Report - Capita winning in local government, as suppliers face challenging market

Profile picture for user ddpreez By Derek du Preez January 26, 2016
Analyst firm TechMarketView has released its annual local government supplier landscape report and it makes for some interesting reading.

Frustrated businessman looking at a drawing of multiple arrows
Just yesterday I posted a story about some of the challenges I’m seeing in the local government market at the moment, with regards to implementing digital tools that transform the way citizens interact with their local authorities.

Which is timely given a report that landed in my inbox this morning from analyst firm TechMarketView looking at how suppliers in the local government market are fairing, with some additional insights into areas where suppliers are seeing demand (e.g. citizen-facing digital experiences).

Central government departments appear to be swinging towards in-housing more of their skills, as the Government Digital Service favours architectures that require some sort of internal digital capability. However, I don’t think that this is going to always be possible for local government and so I tend to be more interested in what suppliers are playing a role at a local level.

Interestingly, TechMarketView’s Michael Larner found that whilst the overall rankings for the top ten suppliers to local government hadn’t changed significantly, their individual performances did vary somewhat.

For example, local government revenues at BT, Mouchel and IBM declined by over 10% year over year (which TMV puts down to an over reliance on a limited number of ITO and BPO contracts).

Whilst Capita, Fujitsu, Agilisys, Civica and Northgate Public Services grew on the back of “some sizeable wins”. But it’s Capita in particular that the report highlights as doing well in the local government market. Larner writes:

Capita continues to lead the market with UK local government SITS revenues of £658m and is able to fulfil a multitude of different local authority requirements. Its recent win at Sheffield demonstrates that Capita can evolve a client engagement from a traditional BPO relationship to a transformational relationship.

The Digital & Software Solutions division will enable it to convert more of its traditional outsourcing contracts into ‘transformational’ engagements. Adding property and highways to the local government business will position the company to transform local areas too.

Here’s a table outlining TMV’s analysis of the top ten suppliers at the moment:

local government suppliers

Larner’s analysis also highlights how things are changing at a local level, when it comes to investment in new technologies. To put it simply, devolution and cuts to funding mean that suppliers need to find new and innovative ways of approaching the market.

It seems that local authorities are not really looking for one supplier to look after everything anymore, as this hasn’t proven effective in taking away all the problems (e.g. they still have to deal with the fallout from citizens). Larner says:

Having only a handful of contracts will risk leaving a supplier with a big hole to fill because it’s very likely that any new contract will be smaller and constructed differently (e.g. as a framework or tower model with a SIAM partner) are re-let.

However, that being said, local authorities are still looking for suppliers that have a broad understanding and/or capability to work across local services. The report adds:

SITS suppliers will need to adapt to a new operating environment. Central funding of local authorities will continue to fall and devolution provides opportunities for local public bodies to deliver services in a more integrated fashion. SITS suppliers that can support digital transformation across public sector organisational boundaries will succeed.

Capita (with leading positions in local government, education and police), Serco (with expertise in community care and health) as well as Agilisys (with expertise in supporting multi-agency working) and Civica (working on integrating health and social care on the Isle of Wight) look particularly well placed to benefit.

Rightly so, TechMarketView highlights that suppliers that are investing in and continue to focus on citizen experience are likely to reap rewards going forward, as councils and local authorities look to shift the onus of responsibility to the user and reduce pressure on call centres. Self-service is a top priority for many.

Some of the other main points in the report include:

SITS suppliers will need to be experts in diplomacy - there are so many stakeholders internally and externally that suppliers need to become pros in handling all these relationships, without causing too many fights.

Devolution bids and budget cuts have left local authorities in a state of flux - TMV says that “to help councils transform their local areas SITS suppliers will need to have expertise in organisational design, subsector domain expertise (in all areas of local public service) and expertise in digital transformation delivery”. This is not easy.

Adoption of analytics remains patchy - However, according to the report, “suppliers

will need to have analytics expertise in order to help local authorities get a better understanding of their citizens, predict the likely evolution of demand on their resources and use preventative analytics to curtail demand and change citizen behaviour e.g. increasing recycling activity or council tax collections”.

My take

An interesting report and plenty to take into consideration. For what it’s worth, keep an eye out this week for a case study of Aylesbury’s digital work that I will publish over the next couple of days - it highlights how councils can work with suppliers and their systems to create really useful digital tools for citizens.