Interview: Phil Pavitt, CIO, HMRC

HMRC's CIO plans to consolidate the department's vast and disparate IT arsenal on to a mere 13 machines over the next five years

Her Majesty's Revenue & Customs (HMRC) is a heavyweight among central government departments, with one of the largest IT estates in the UK. As of the end of 2011, HMRC had 6,000 datacentre servers, 600 systems, 80,000 desktops and 7,500 laptops.

This vast IT arsenal presents considerable management challenges, especially in the face of ever-increasing pressure to lower costs and drive up efficiency.

The man whose job it is to grapple with these challenges is Phil Pavitt, who became HMRC CIO in 2009, after two years working as IT supremo at Transport for London (TfL).

When he joined in 2009, IT accounted for a hefty 23 per cent of HMRC's running costs. Since then, Pavitt has managed to bring this figure down to 16 per cent, and he claims it will fall even further - to 12 per cent - by April 2012.

Reducing the cost of running IT is no small feat and Pavitt puts a lot of his success down to implementing a scheme called the 13 Machines, where he aims to consolidate 650 critical applications into about 150, across 13 machines or platforms, over the next five years.

13 Machines began as a transformation programme branded Aurora, whereby HMRC sought to retire 40 applications, while spending as little capital as possible. This was achieved by using the cost savings from one retired application to fund the retirement of the next.

"If the original application cost £2 to run, let's say, and the new one cost £1, we used the £1 cost saving we made to fund the next retirement," explains Pavitt.

"We managed to do this for 18 months and retired 64 applications. Each application we retired, we retired it on to a platform we already had."

Aurora eventually morphed into the 13 Machines project, which will use the Aurora methodology to consolidate the current 650 applications into just 150, across 13 dedicated platforms, such as business intelligence or ERP.

"My job was to say, ‘Instead of having seven versions of SAP, why don't we just have one?'," says Pavitt.

"Over the next few years we are going to retire, move, migrate or upgrade applications on to one critical machine per subject. So, for CRM, we have chosen one vendor, one application, something we already have on the estate, and the rest will be retired on to it.

"Each year for the next five years, HMRC will save £161m in running costs and barely spend any capital."

Pavitt admits it was a challenge to get the business to accept the 13 Machines programme, but since its implementation it has gained traction and other government departments are beginning to follow suit.

Interview: Phil Pavitt, CIO, HMRC

HMRC's CIO plans to consolidate the department's vast and disparate IT arsenal on to a mere 13 machines over the next five years

“It is always a challenge to get the business to adopt an IT strategy. But now that we are starting to see results, I’m increasingly under pressure from the business to move the project along and speed it up,” he says.

“It’s interesting being in meetings where my own 13 Machines strategy is quoted at me and I’m sitting there thinking, hang on a minute – I wrote that.

“There are also two other government departments, although I can’t say which, currently writing their own version of this. The private sector doesn’t do this either, but it needs to.”

Pavitt indicates that because of 13 Machines, HMRC will be “tendering a lot less than it ever did before”.

It will now only be tendering for point solutions, such as a new data warehouse, because, according to Pavitt, it does not currently have a sufficient warehouse on the IT estate. This will be done over the next 12 to 18 months.

Savings have also been made through better negotiations with suppliers – in particular, the £2.8bn Aspire contract that HMRC struck with Capgemini in 2004, which is set to run until 2017 and covers a majority of the organisation’s systems.

Pavitt manages these negotiations by using third-party quotes as leverage in order to obtain value for money.

“I operate a tripartite mechanism at HMRC when it comes to contract renegotiations. If we have a new piece of business with our supplier, we give it to them for a quote. We then take that quote and find a cheaper one from an equivalent organisation,” explains Pavitt.

“We often have to pay that organisation to quote for us because it will never win the business, as Aspire is an exclusive deal, but we then take that quote back to our supplier and demand it matches it. This has begun to reduce our cost.”

Pavitt also has strong opinions about the government’s cloud strategy, labelled G-Cloud, which was released at the end of last year.

G-Cloud outlines how the public sector will adopt a “public cloud first” approach, where departments have to look to the public cloud as the first option for deployment, and aims to save as much as £340m between now and 2015.

Pavitt says that G-Cloud is now a practical guide for departments across the public sector.

“What I like about the G-Cloud strategy is that it has gone from being a theoretical, hopeful idea that we have been talking about for five years, to a plan that details what applications will be in it, how we will access it, how we pay for it and how we measure it,” he says.

“For example, in the end-user space, which I look after, I now know I don’t have to worry about collaboration and co-ordination software for desktops, because that is going into the G-Cloud. So we are finally getting demarcation about who is doing what.”

However, Pavitt has reservations about how much the public cloud first policy will be applied to HMRC due to the high security requirements that inevitably come with collecting taxes and issuing benefits.

“The use of public cloud definitely depends on where you are in government. The words public cloud and HMRC will not easily be seen in the same sentence,” says Pavitt.

“We have to recognise the uniqueness of what we do around tax and around providing benefits – that there is a level of security the taxpayer would expect.

“So I think that exploiting the cloud will depend on what the department in question does. Within HMRC the cloud is going to be about exploiting it within our perimeter – with private cloud.

“One size doesn’t fit all, especially in government.”