Even as the political rhetoric over offshoring picks up in the US, UK’s top back office provider Capita has decided to use India as an offshoring base for its new IT business. Capita recently diversified from its traditional back-office business into IT, and a top official from the UK firm said it would hire people in India for IT application development and maintenance work.

The Capita group is one of the largest BPO providers to the UK life and pensions industry, and its IT facilities in India will be used to provide testing services and to support technology platforms for life and pensions clients. “We have been expanding our IT capability quite significantly and have made three-to-four acquisitions in IT,” said Simon Pilling, COO, Capita. IT skills are key to Capita’s growth and Samad Masood, an analyst with technology researcher Ovum, said in a recent report that many of the firm’s wins involve using IT as a key part of service delivery.

“Capita needs to build IT capability and expertise fast. IT skills are increasingly important in winning BPO deals, not least because many BPO deals require service providers to integrate, modernise or web-enable clients’ existing software platforms... On top of this, leading IT services companies such as IBM, Accenture, Capgemini, Atos Origin and Capgemini (to name but a few) are increasingly using their IT expertise to encroach on Capita’s BPO turf,” said Mr Masood.

Capita intends to employ around 300-400 people, representing around 10% of its workforce in IT across Pune and Mumbai by the year-end. It has hired, Manpreet Singh, a former senior vice-president with the Vertex group, to head the IT operations.

The UK government, which is the key customer for Capita is also expected to outsource more business.

“There was a slowdown in the build up to the general elections but we expect opportunities to open up now. There are good messages coming out of the coalition government, and I expect significant changes over the next two-to-three years,” said Mr Pilling.

UK prime minister David Cameron’s coalition government has said it will cut down spends on big projects, including some awarded to Indian outsourcers such as Tata Consultancy Services. But the pitch outsourcing companies like Capita are making to the UK government is that by outsourcing administrative tasks, the government can significantly reduce expenditure and focus on the task of governance.