Can HMRC Deliver Its £500m Datacentre-Exit Deal On Time, On Budget, and Within Specification?

HM Revenue and Customs (HMRC), the UK’s tax authority, has embarked on an ambitious £500 million project to exit three Fujitsu-hosted datacentres and migrate its services to a hyperscale cloud environment over a 10-year period, with the deal set to last until 2036. This "Datacentre Exit" (DCE) programme aims to modernise HMRC’s IT infrastructure, shifting from legacy on-premises systems to a cloud platform managed by one of the world’s leading hyperscalers—think Amazon Web Services (AWS), Microsoft Azure, Google Cloud, IBM, or Oracle. The stakes are high: HMRC manages £500 billion in annual tax revenue, and any disruption could have significant economic repercussions. 

 

But given HMRC’s track record with large-scale IT projects, can it realistically deliver this initiative on time, on budget, and within specification? Let’s break it down.

 

The Scope and Complexity of the Project

The DCE programme is not a simple lift-and-shift operation. HMRC’s current datacentres, operated by Fujitsu, host a sprawling array of systems running on diverse operating software, including P-Unix, IBM AIX, Sun Solaris, Red Hat Enterprise Linux, SUSE Linux Enterprise, Windows, VMware ESXi, Oracle Linux, and NetApp ONTAP, among others. Migrating these to a unified hyperscale cloud environment requires meticulous planning, compatibility assessments, and execution across hundreds of services. The chosen hyperscaler will need to provide a platform that not only supports this migration but also ensures resilience, security, and the flexibility to accommodate future business changes.

 

The 10-year timeline suggests a phased approach, which could mitigate some risks, but it also introduces long-term dependencies on the selected provider. HMRC has acknowledged that the hyperscaler may subcontract elements of the service, adding another layer of complexity to project management and accountability. The tax agency has also conducted an initial "R-treatment" assessment—evaluating what to rehost, retire, or retain—but this plan will evolve during procurement, indicating that the full scope is not yet locked in. This fluidity could be a strength, allowing adaptability, or a weakness, inviting scope creep and cost overruns.

 

HMRC’s Historical Performance: A Mixed Bag

To assess HMRC’s capability, we must first examine its history with large IT projects. The agency has a reputation for ambitious transformation efforts, but delivery has often been uneven.

• The Aspire Contract (2004-2017): HMRC’s £10 billion IT outsourcing deal with Capgemini and Fujitsu, known as Aspire, was one of Europe’s largest civil IT projects. It successfully collected £500 billion annually but came under fire for its cost—£7.9 billion by 2014, with a 15.8% profit margin for suppliers—and lack of flexibility. The transition away from Aspire, intended to bring skills in-house and diversify suppliers, was deemed "highly risky" by insiders, with concerns over skill retention as key staff opted to stay with Capgemini and Fujitsu rather than transfer to HMRC. This suggests challenges in managing large-scale transitions and retaining expertise—both critical for the DCE programme.
• Making Tax Digital (MTD): HMRC’s flagship digitalisation effort has faced delays and criticism. The National Audit Office noted that HMRC underestimated the scale of work and added complexity by attempting to replace legacy systems while introducing digital record-keeping simultaneously. This lack of sequencing contributed to timetable slips and increased costs, raising doubts about HMRC’s ability to manage overlapping IT priorities effectively.
• Securing Our Technical Future: Part of this ongoing five-year programme involves moving 600 services from Fujitsu datacentres to cloud or Crown Hosting infrastructure by 2025. A £40 million deal with AWS is already in place, but Brexit-related pauses and shifting priorities have stalled progress, according to a 2022 report. The DCE programme builds on this effort, but its predecessor’s delays suggest that external factors and internal replanning could derail timelines.
• Unity ERP Project: Launched in 2023, this £500 million effort to replace SAP ERP across HMRC and two other departments earned a "red" rating from the Infrastructure and Projects Authority, indicating that "successful delivery appears unachievable." This reflects ongoing struggles with large-scale IT procurement and integration.

These examples paint a picture of an organisation capable of managing complex systems but prone to underestimating challenges, losing control of costs, and slipping schedules. The DCE programme’s reliance on a single hyperscaler echoes past dependencies on monolithic suppliers like Fujitsu and Capgemini, which HMRC has struggled to unwind efficiently.

 

Key Factors Influencing Success

1. Time: The 10-year horizon provides breathing room, unlike the tighter deadlines of previous projects like MTD or the 2022 Fujitsu contract expiry. However, HMRC’s history of delays—exacerbated by external shocks like Brexit—suggests that even a decade may not guarantee timely completion. The agency’s ability to stick to a phased migration plan and avoid "significant replanning exercises" (as seen in 2022) will be critical.
2. Budget: At £500 million, the DCE deal is substantial but not astronomical compared to Aspire’s £10 billion price tag. Yet HMRC has a track record of cost overruns, partly due to poor negotiation (Aspire’s high profit margins) and evolving requirements (MTD’s complexity). The hyperscaler market’s dominance by AWS and Microsoft, which hold 80% of UK share, may limit HMRC’s leverage to secure competitive pricing. If the scope expands or subcontractors inflate costs, staying within budget could prove elusive.
3. Specification: Meeting the technical and security requirements of a hyperscale migration is within HMRC’s grasp, given its experience with AWS and the Customs Declaration Service rollout. However, the diverse legacy estate and evolving R-treatment plan introduce uncertainty. Past projects have faltered when specifications shifted midstream, and the DCE’s dependence on a single hyperscaler to "manage the migration and hosting" risks repeating this pattern if the provider struggles with HMRC’s unique needs.

Mitigating Factors and Potential Strengths

HMRC isn’t starting from scratch. It has bolstered its in-house capabilities, absorbing 565 skilled staff from its dissolved IT provider, RCDTS, in 2023, which could reduce reliance on external expertise. The agency’s existing £40 million AWS deal provides a foundation for hyperscale adoption, and its focus on resilience and security aligns with the DCE’s goals. The 10-year timeframe also allows for course corrections, unlike shorter-term projects that collapsed under pressure.

 

Moreover, the hyperscaler model offers scalability and expertise that on-premises systems lack. If HMRC selects a provider with a proven track record (e.g., AWS or Azure) and negotiates clear deliverables, it could offload some technical burden. The agency’s stated intent to validate the single-hyperscaler approach during procurement suggests a willingness to adapt, though this flexibility must be balanced against decisive execution.

 

The Verdict: Cautious Scepticism

HMRC is remotely capable of delivering the £500 million datacentre-exit deal, but significant hurdles remain. Its technical know-how and long-term vision are assets, but historical missteps—underestimating complexity, losing cost control, and succumbing to delays—cast doubt on a smooth outcome. The 10-year timeline offers a buffer, yet external disruptions (like Brexit) and internal replanning could erode it. Staying within budget hinges on strong procurement and scope management, areas where HMRC has faltered before. Meeting specifications is feasible but depends on locking down requirements early and managing the hyperscaler effectively.

 

Critically, HMRC must learn from past failures: sequence tasks logically, retain skilled staff, and resist over-reliance on a single supplier’s promises. Without these adjustments, the DCE risks joining the litany of government IT projects that promise transformation but deliver frustration. On balance, while success is possible, the odds lean toward a familiar story—late, over budget, and partially delivered. Taxpayers, as always, will be watching.

Tax does have to be taxing.

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Assistant Commercial Director - IT Contract Management HMRC £96K

HMRC is offering an annual salary of £96K for an assistant commercial director - IT contract management, to oversee its engagements with IT suppliers as it nears the post-Aspire era.

The IT outsourcing deal with Capgemini and Fujitsu, which was originally due to end in 2017, is now going through a phased migration, with all services due to be retendered or brought back in house by 2020.

As per the advert:

“HMRC has recently exited the Aspire contract for IT provision with commercial staff playing a leading role,” the department said. “In doing so, it has reached a negotiated position with incumbent suppliers and activity has been undertaken to source suppliers for newly defined elements of the bought-out services. New contracts will allow the department to take better advantage of digital innovations, and keep pace with digital and technology trends of the future.”

The role, which will be based in Telford or London, comes with a salary of up to £95,950.
The successful candidate will manage a team of about 10 contract managers, and will report into the head of commercial contract management. The IT contract chief will help manage a hundredfold increase in the organisation’s supply chain.

HMRC said:

“You will play a key role in managing our supply base effectively through the IT transformation as HMRC continues to move away from the single biggest IT outsource deal in Europe, Aspire, to a supply chain of over 200 suppliers. You and your team will be closely involved in managing and supporting the ongoing transition to the new supplier environment.”

Key Responsibilities:

▪ Proactively lead, manage and develop a team of contract managers, giving clear direction and support to maximise capability, quality and productivity. Ensure the appropriate level and number of staff are assigned to each eligible contract.
▪ Implement the strategic direction of HMRC contract management.
▪ Oversee production and delivery of contract management team plans, pipelines and actions for your category pillar
▪ IT to deliver effective contractual outcomes, including quality, value, delivery, innovation and continuous improvement agendas.
▪ Provide assurance that the policies, procedures, action plans and initiatives for Commercial Contract Management and Supplier Relationship Management are adhered to consistently across IT category pillar and business areas, working within the Supply Chain Assurance framework.
▪ Build and maintain key relationships across the business, promoting collaboration between business areas, and commercial teams.
▪ Ensure an effective risk management framework is in place to map, manage and mitigate supply chain risk for your category pillar.
▪ Support the delivery of a SRM programme for strategic suppliers within IT category driving additional value (service, cost and risk) beyond that originally contracted.

Key Criteria: To be successful, candidates will need to demonstrate capability against the following criteria:

▪ Has a strong delivery focus with the ability to operate successfully and deliver within a challenging and complex environment.
▪ Needs to be resilient – the transformation programme within IT and the structural changes in Commercial will provide challenges and opportunities.
▪ Extensive experience of managing strategic IT suppliers.
▪ Able to build and maintain effective customer and supplier relationships.
▪ Strong negotiator, with a drive to deliver value for money and achieve excellent service from our suppliers.
▪ Applicants must have achieved an A or a B* at a GCF Assessment and Development Centre (ADC) or be willing** to attend an ADC.

Applications are open until 16 April.

Once candidates have been "sifted", successful applicants will be invited to an assessment centre during the week commencing 7 May.

Final panel interviews will take place the following week.

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HMRC IT Delivery Programme Director

It's all go at HMRC these days, not only are they looking for a deputy IT director for cloud services but they are also looking to hire an IT Delivery Programme Director:

"HMRC is in the midst of what is probably its biggest transformation. By 2020 it will be one of the most digitally advanced tax administrations anywhere in the world, changing from legacy systems and a one supplier approach to a cloud and open source environment, with Agile working. 

This cutting edge technical evolution and business model will increase self-service through digital channels. HMRC is looking for a motivational IT Delivery Programme Director to lead a diverse portfolio of IT projects and programmes, shape the strategy of future IT delivery based around Agile methodology, supplier management and lead and shape the Project Delivery profession."

The post pays £120K, and the closing date is 22 July.

Tax does have to be taxing.

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You Pay Peanuts You Get Monkeys

As loyal readers know, HMRC is doing away with its Aspire contract in favour of shorter contracts with a wider range of suppliers.

In order to ensure a smooth transition from the contract, HMRC has set up a new government-owned company called Revenue and Customs Digital Technology Service (RCDTS). Its purpose is to directly employ private sector contractors who had been working for Capgemini.

However, there is a fly in the oinkment for those who switch from private to public; as there is an ongoing Treasury policy of limiting all annual payrises across the public sector to 1% until at least 2020.

This is ironic as Dearnley told PAC this week that the new company had been set up specifically to provide "a better employment offer for the staff coming in from the private sector", including better base pay and pensions than could be expected as direct employees of HMRC.

However, he is quoted by Public Technology:

"It is limited by the pay cap.

But it does have a different salary scale and remuneration structure, so in that, we've been able to put together what we believe is a much more appropriate offer for people coming in from the private sector."

Adding:

"I'm sure this will be an ongoing topic of conversation with the Treasury over the next few years."

In other words this deal hasn't been agreed/signed off by the Treasury!

Seemingly more than a quarter of the private contractors, eligible for transfer into the civil service, have chosen not to do so.

"This was them making a personal choice that they either wanted a career somewhere else or they found a different job with a current employer, or it was their moment to retire or go off to do something different. 

That level of attrition that we saw was actually lower than we expected – but in line with the industry standard."

Maybe the civil service and the government needs to rethink how it rewards and retains people?

Tax does have to be taxing.

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Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

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HMRC May Miss Aspire Deadline

The National Audit Office has recently published a memorandum into HMRC's progress wrt Replacing the Aspire Contract. Rather unhelpfully it does not present any conclusions. However it does present a list of the risks faced by HMRC in replacing Aspire.

Unsurprisingly HMRC is at risk of not being able to complete the switch-over of its Aspire contract in time, while HMRC’s internal IT organisation and revenue & custom’s Digital Technology Services may fail to work together productively.

It was ever thus!

Tax does have to be taxing.

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Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

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HMRC's £10BN Divorce From Aspire

As part of its bold new digital vision, HMRC has finally reached an agreement with its major IT suppliers (Capgemini and Fujitsu) HMRC on the phased exit from its £10BN Aspire IT contract (set to end in 2017).

Having disengaged from this monolith, it will move to a mixture of existing and new suppliers including SMEs for smaller-scale work packages in the run up to the complete rollout of digital tax accounts.

HMRC will use more flexible contracts. HMRC claims that it will save around 24% (£200m) a year by 2020-21 on the provision of like-for-like IT services, against a £854m total IT spend in 2014-15.

Lin Homer is quoted by CCH Daily:

"HMRC’s ambition is to be one of the most digitally-advanced tax authorities in the world, and the agreement we have reached to exit the Aspire contract brings that a huge step closer.

Our new approach enables HMRC to secure the adaptable, cutting-edge IT services we need to transform our services to customers and modernise the way we work, at much better value for money for the taxpayer."

Well then, let's see how this all works out!

Tax does have to be taxing.

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Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Solar Tax Investigation Insurance



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HMRC's Digital Future - Bain

HMRC has selected Bain & Company to guide its transition away from its £10.7 billion Aspire IT outsourcing contract. Bain beat eight other bids for the £20 million contract.

In order to try to gain more control over its IT infrastructure, and end the excessive profit making, the HMRC is exploring ways to change the way in which its IT operations are managed. 

Consultancy.uk reports that Bain & Company was chosen on the back of its strategic IT expertise (85%) and price (15%), and the move will see the consultancy become HMRC’s main transformation advisory partner.

Bain’s new role will be to provide strategic support to the HMRC, helping the “programme management team exit from a large-scale outsourced IT arrangement” according to the tender document. 

The consultants will among others be responsible for IT strategy advisory, programme management and governance, system process re-engineering, supporting the people and culture change workstream, and providing further functional/industry expertise as required. 

The contract with Bain formally started in September of this year and runs until August 2017, thus sometime after the Aspire contract comes to an end.

Let's see how this goes then.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

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HMRC's £20M IT Tender

HMRC recently launched a £20M tender for consulting firms to guide its IT department.

HMRC wants increased control over projects, as well as increased competition lowering profit-making. The current contract with Capgemini ends in 2017 and, theoretically, HMRC wants the new changes up and running by then.

Currently Capgemini co-ordinates HMRC's main sub-contractors Fujitsu and Accenture. However, aside from issues highlighted by a 2014 National Audit Office report, recent benchmarking studies also show that of the around £10BN (yes you did read the figure correctly!) the project is expected to cost by 2017, Capgemini will be making 16% profit (ie £1.2BN).

FACTOID: The original profit projection was a "mere" £0.5BN!

Under the new procurement system, HMRC will seek to have its IT systems managed by up to 400 IT subcontract suppliers, with no contract worth more than £100M.

However, as Consultancy UK notes, not everyone believes however that bringing in a large number of small players will improve the quality of service or lower operating costs. Mark Dearnley, HMRC's Chief Information and Digital Officer, says that getting rid of Aspire for a new system could itself cost up to £600M.

Additionally, the government’s Chief Commercial Officer Bill Crothers warns that if wide-ranging changes are to be made then planning needs to start early:

“This is enormous, risky and important, and that should guide what we do. Sitting behind this is getting better capability, being a better client and doing things in a phased way as much as possible...we should not be complacent.”

When has a government department ever fucked up an IT project?

Oh, hang on......

Tax does have to be taxing.

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Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Solar Tax Investigation Insurance



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HMRC's Private Digital Company

HMRC is apparently on the cusp of creating a new organisation which will take over responsibility for IT work previously outsourced to private companies (ie that work currently denoted as Aspire)

According to Government Computing, from November 2015, developments around case management, Customs and International as well as third-party supplier contracts may be delivered by what some have described as an "HMRC digital company".

The organisation is understood to be a limited company wholly owned by HMRC.

HMRC is also expected to announce that Capgemini will be providing 'test and release' services until 2020 during the digital transformation process. It is understood that up to 250 Capgemini jobs may be transferring to the new company.

Tax does have to be taxing.

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Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Solar Tax Investigation Insurance



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HMRC Aspires For Expertise

HMRC is seeking "transformation expertise" in order to exit Aspire in 2017.

HMRC is offering a two-year, £20m contract for a partner with "experience of managing large post-merger work force integrations and the significant people and cultural issues that arise".

 
HMRC needs an injection of strategic-level experience and capacity to support people and culture transformation.
The tender, which is also issued in the name of HMRC's chief digital and information officer (CDIO) Mark Dearnley, says it requires a Programme Management Office to undertake the management aspects of the programme.

HMRC is quoted by Government Computing saying that it envisages that the "lead transformation partner will provide leadership of the PMO and work alongside HMRC employees."

Basically Whitehall doesn't believe that HMRC has the ability to achieve that exit without external expertise.

A supplier event is to be held in London in the week commencing 8th June 2015, with bidders warned to expect that after evaluation, they may be required to attend an interview in London week commencing 20th July 2015.

The contract will begin barely a month later, on 1st September (how the fark will HMRC be able to evaluate the tenders so quickly?) and is due to end on 31st August 2017.

Those interested may apply here.

Good luck!

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Solar Tax Investigation Insurance



HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"