of cost savings we can make.
"By having a look at this pilot we can see whether some of the software development work can be done outside of the UK - it's a chance for us to see if we can do it more widely.
"We are aware of the cost of IT and we are always looking to try to drive it down, this is another tool we may be able to use."
The decision to offshore work for Chief will save HMRC £5m from the £56m cost of its five-year contract with Capgemini to support and develop the system.
The HMRC spokesman said no posts had been lost as a result of the decision to carry out the work offshore because this work had not previously been carried out by Capgemini, which only took over the contract for Chief in January this year.
No personal data will be sent offshore as part of the application development work the spokesman said.
The HMRC spent £840m on its IT budget last year. It has one of the UK's largest outsourcing deals, the Aspire (Acquiring Strategic Partners for the Inland Revenue) IT services contract with Capgemini that costs about £750m each year.
HMRC's decision to look to IT offshoring to save money coincides with a Whitehall-wide savings drive, with chancellor Alistair Darling using Wednesday's budget to reveal cuts to central government spending of £11bn per year, £500m of which will come directly from IT savings.
silicon.com's recent analysis of the merits of sending more government IT work offshore found that such a move may be inevitable as the administration struggles to reduce the national debt, which is predicted to grow to three-quarters of Britain's GDP in 2014/15.