Kyndryl bags short-lived HMRC mainframe contract

IBM spin-off Kyndryl has won a 15-month contract from the UK tax collector to manage its mainframe estate and prepare the services for cloud migration.

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Officially spun out of Big Blue in 2021, Kyndryl is effectively the IBM Global Technology Services (GTS) division minus Technical Support Services, and as such it's former parent has a long-standing relationship with His Majesty's Revenue & Customs (HMRC).

The £4.4 million ($5.4 million) project will see Kyndryl continue to manage a proportion of HMRC's mainframe services while the vendor's consulting team does the "discovery work" needed to prepare for cloud migration and modernization, according to a statement.

HMRC has a "significant" mainframe estate, according to the missive, and the deal with Kyndryl fills the government department's need for "efficient and low-risk routes to migrate applications and eliminate technical debt."

Kyndryl Consult is to work with Microsoft and the Advanced Computer Software Group's Application Modernization Practice to develop replacement options for legacy applications.

"Kyndryl is thrilled to sign its first direct contract with HMRC to support HMRC's strategic aims of administering tax systems in the simplest, most customer-centric and efficient way," said John Chambers, Kyndryl UK and Ireland president. "The agreement underpins our continued commitment and focus to support the UK's public sector and to drive better outcomes for UK citizens."

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As an indication of the depth of HMRC's legacy estate, the tax collector is still running Customs Handling of Import and Export Freight (CHIEF), a system first introduced in 1994 and currently supported by Fujitsu.

In August 2022, HMRC launched the Digital and Legacy Application Services (DALAS) tendering process for a set of contracts worth up to £4.5 billion ($5.4 billion) to refresh legacy tech in the tax department.

HMRC has one of the largest and most complex IT estates in Europe with over 600 systems, 800 terabytes of data, 1,000 IT changes a month, and a 24/7 IT operation. It serves 45 million citizens and more than 5 million business taxpayers.

The formal competition for DALAS started in October 2022, but the framework deal has yet to be awarded. The contract is set to replace agreements for legacy support that expire between September 2023 and January 2025, although HMRC told The Register the Kyndryl contract – made via the government's G-Cloud framework – was not connected.

A spokesperson said: "Taking advantage of Cloud is helping transform how we operate. It enables us to build and run more resilient services, update them easily where we need to and scale up quickly at peak times of the year.

"HMRC intends to use DALAS alongside other routes to market to procure services."

The Register understands the Kyndryl contract is for infrastructure cloud services and is out of the scope of the DALAS framework.

In its annual report, HMRC said it had migrated or retired 62 percent of the services from its legacy datacenters and the majority of the remaining services would be migrated by December 2023.

"There will be more work to do to remediate or replace software that is out-of-date or no longer fit for purpose," the 2022/23 report said. ®