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By Steve Ranger, 24 August 2005 15:25

NEWS The Department of Work and Pensions (DWP) has slashed hundreds of millions of pounds from its IT spend through a "realigned" contract with EDS.

The DWP said it will make substantial savings on its IT costs while getting an improved service which will include upgraded IT infrastructure, better system availability and faster system response times. It will also benefit from simplified systems, for example combining the seven email systems which the department inherited into one.

On average, over the next five years, the DWP will spend around £520m on services delivered by EDS, compared to the more than £700m per year spent since the DWP was created.

The department said the savings are a result of a "contract realignment" which simplifies the complex structure of contracts inherited by the DWP when it was created out of the Department of Social Security and the Department for Education and Employment.

For its part, EDS said the new contract structure will allow the company to increase its revenue estimates from the DWP deal by £800m.

An EDS spokesperson told silicon.com: "This is a realignment of multiple existing contracts into one contract. The savings are a result of simplifying the previously complex structure of separate contracts inherited by the DWP."

Sir Richard Mottram, permanent secretary at the DWP, said in a statement: "We have agreed with EDS new ways of working using, wherever possible, industry standard processes and best practice. Compared with present practices, we expect a better, more robust service and substantial savings. This will make an important contribution to the efficiency savings to which we are already committed."

The contract is valued at £2.6bn over five years but if EDS performs well the DWP could award the company additional work valued at up to £180m.

Doug Hoover, EDS vice president and managing director for UK, Ireland, Middle East and Africa, said in a statement: "We are pleased that we have realigned our relationship with DWP. The consistency and flexibility in IT services will better equip the department to meet its demands."