HM Revenue & Customs says its newly revised Aspire contract with Capgemini will save £110m a year without cutting jobs.
The department has specified that the spending reduction must be achieved by 2011. It is in addition to savings of £70m a year pledged in 2007, when Capgemini cut its workforce in the department by more than 20 percent.
A spokesperson for HMRC told GC News that the department intends to reduce costs through a process of modernisation and getting rid of legacy systems.
"It's not about cutting jobs. Jobs will remain as they are, it's about cutting money by changing the way Capgemini runs our IT systems," he said.
"Obviously when Customs & Excise and the Inland Revenue were joined together as HMRC there were legacy systems, some of which remain. So it is about cutting them and duplication and using best practice IT."
The department spends about £740m a year on IT. It signed the original Aspire contract in 2004 when it was worth £2.6bn to Capgemini, but the figure has risen to £8.5bn.
Lesley Strathie, chief executive of HMRC said: "This is just one of the ways HMRC will be reducing operating costs and it signals the intent to bring IT costs down as announced in the 2009 Budget."
Chris Pennell, a senior analyst at Kable, said: "The department needs to find significant savings to continue its transformation programme. It will be interesting to see whether this will have an impact on the current re-tender for the Sprint framework, being run by Buying Solutions.
"It will also be worth watching how HMRC and Capgemini manage the transition of suppliers into Aspire and what impact this will have on Capgemini's partners."
