Conspectus Direct Newswire

Previous Issue: Issue 4

12 March 2003

This issue is sponsored by:

gedas united kingdom limited, IT SERVICES & SOLUTIONS and THE NAKED LEADER

This issue agenda

1. Services Update: IT does well in public sector
2. Research Today: Getting in shape for the recovery
3. Buyers' Analysis: Impact of e-Government
4. Market Opinion: Business intelligence for the masses
5. News Analysis: How public contracts can go wrong
6. Further information - feedback/forward to a colleague/unsubscribe

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1.** SERVICES UPDATE **

Sarah Underwood focuses on events in the IT services marketplace.

UK suppliers are reaping the benefits of government spending on IT services, with both Capita and ITNet turning in a strong performance for 2002.

Capita achieved record financial results in its 14th year as a public company, building its strength in the business process outsourcing market. Its pre-tax profit for 2002 rose 36% to $156.8 million, on revenues up 30% at $1.4 billion. Margins increased from 11.2% in 2001 to 12%, with new contracts signed up from $1.2 billion to $1.8 billion.

Among the highlights of the year, Capita noted the implementation to specification and on time of the Transport for London congestion charging scheme which was introduced in the capital on 17 February. Meanwhile, ITNet reported a 29% gain in 2002 pre-tax profit to $26.2 million (though this figure was reduced to $11.6 million after accounting for extra costs). Revenue in the year rose 1.4% to $285.5 million.

Commenting on the results, ITNet chief executive Bridget Blow said: "The confidence that we expressed a year ago that we would see another good performance in 2002 has been fully justified with the delivery of excellent profit growth against a backdrop of continuing economic uncertainty."

2. ** RESEARCH TODAY **

Comment by Neil Ferguson, Director of PMP.

The current recession in the IT industry offers organisations an opportunity to address their long-standing data issues and fully integrate all their systems across the enterprise.

Historically, most large companies dispensed with their legacy systems, replacing them with a single enterprise resource planning (ERP) system to integrate all their internal business processes. However, the reality of corporate life is that most organisations have multiple ERP systems, partly through devolved decision making by autonomous business units and partly through corporate acquisitiveness.

Andersen's recent Enterprise Solutions Survey shows that a massive 87% of respondents have been involved in merger and acquisition, spin-off or buyout activity in the last three years.

Organisations using multiple ERP systems often don't know which products are being sold to which customers or purchased from which suppliers. The classic problem is sales staff not knowing their available inventory or manufacturing schedule, so they can't give an immediate delivery date to customers.

There are two solutions. The first is to consolidate the ERP systems into a single instance from a single vendor, which is a lengthy and time-consuming exercise. The other approach is to link disparate ERP and other core business systems using enterprise application integration (EAI) software.

Andersen's research shows that respondents were evenly split on which approach they expected to take.

The study finds that some organisations are also starting to recognise that once they have optimised their internal processes and systems, the next opportunity is to optimise the processes and systems across the corporate boundaries.

It is vital for organisations to identify their core competencies, such as customer management, billing, product development or brand. They can then start to create close partnerships with other organisations, breaking down their existing value chains and reconstructing new ones with different companies.

Partnerships are formed with third parties whose own core competency is in the organisation's non-core areas or is outside its own competency. This can result in new offerings, new businesses and new solutions.

"Organisations should only invest capital in activities that really are driving value," advises Andersen's Charles Swain.

Swain can be contacted at Andersen on 020 7304 1650 or email charles.swain@uk.andersen.com.

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3. ** BUYERS' ANALYSIS **

PMP continually tracks the buying intentions of thousands of UK companies. Telemarketing Manager Julie Welch highlights the key trends revealed.

One market that even in these difficult times still continues to invest in new software projects is the public sector.

From the level of local councils and universities, right through to the MoD and the Prison Service, IT directors across the UK are beginning to feel the hot breath of the next e-Government initiative deadline in 2005 scorching their necks!

The various e-directives from central government are raising issues across the board for IT departments. The need to make information more available both within organisations and to their 'customers' - ie, the public - is creating needs in totally new areas such as CRM systems, call centres and web portals.

In turn, this creates infrastructure management issues and the need to enable systems to communicate information across various departments.

Public sector bodies are even following their counterparts in industry in being consumed by mergers and acquisitions: government agencies are being encouraged to run their IT architectures on a more centralised basis, and this often means merging or transferring data across systems.

Software vendors have been a bit slow on the uptake where the public sector is concerned, with only a few cashing in on the opportunity to produce ready-made solutions for this specialised area, and many reluctant to get involved in the lengthy tendering processes required.

This approach is both short-sighted and limiting. A testimonial from one public sector organisation is a ticket to ride the wave of increasing legislation in this area, not to mention the increased level of funding from central government - which cannot be ignored in light of the intense belt-tightening activities in most companies currently.

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4. ** MARKET OPINION **

Pat Sweet reports on the latest findings from Conspectus' regular survey of UK IT end users.

Data warehouse implementations are becoming increasingly ambitious, according to recent Conspectus research. A quarter (26%) of the organisations polled have so far carried out an enterprise-wide implementation, but that figure is set to reach 56% within the next two years.

Many data warehouse implementations are fairly new, with one in five being installed within the past 12 months.

Almost half (46%) of those surveyed feel their senior management team has become more committed to this technology during the past year. Improved management information emerges as the key benefit companies are seeking, cited by 90% of the sample. To achieve this, more than three-quarters (78%) are using specialist business intelligence (BI) or analytics tools.

But the biggest change since last year's survey is the increased use of such tools by non-specialists, with 40% of those polled saying BI applications are now routinely deployed as part of operational applications. This compares with just 8% who recorded the same trend last time around.

The Conspectus survey on data warehousing, BI and analytics is based on interviews with 50 companies from a variety of industry sectors and with turnovers of between £10 million and £1 billion.

5. ** NEWS ANALYSIS **

By leading IT industry watcher Sarah Underwood.

As the 2005 deadline for online public services approaches, both government departments and their suppliers have much to learn.

On the upside, an increase in government IT spending is supporting suppliers of products and services that are suffering in a poor commercial environment.

On the downside, government contracts can be among the most difficult to secure, manage and complete. A recent example of a breakdown between buyer and supplier is the private finance initiative between Fujitsu Services (formerly ICL) and the Lord Chancellor's Department that has been criticised by the government's watchdog, The National Audit Office (NAO).

The so-called Libra project was set up as a PFI contract in 1996 to build electronic links between magistrates' courts and other courts and enforcement agencies.

Fujitsu Services was the sole formal bidder, quoting a price of $240 million over 11 years. But this rose to $302 million when the contract was signed in December 1998 and again on renegotiation in May 2000 to $524 million. A second renegotiation in October 2001 could not be concluded.

Sir John Bourn, head of the NAO, said: "There are a number of lessons that other departments can learn from the Libra project. Departments should take it as a warning sign that their proposed PFI projects may not be workable if few bidders show initial interest and others withdraw as the procurement process continues. In a single tender situation, departments need to take special care to safeguard value for money."

Clearly, for IT vendors, while there is money to be made in the public sector there is also kudos to be lost.

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