Capita beats IBM to £424m Birmingham IT deal

Council claims it will help save £100m a year

Capita has beaten IBM to a massive IT services contract with Birmingham City Council worth £424m over the next ten years.

Birmingham claims the deal could help the council, which is the largest in Europe, save £100m a year through radical business transformation and investment in new technology.

Around 450 Birmingham council IT staff will be seconded into a joint-venture with Capita, called Service Birmingham Partnership, and there will be investment in a new MPLS-based wide area network and a Capita-run data centre.

Birmingham City Council deputy leader, councillor Paul Tilsley, said in a statement: "We have estimated that the partnership can potentially help us achieve savings of £1bn over the ten year term. Capita will create a new business centre in Birmingham and has guaranteed to bring hundreds of new jobs into the city during the course of the deal."

Birmingham's existing IT suppliers include Serco, which recently bought ITNet.

John O'Brien, government analyst at Ovum, said in a briefing note that this way of structuring large IT services deals helps organisations sidestep some of the pitfalls of traditional outsourcing megadeals.

He said: "[Secondment] avoids some of the problems outsourcing can cause such as loss of in-house expertise and control of assets. Additionally, Birmingham will also have a vested interest in the joint venture, which in the future could sell services to other local authorities. Joint ventures and secondment staffing models are therefore gaining increasing favour in local government mega-deals."