Wednesday, 26 August 2009

Serco update

(By Anthony Miller - Wednesday 26th August 2009 3:30pm). After chatting with Serco CEO, Chris Hyman, at this morning's results briefing (see Serco targets double-digit growth in 2009), I am rather of the view we will be seeing more of the support services giant in the traditional UK IT/BPO services marketplace. Hyman told me they generate some £300m p.a. in IT/BPO, almost all in the UK – that already puts them just outside the UK SITS Top 20, something I suspect is not well appreciated by many in the marketplace.

Serco is on the lookout for acquisitions to boost its “very, very small” BPO business (which suggests to me that the acquisition of UK IT/BPO player ITNET back in 2005 never really delivered on the promise). They now have a real incentive to fix the BPO problem. Hyman said that clients are increasingly looking for a single supplier to prime large contracts, and that sometimes leaves Serco out in the cold – or at least as second string – if the deal has a large IT or BPO component. Indeed, this is why Serco couldn’t prime at Essex County Council (see IBM beats Capita, Mouchel, TCS and T-Systems to Essex deal) though I understand they are back in the frame in a subcontract role. That’s not where Serco really wants to be.

I got the impression Hyman does not see the same sense of urgency to boost Serco’s IT services capability as Capita (e.g. see Capita buys Carillion IT Services). Hyman seems happy – for now – to continue to rely on partners such as IBM, Logica, Raytheon, Lockheed and others besides. I just wonder for how much longer he will be prepared to cede what is becoming an increasingly larger part of major public sector deals to his competitors. If the answer turns out to be 'not much longer', then they will first need to work out what went wrong at ITNET before attempting anything bigger and bolder!

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