PracticeConsultingCapita: All part of the process

Capita: All part of the process

Despite Capita's involvement in controversial projects such as congestion charging and criticism from government ministers, the company is continuing to defy its critics. So... can its growth continue?

Although the consultancy market reached dizzy heights, then nose-dived, before dusting itself off all within the space of five years, Capita has always had plenty to smile about.

Despite some high-profile problems, the professional services and support company has avoided the pitfalls that blighted consulting firms that focused heavily on IT services.

Capita has maintained a steady increase in its consulting and business process outsourcing work over the last 15 years, mainly through contracts with central and local government and their agencies. Yet it has increased the number of private sector deals it has struck to a level that accounts for nearly half of its £1bn revenues.

Its staffing levels have leapt from 320 in 1991, to the current figure of around 19,000.

‘Our focus on enhancing services and re-engineering the cost of delivery continues to attract new and existing clients,’ argues executive chairman Rod Aldridge.

Capita has also performed well in the consulting and technology market compared to its peers, according to the latest Management Consultancy league tables. Fee income for 2003 was £160m, a 10% (£15m) increase on the year before, and it has even jumped above the renowned McKinsey in the rankings for UK fees.

According to Capita’s annual report, 2003 was a ‘good year’. It is a difficult statement to dispute, as it posted pre-tax profits of £121m, a 23% increase on the 2002 figure of £98.3m.

During that year it secured more than £600m of ‘major’ contract wins, including deals with Brent and Lambeth borough councils, the Department for Education and Skills, and Transport for London’s infamous congestion charging scheme.

However, Capita’s current raft of outsourcing and BPO contracts is a far cry from its humble origins.

Capita was originally the computer services arm of the Chartered Institute of Public Finance and Accountancy. In 1987 Aldridge, then managing director, led a management buyout, and the rest is history. Aldridge remains Capita executive chairman but Capita has come under fire on several occasions recently for its contractual obligations.

Former education minister Estelle Morris was a ‘very dissatisfied customer’ of Capita because of delays with the roll-out of the Criminal Records Bureau system in 2002. And the terms of its contract as administrator of the Individual Learning Accounts scheme were ‘deeply flawed’ and lacked proper security measures, according to the Department for Education and Skills.

The company also failed to retain its £50m contract to run Bromley council’s council tax and housing benefits administration.

Despite these setbacks there are plenty of success stories. Richard Ennis, director of finance at Lambeth council, has seen Capita ‘improve greatly’ over the last decade. ‘They are doing very well in council tax and business rates collection,’ he told Management Consultancy. ‘We are in a good relationship with them. There is no “bunker type mentality” between us.’

Ennis also said that competition for service contracts in the public sector was increasing. ‘Capita has to work hard to win a contract. Competition from the likes of [BPO provider] Vertex keeps everyone sharp.’

Capita has re-engineered its business or ‘service’ units ð and is now split between four: business services; commercial services; integrated services; and professional services.

Within these structures is a whole raft of services divisions, including Capita Consulting. This practice employs more than 100 professional staff and offices across the UK, and more importantly, Capita stresses that it is at the ‘forefront’ of business process design and outsourcing.

According to analyst firm Ovum Holway, Capita has the largest share of the total BPO market in the UK with 24.3%

Ovum also predicts further good news for Capita. It expects the BPO market to achieve ‘double digit’ growth up to 2007.

So will the good times continue? Its education resourcing division has just won a contract to supply education recruitment services to the DfES.

But Capita and the Home Office have been accused by the Commons Public Accounts Committee of miscalculating applications regarding its Criminal Records Bureau contract, which has resulted in Capita earning £150m extra on the deal.

Capita’s colourful story will no doubt soon have another chapter.

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