It will take over from UK outsourcer Capita Group which has been handling customer services around the project including the underpinning technology platform and back office administration work.
Capita won the original five-year, 230m pound ($471m) deal back in March 2002 and subsequently secured a 17.7m-pound ($36m) contract to extend the geographical coverage of the charging zone in October 2005. More recently, it was awarded a 22-month, 90m-pound ($184m) extension in September 2006.
Capita worked with a number of sub-contractors including Indian software services supplier Mastech, Northgate Information Solutions, Paypoint and parking services giant NCP. The latter will continue to work on the new contract as a partner to IBM.
As well as beating Capita, IBM also pipped a rival bid from a consortium led by French vendor Thales Information Systems which also included Accenture and Vertex Data Sciences. Graeme Craig, Interim Director of Congestion Charging at TfL, said IBM’s offer was the most economically advantageous.
The value of IBM’s contract has not been disclosed, although Capita was quoted as saying that it expected to make 60m pounds ($123m) in revenue from the deal this year. TFL has the option to extend the IBM deal by a further five years.
Our View
Transport for London has made a brave decision.
It is always the easy option for a client to stick with their incumbent outsourcing supplier when the current contract expires, and this is the option taken by more than two-thirds of organizations in this position, according to analysis of Datamonitor’s IT Services Contracts Database.
Keeping the same vendor means that the client can avoid the potentially disruptive process of handing the service over to a new supplier. The incumbent can become uncooperative and not share data with its successor about how it manages the service, and the handover becomes even more complex if the original deal involved a significant number of staff transferring over to the vendor.
Capita’s handling of the controversial contract came under intense scrutiny from the word go. While there have been problems with the license plate recognition process that is employed on the deal (a vintage car in a Bristol museum that had not been on the road since 1947 was mistakenly identified as having strayed into the charging zone without paying), Capita got the scheme up and running on time and budget.
IT services companies have been eyeing the transport congestion management space with interest for some time. But the truth is that there have been precious few local authorities in the UK or Europe that have been willing to follow London’s lead in implementing such a scheme – indeed several UK city councils have told us that they are political suicide due to their unpopularity with a large part of the voting public. In the first British referendum on the issue, residents of Edinburgh rejected plans for a congestion charge scheme in their city by three-to-one in 2005.
One congestion management scheme that has got off the ground is in Stockholm where 53% of residents voted last year that a six month trial congestion charge scheme should be made permanent. The underpinning technology was much the same as in London, although cars could also be fitted with transponders which automatically debited a driver’s bank account when they pass one of 18 control points at the edge of a boundary zone.
The scheme was managed by the Swedish Road Administration, Vagverket, but IBM played a prominent role in developing and running the technology infrastructure, data processing, call-centers, and coordinating the technology and services involved on the project.
Capita’s shares took a 4.8% hit on the back of the announcement, but its position as one of the UK government’s preferred outsourcing suppliers has survived many years of industry and media criticism, and recent wins suggest that it is going to retain this status for some time to come.
It beat IBM to a 475m-pound ($973m) contract with Birmingham City Council in April 2006 which was expanded earlier this year, and in the last 18 months it has won major deals with North East Lincolnshire Council, Swindon Council, and Westminster City Council.
