MCN Direct Newswire

Vol. 2 No. 46, 8 December 2003

This issue is sponsored by:

Network Associates, Citrix Systems and Executive Consultants Network

This issue news

1. EDS fights for $6.3bn Inland Revenue contract
2. Xansa quits mainland Europe
3. HP banks $600m contract
4. Axon shows promise
5. SchlumbergerSema gets fit for Athens Olympics
6. Further information - feedback/forward to a colleague/unsubscribe

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1. EDS FIGHTS FOR $6.3bn INLAND REVENUE CONTRACT

EDS is lobbying the Treasury to overturn an Inland Revenue recommendation to award its $6.3 billion Aspire contract to Cap Gemini Ernst & Young (CGEY), rather than to EDS in partnership with Accenture.

The recommendation - from the board of the Inland Revenue - reportedly reflects the chaos caused by EDS systems supporting the introduction of tax credits in April.

Problems with the systems' stability, speed and availability caused serious performance issues, leading to late payments of tax credits. Most of the early glitches have been ironed out, but the Revenue is still in discussion with EDS over compensation for poor performance.

A final decision on the 10-year Aspire contract - which involves a complete overhaul of the UK's tax and national insurance systems - is due later this month. The Inland Revenue would say only that "no decision has yet been made", but any move against EDS and partner Accenture would be a mighty blow to the IT services company as it attempts to recover from a string of disasters that have decimated its financial results and caused thousands of job cuts.

In an effort to restore its position at the Revenue, EDS has launched an unprecedented advertising campaign in the London Evening Standard and the MP's House magazine, to persuade the Treasury to reject the Revenue's recommendation.

The adverts warn against taking unnecessary risks and claim that EDS has the experience needed to work on large-scale national programmes. EDS also claims that a contract switch to CGEY and its partner Fujitsu Services would cost millions of dollars and that its competitors do not have the financial strength to pay the penalties that will be incurred if the system under-performs.

CGEY declined to comment on the fracas ahead of the contract award.

The two final bidders for Aspire were chosen in July, when an alliance of BT Syntegra, BT Global Services, CSC and SchlumbergerSema was excluded from the preferred bidder list (MCN Direct 2-28). The winner will take over at the Revenue when existing IT services contracts held by EDS and Accenture expire in July 2004.

2. XANSA QUITS MAINLAND EUROPE

Xansa is pulling out of continental Europe because it claims the market is not ready for the large-scale IT outsourcing and business process outsourcing (BPO) solutions offered by its offshore model.

The decision to withdraw from France, Belgium and the Netherlands follows the closure of Xansa's Asia-Pacific operations and an office in Paris earlier in the year (MCN Direct 2-35). The 40-50 staff affected by the withdrawal are in consultation with Xansa about their departure.

Xansa announced the cutback as it reported first-half results in line with expectations. Pre-tax profit dropped 6.8% to $23.8 million, on turnover sliding 2.9% to $389 million. Taking account of exceptional items, including a $22 million contract settlement, Xansa showed a pre-tax loss of $23.3 million - a major improvement on the $242.4 million pre-tax loss it made in last year's comparable period.

UK revenues in the six months to 31 October were flat at $361.8 million, with Asia-Pacific down 56% at $1.9 million, continental Europe down 13% at $4.7 million and the US down 38% at $20.5 million. Both Asia-Pacific and continental Europe showed a loss in the six months.

Xansa chief executive Alistair Cox said: "Our UK business has grown despite the market remaining flat. In India, we are continuing to grow rapidly and have increased headcount by 36% to 1,426. The US has returned to break-even. We do not believe that the market in continental Europe is ready for large-scale outsourcing and BPO that leverage our offshore model, so it is our intention to exit these operations, keeping the option of re-entering when we believe the market is more developed."

Looking forward, he added: "The board is confident that the actions we are taking will allow us to compete in today's flat market. Simultaneously, we are rapidly establishing early positions in those areas most expected to deliver significant future value."

* Separately, Xansa has announced the appointment of a new chairman, Bill Alexander. Alexander is chief executive of Thames Water and will take up his post at Xansa on 1 January, succeeding Andrew Buxton who will revert to his previous role as deputy chairman.

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3. HP BANKS $600m CONTRACT

Hewlett-Packard has secured a $600 million, seven-year IT services contract with Bank of Ireland. HP will manage the bank's IT infrastructure - including systems, servers, mainframes, local area networks, desktop systems, printing operations and service desk. In addition, 500 Bank of Ireland employees will transfer to HP.

The solutions and services used will be based on HP's Adaptive Enterprise strategy, aimed at reducing the bank's operating costs and volume consumption.

Bank of Ireland's group chief information officer, Cyril Dunne, said: "Completion of this contract marks the culmination of a lengthy process, during which Bank of Ireland assessed a number of potential service providers. We chose HP because of its proven managed services capability, its presence as a large IT services provider in Ireland and its attractive plan for the transfer and welfare of the bank's IT staff. The contract supports our ambition to maintain industry-leading IT capability and greater certainty around IT costs."

HP Services executive vice president Ann Livermore claimed the contract "reinforces HP's position as a global leader in IT services".

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4. AXON SHOWS PROMISE

Business transformation consultancy Axon has issued a trading update, noting some significant contract wins and a new appointment to its board.

Axon says it is confident of meeting market expectations for 2003, following first-half pre-tax profit growth of 66.6% to $3.2 million, on revenues rising 15.3% to $39.8 million (MCN Direct 2-35).

Since the half-year report in September, the consultancy has formally signed a previously announced $16 million contract with the Qatar Foreign Ministry to create a limousine company to support the 2006 Asian Olympics. It has won - but will not provides details of - a "significant" business transformation programme with a large consumer goods company. It has also signed contracts with organisations including the Police Information Technology Organisation and a leading UK police authority.

Strengthening its board, Axon has promoted Steve Cardell - commercial director and former managing director of Bywater, the business consultancy that was acquired in 2001 - to the post of chief operating officer.

Axon CEO Mark Hunter said: "We have a strong order book and healthy sales pipeline, and we look forward to 2004 with enthusiasm."

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5. SCHLUMBERGERSEMA GETS FIT FOR ATHENS OLYMPICS

SchlumbergerSema has started work on the Athens 2004 PC factory that will support next year's Olympic Games.

The company has a contract with the International Olympic Committee covering four winter and summer Olympic Games over eight years, the world's largest sports-related IT contract. Following its success at Salt Lake City in 2002, SchlumbergerSema is now preparing for the Athens games and will then move on to work on the games in Turin in 2006 and Beijing in 2008.

Under the contract, SchlumbergerSema has responsibility for consulting, systems integration, operations management, security and software applications. At the Athens games it will lead a consortium of technology suppliers and, during the games, will field a team of 3,250 IT professionals based in the technology operations centre, secondary data centres and 60 competition and non-competition venues.

The PC factory can configure 500 PCs or laptops a day and, by the start of the games in August 2004, will have configured and installed 10,000 servers, desktops and laptops, as well as hundreds of routers and switches.

Dimitris Beis, technology general manager for Athens 2004, explains: "Without a comprehensive system, it would be impossible to configure, ship and track several thousand pieces of hardware. SchlumbergerSema is implementing a sophisticated system that combines automation with an expert team to prepare the IT infrastructure for reliable deployment and operations under the highest security conditions."

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