HM Revenue & Custom’s (HMRC) outgoing CIO Mark Hall has branded the department’s £700 million-a-year outsourcing contract, Aspire, as a ‘child of its time’, but added that it is now increasingly being viewed as historic and traditional.

Aspire was set up in 2004, with prime contractor Capgemini delivering much of HMRC’s IT services via an ecosystem of suppliers that include BT, Fujitsu, and Level 3. The contract is due for renewal in 2017 and is currently being restructured.

Speaking at Gartner’s Outsourcing & Strategic Partnerships Summit in London this week, Hall said that suppliers are now offering ‘vanilla’ services and most of the innovation is coming from SMEs and start-up businesses.

He also commented that large suppliers are “tied up in knots” and that they are still selling IT in verticals, when he believes innovation could be drawn from other sectors, such as retail and gaming. This is where working with SMEs that have innovative products and ideas can be beneficial, said Hall.

“Our outsourcing partners have been there when we have needed them, they’ve been with us in the good times and they have been with us in the tough times. That’s a lot of what the contract was designed for in the early 2000s. The challenge is that the whole world is moving and changing around this contract,” said Hall.

“It is really difficult to keep pace with the market. Go back to 2001, how many people would have put cloud-based services in their contracts at that point? How many people would have thought about the social networking aspect? You wouldn’t. The contract was designed to be flexible, but was designed in a completely different paradigm than we face today.”

He added: “It’s also created supplier dependency – we’ve got a great partner (Capgemini), but our challenge is that our partner is the prime integrator of what we do, so a lot of the knowledge and a lot of the experience rests with the supplier. It’s a challenge about how you bring innovation into delivery.”

Hall’s comments come as the Cabinet Office and the Government Digital Service are mandating that central departments digitise many of their transactions and create innovative online products for citizens to use, in a bid to save £1.7 billion a year by 2015.

Key technology leaders in government have also reformed leadership in departments by advising that the traditional CIO role is replaced by a CTO and a chief digital officer, with the view that this is more suited to moving away from ageing legacy systems.

There is also a strong agenda being pushed out from the Cabinet Office to work with agile SMEs, which is currently largely happening via the government’s CloudStore and the upcoming Digital Services Framework.

Hall noted that HMRC has a strong desire to push these agendas, but there is a challenge with such a large department working with small players.

“What we have done is a lot of outsourcing-based work, but the challenge is how to bring innovation, and if I’m being slightly blunt, innovation from SIs and large vendors that are trying to sell us the vanilla type IT,” he said.

“Most innovation is coming from start-ups and SMEs, it’s not coming from the large traditional vendors. So there’s a challenge about how you get those people into a large outsourcing arrangement. We recently ran an event where we brought in 12 small businesses and ran an innovation session with them for a day, and we are now taking all those 12 forward in terms of ideas they are developing.”

He added: “But it’s taking that radical thought to really put those people in. If you are a small business of 10 people with a really great idea, imagine coming into an organisation like HMRC that start to talk to you about risk, challenges, availability – it all becomes quite difficult. So we are doing a lot of incubator work to try and help those businesses.”

It was recently revealed that Hall is soon to be replaced by Mark Dearnley, currently Vodafone’s UK CIO, as HMRC’s new Chief Digital and Information Officer.