Tola Sargeant, Samad Masood
Capita signs two £100m+ deals
Capita has announced two prominent deal signings. The first is a ten-year HR outsourcing deal with the BBC, worth more than £100m. Capita will take on 260 BBC staff under the deal, and create 100 new jobs in its Belfast centre, which already provides services to the BBC, fielding complaints and requests for information from the public. The new BBC deal covers recruitment, payroll, occupational health and some aspects of staff development. Capita also announced that it has been named preferred supplier in the re-tender of the contract to administer miner's personal injury liability claims on behalf of the Department for Trade and Industry (DTI). The deal is expected to be worth £120m over a three-year period to the end of July 2009, with an option to extend. Capita is the incumbent on the contract, having replaced Aon in February 2004 under a two-year deal worth £125m. Comment: This is a good start to the year for Capita, and these deal announcements come just after it boosted its H2 with a £424m deal with Birmingham, and a £300m deal with Zurich's UK Life operations in December last year.HR outsourcing deals of the size and scope of the BBC deal don't come along often in the UK - the last prominent broad-based HR outsourcing deal being the significantly larger renewal between Accenture and BT more than a year ago. Given the growing appetite from IT services and BPO players alike to take on £100m+ HR engagements, we expect the competition for the BBC work was fierce. We would be cautious about any claims that this deal is evidence of increased growth in multi-service HR outsourcing deals in the UK market. Apart from multi-nationals, we don't think there are that many UK companies ready to hand over large swathes of their HR function straight away. Clients who are already experienced in outsourcing are certainly more likely to increase the amount of HR services that they contract out. But we expect most HR outsourcing deals to continue to focus around single services such as payroll, pensions administration, training and recruitment - rather than handing over everything at once. Capita's DTI contract renewal comes as little surprise. The deal suits Capita to a tee, combining the company's public sector and insurance services expertise. Capita also has a good relationship with the department and has successfully delivered on the contract over the last two years. And of course changing supplier now would be a huge upheaval: some 1,250 staff transferred to Capita from Aon when it won the contract in 2004. As a result, Capita claims its insurance services business is now the largest employer of technical liability claims handlers in the UK outsourcing market.
