It's hard to comprehend the scale of the challenge facing HM Revenue & Customs (HMRC) chief digital and information officer Mark Dearnley.

HMRC still has 70,000 staff, relies on 1,700 different documents, claims to get 70 million phone calls every year, collects £500 billion in tax and is responsible for almost three-quarters of all government transactions.

Over the next two years the department aims to collect all of those taxes online, build a 'digital' tax platform and modernise its 1970s-era systems, all while replacing a £813 million-a-year Aspire ICT deal with Capgemini in 2017.

Dearnley, who joined from Vodafone in August 2013, admits his pipeline of work is "incredible".

It's nothing short of transforming a centuries-old organisation into a digital, modern, real time business, he says.

Dearnley acknowledges the challenge presented by legacy systems, a long-standing issue for HMRC IT chiefs. He says he would like to consolidate tax systems from over 100 to "one or two". All of which sounds familiar; since 2010 the HMRC IT team, led first by Phil Pavitt, then Mark Hall and now Dearnley have been consolidating and re-platforming the technology estate of HMRC. Dubbed 13 Machines, the SAP-based simplification plan reduced 550 different applications on to 13 instances of SAP, Hall told this title in May 2011. In June 2013 Hall was confident that the legacy of HMRC was at an all time low and the Whitehall department had 200 online services to offer citizens. So it is interesting to see Dearnley place so much focus on the legacy technology at HMRC.

However he rejects the idea they are somehow "bad platforms".

"This nation has survived and brought in trillions of pounds worth of tax on these platforms," he says.

"Is real-time brilliant and batch terrible? That's the wrong question. There are things for which batch is fine. There are other things where you need real-time updates."

Instead Dearnley says he aims to converge systems. "Some of that will use things that are new. Some of that will take advantage of some of the great things that have been developed over the years," he says.

"There's no 'oh it's not new so it must be bad' - there's actually 'if it's ideal for the role let's build on it'."

Single data hub

As part of plans to consolidate systems, the department has built a single Hadoop-based data hub for all of its structured and unstructured customer data.

Once operational, it will be used for compliance work and for analysing cyber security, fraud and other issues, according to Dearnley.

"All the tax information we have about you as an individual, so all of those legacy systems, all the data from those will go into the hub. We've built the hub and we're just starting the process of building the ingestion routines at the moment. There are quite a lot of them," he explains.

The secure hub will be "the place to start for all our analytics across the organisation. It will help to remove the silos. And we will finally have this really single view of the customer".

Aspire replacement

Unsurprisingly, Dearnley is tight-lipped on plans to replace Aspire, the major outsourcing contract for technology services within HMRC and the biggest outsourcing contract in the UK government. He acknowledges there are options to extend it beyond the 2017 deadline but he insists HMRC is "on track".

The department will move from a single deal with Capgemini to multiple contracts where "we would expect to take more control ourselves", he says.

HMRC has submitted a business case for the replacement to HM Treasury and will start to discuss plans during the spring, Dearnley adds.

A recurring concern, raised recently by the Public Accounts Committee, is that HMRC lacks the necessary skills in-house to manage multiple IT suppliers and integrate systems when Capgemini backs away.

But Dearnley believes these worries are overblown.

"Most people underestimate how much talent we have within HMRC," he says. "It would appear we actually have more than some other parts of government.

"I have thousands of civil servants. We already run all of the platforms that collect 40% of the UK's tax. And I've managed to create what I think is quite a fantastic leadership team."

Digital services

Ultimately, all of this work is to support the department's main priority: modernising its digital services.

Dearnley says that the department is following a three-pronged approach: moving its services online, designing new online services from scratch, and improving existing ones.

HMRC has promised to give every citizen, business and tax agent their own online tax account and for everyone to have the option to deal with the department entirely online in the next three years.

It is rebuilding four out of Whitehall's 25 'digital exemplars' - a project to redesign and digitise the highest volume government transactions by March 2015.

In HMRC they are: PAYE for employees, tax self-assessment, 'your tax account' for businesses and an online service for tax agents.

"We've got three in public beta therefore, give or take, launched. But agent online self-service, our most complicated one, will go into beta shortly after April," Dearnley explains.

He describes the four redesigned services as "useful catalysts to get the digital agenda really moving within HMRC" but "a very, very small part of our digital transformation".

Dearnley is halfway through digitising the 1,700 paper forms the department oversees, moving them on to HTML5 so they work on phones, tablets and desktops. He says the department is already seeing a 10-15% error rate reduction for submissions.

Delivery centres

The department has opened two dedicated 'Government Digital Service'-style centres focused solely on delivering digital services: one in Newcastle and the other on the Southbank in London.

Dearnley says there are about 300 people in the Newcastle centre, which opened in April. He says he is "over the moon" at the recruitment process. The Southbank centre has consolidated 200 existing digital HMRC staff, so they can work together from one building.

"We're getting loads of applicants for every job, we're getting the talent we want, the calibre we want," Dearnley says.

"The ownership of the roadmap of what we're creating, what it looks like and how it feels, is completely driven by civil servants, which I love."

The fledgling team in Newcastle have already proven their worth by moving tax credits renewals online in just eight weeks in start to finish, Dearnley claims.

"We set up a Scrum team and said: 'Go and see what you can do, you've got eight weeks'. They built a complete tax credits renewals service in eight weeks from start to finish, and we integrated it in real time to all the back-end systems.

"That went live in eight weeks. We thought if it went really well, maybe 80,000 people would use it during renewals – 410,000 people used it. I think we had about a 94% customer satisfaction rate, which is absolutely phenomenal."

Dearnley describes it as a "seminal moment across the leadership of HMRC".

"Everybody realised that this could be very different. It's also caused an avalanche of demands. Everybody thinks we can do everything in eight weeks now," he says.

'Not just a website'

While the main focus is on digitising citizen-facing services, digital transformation also depends on work behind the scenes to get the department's internal technology up to scratch, Dearnley explains.

"Digital is more than just the web. At HMRC we have trained the nation to write to us or ring us up. We get 70 million phone calls a year.

Mark Dearnley, HMRC chief digital and information officer

"So we're in the middle of rolling out a completely virtual call centre solution across the whole of HMRC. That's being delivered by an SME - KCOM - who I have to say have been absolutely fantastic, and totally got the cultural stuff around how to work with us and how to be agile," he says.

Once that work is done, Dearnley says he will set up online chat, secure messaging and other tools to support digital services.

"Hopefully you get the sense of an attempt at a complete customer experience transformation, not just digital as a website," he says.

With such a gargantuan pile of work ahead of him, it must be difficult to keep motivated. If Dearnley ever needs inspiration, he says he listens to HMRC's staff and citizens using its services.

"There's nothing like listening to a customer telling you how easy or not it was to work with you. And there's nothing like sitting watching a member of staff doing their job and realising how much you need to change."

"If you ask me: 'Will I ever be happy'? Of course not. It's the moment you're happy you're falling behind."