HMRC has revealed savings of £226m, following two years of transformation that has included a massive reduction in the department's IT estate.
Phil Pavitt, HMRC chief information officer, said the transformation journey is only halfway through, even though the IT in use at the department had already been significantly reduced.
"We are on a journey, going through a number of changes. Any idiot can cut costs but it's whether you can cut costs in a sustainable way that allows the services to still be usable," he said at a Westminster conference.
"Three years ago, this organisation had reached a point of no return. For example call centre customer experience was said to be far from positive.
"We have made significant progress with costs 40 percent lower than what they were and the service is some of the best performance I have experienced."
Pavitt said the department's Change Plan 2011-15 stemmed from the government's spending review in 2010, which required HMRC to reduce costs by 25 percent, while also increasing its revenues by £20bn.
Pavitt said changing the IT systems had not been an easy journey, especially given the risk averse nature of the organisation - a philosophy that had become deeply ingrained after the unwelcome publicity when it lost discs containing 25 million child benefit records.
"Remember we are the organisation that administered the loss of the tax disc so taking on risk was not something people wanted to do," said Pavitt.
"Every time we went to make a change, there was resistance."
Pavitt said the HMRC had adopted a consumption unit pricing model that operates online and in real-time.
"This allows staff to know exactly what they are using. It has meant that 12,000 desktops were given back, as well as 800 laptops and 25,000 telephony extensions," he explained.
Pavitt said he had also improved benchmarks with suppliers and streamlined the HMRC IT estate.
"It was very complex. We probably owned one piece of software from every software manufacturer in the world. We just weren't sure where they were running or who was using them," he added.
Additionally, a big part of the transformation was the HMRC Aurora programme, which aims to reduce IT running costs by migrating staff to a number of chosen IT solutions, while retiring the rest.
"We injected no capital into this programme but at the end of it, in two years time from now, we will have saved millions," Pavitt noted.
Pavitt also described how HMRC had encouraged suppliers to help the IT department streamline.
"We implemented a policy where we allowed any business to implement an application on our estate if they could find the equivalent or more savings from retiring some IT on our estate," he said.
"We found that they would ferret around looking for stuff to retire in order to implement what they know is important for their business. We've already reduced 900 apps to 125 apps."
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