Government Hopes To Earn £500m With Its IT Service Tools

Today, the UK government has revealed that the first ever joint venture created to license its intellectual property will be launched in July.

The yet unnamed company will market PRINCE2 (PRojects IN Controlled Environments) management tools and ITIL (Information Technology Infrastructure Library) professional IT services standards, developed by the Civil Service and widely used in business.

The government hopes to earn as much as £500 million from the joint venture over the next ten years. Business outsourcing and recruitment specialists Capita Group will manage the new company with a 51 percent stake, while the government will own 49 percent.

Opportunities for business

PRINCE2 and ITIL are both part of the Best Management Practice portfolio of IT tools, mainly used in the education industry for accreditation of exam institutes and training organisations, but with plenty of other possible applications. PRINCE2 can be used to manage all types of projects, while two-decade-old ITIL is still the most widely accepted approach to IT service management in the world.

Under the deal, standards and procedures developed by the government will be available on international markets. The new company will also accredit Exam Institutes and training organisations to run exams and courses.

The majority of customers of the joint venture are expected to be SMEs, and both parties have promised to maintain support of businesses already relying on the IT products from the Best Management Practice portfolio.

“PRINCE and ITIL have both achieved impressive international credibility, credit to the hard work and investment by the public purse in developing them,” said Gary Flood, an IT journalist and former editor of a public technology and IT title. “The fact that whole training and accreditation ecosystems now exist around them mean that it does make sense for them to start ‘paying their own way’ like this.”

The new company will take over the portfolio once the current concession contracts expire in December 2013. It will choose a name and appoint a CEO in the next two months.

“The commercial, technical and innovation skills that we bring to the JV will help to create a thriving business capable of delivering real value to all parties and releasing a secure and growing income to the Government,” said Paul Pindar, CEO of Capita plc.

Capita will pay the Government £10 million up-front for its controlling stake. It will pay a further £9.4million annually for the duration of the venture – equal to the current profits government receives from PRINCE2 and ITIL, eliminating any risk for the taxpayer.

After three years, the new company will also start paying profits to the joint venture partners according to their stake in the business. This means Capita will only make a profit once the government gets the amount it would earn without Capita’s involvement.

“The open question, however, has to be to what extent they can become self-standing businesses of any real size or potential, especially in the current sluggish global ICT market,” commented Flood.

If everything goes according to plan, government’s 49 percent of the company will be a lot more valuable than what the relevant intellectual property makes today. The Cabinet Office minister suggested that if successful, this model could be used for similar deals in the future.

“The state is littered with potential businesses which could be bringing in revenue, creating jobs and driving economic growth. We are committed to getting Britain ahead in the global race, which is why we want to exploit these hidden gems and use the profits to protect our frontline public services,” said Maude.

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