MCN Direct Newswire

Vol. 2 No. 47, 15 December 2003

This issue is sponsored by:

Network Associates, Citrix Systems, Sage and Security Conference

This issue news

1. CGEY beats EDS to $5.2bn tax contract
2. NHS chooses key winners
3. LogicaCMG says merger is working
4. Unilog builds UK business
5. IBM rolls up $1.2bn contract
6. Further information - feedback/forward to a colleague/unsubscribe

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1. CGEY BEATS EDS TO $5.2bn TAX CONTRACT

Cap Gemini Ernst & Young (CGEY) has snatched the $5.2 billion Inland Revenue Aspire contract from incumbent EDS, despite a last-ditch effort by EDS to persuade the Treasury to overturn the recommendation (MCN Direct 2-46).

EDS said it was "extremely disappointed" not to be selected, adding: "The company continues to believe that it offered the best solution at the best value, one that would provide the most advanced technology development and support for the Revenue's demanding modernisation agenda, while securing the uninterrupted flow of tax revenues and credits."

CGEY pronounced itself "delighted to have secured this prestigious contract" and said it was chosen for its "strong track record of delivery and strengths in innovation and technology-led change".

CGEY will work with Fujitsu Services on the contract, which will run for an initial 10 years with an option to extend for a further eight years. It will take control of the Revenue's IT systems on 1 July 2004 after a six-month transition period in which it will work with EDS and its partner at the revenue, Accenture.

Accenture has been running the Revenue's national insurance systems under a 10-year, $78 million contract awarded in 1995. This contract expires in June 2004, but has been extended by a year to give any new supplier to the Revenue a year's grace to get to grips with the tax systems before tackling national insurance.

As part of the Aspire deal, around 2,250 employees from EDS and Accenture will join CGEY, with over 900 joining Fujitsu Services under TUPE arrangements. Fujitsu Services has been subcontracted to manage data centres, applications, IT support and disaster recovery services, while BT has been subcontracted to provide wide area network and voice support services.

Speaking for the Revenue, chairman Nicholas Montagu said: "I am delighted with the outcome of this competition. It has been genuinely tough and fair throughout, and we had to decide between extremely strong bids. The Inland Revenue remains at the forefront of the themes that the Government wants to pursue - modernising public service, welfare reform and the expansion of e-services. These present us with huge challenges. We need a technology partner that can help us meet them and I am confident that in CGEY we have found such a partner."

While no mention was made of EDS's poor performance in supporting the Revenue's introduction of tax credits in April, industry analysts suggest this could have swayed the decision makers on Aspire.

2. NHS CHOOSES KEY WINNERS

The NHS has named BT as the winner of its $1.1 billion national application service provider contract to set up and run a care records service within the National Programme for IT (NPfIT).

BT beat IBM to the 10-year contract, following Lockheed Martin's decision to pull out of the bidding because of demanding performance targets and costly penalty payments (MCN Direct 2-32).

BT also scuppered IBM in the award of local service provider contracts. Two of the five regional contracts have been awarded, with BT taking the $1.7 billion, 10-year contract to provide access to the NHS care records service and local IT support in the London region.

BT won the London contract in alliance with Perot, beating a consortium of IBM, Cerner and Atos KPMG Consulting.

The second regional contract to be awarded covers the north east. It has been won by Accenture, working with Siemens and Microsoft. This $1.9 billion, 10-year deal was contested by a consortium of Cerner, SchlumbergerSema, Serco, HP and TCS - following the NPfIT's decision to de-select Patient First Alliance, led by Jarvis and including SAIC, from the shortlist.

With the three remaining regional contracts to be awarded by the end of the year, IBM still has a fighting chance of securing some of the NPfIT's $3.7 billion budget. It is bidding against consortia led by BT, CSC and Fujitsu for the west Midlands and north-west regional contract, while consortia led by Accenture, Cerner, Cap Gemini Ernst & Young and PlexusCare - comprising EDS and LogicaCMG - are competing for the east of England.

The south-east and south-west regional contract is being pursued by consortia led by Fujitsu, PlexusCare and SchlumbergerSema.

NHS IT director general Richard Granger said: "The contracts have been set up to reward delivery of systems to the NHS on time and to budget. We will remunerate suppliers for successful delivery, but not for delay and failure. The National Programme team will robustly manage this process to ensure it happens."

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3. LOGICACMG SAYS MERGER IS WORKING

LogicaCMG has issued a trading update claiming the benefits of merging Logica and CMG are being realised in the shape of increased market share and progress on order intake.

As the company approaches the first anniversary of its merger and the close of its financial year on 31 December, chief executive Martin Read said: "Trading overall during the second half of the year has developed in line with our expectations. The successful integration of the two companies has been an important step in the development of the group. While challenges remain, most notably in Germany, we are confident that the progress made this year will continue in 2004."

LogicaCMG is forecasting that its IT services revenues for the second half will be similar to the $1.3 billion it made in the first half, but expects to improve its first-half margin from 6.5% to over 8% in the second half, largely as a result of merger rationalisation.

The company said the UK market continues to provide opportunities, particularly in the public sector and for its blended outsourcing model using nearshore and offshore facilities. Its French operation has been overhauled and is expected to enter 2004 as a profitable business, but Germany remains difficult, particularly in the banking sector where LogicaCMG has much of its business. Here, the company said it will take longer to restore profitability.

Concluding its IT services review, LogicaCMG said: "Our current expectation for our IT services business is that it will return to growth during 2004 and consequently deliver some improvement in margin over the second half of 2003."

Second-half revenue from LogicaCMG's wireless networks business is expected to match the $234 million of the first half, with the business showing a profit for the full year.

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4. UNILOG BUILDS UK BUSINESS

Paris-based IT services provider Unilog has strengthened its presence in the UK market through the acquisition of Mezenet, a Manchester-based business intelligence consultancy.

Founded in 1997, Mezenet employs 30 consultants specialising in SAP business intelligence solutions. Unilog has been in the UK for two years and will add the business and skills of Mezenet to the SAP practice it set up six months ago.

While the financial details of the transaction were not disclosed, Mezenet said it anticipates turnover of about $5 million in the current fiscal year and names clients including Unilever, Novartis and BBC Worldwide.

Unilog president Gérard Philippot said: "Strengthening our presence in the UK, and more generally in northern Europe, is a strategic priority for Unilog. The choice of Mezenet is a first illustration of our acquisition approach, which is that we aim for selective and controlled growth."

The acquisition of Mezenet adds to Unilog's existing SAP capability of 800 business and IT consultants across the UK, France, Germany and Switzerland.

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5. IBM ROLLS UP $1.2bn CONTRACT

IBM Global Services has secured a $1.2 billion, eight-year partnership agreement with worldwide tyre producer Michelin.

IBM will take over the management and maintenance of Michelin's IT infrastructure in Europe and North America. Around 600 Michelin employees worldwide will transfer to IBM in the first quarter of 2004.

The agreement forms part of Michelin's bid to focus on financial results through the application of IT best practices and access to external IT skills.

Michelin has 80 production sites on five continents, 130,000 employees and sales operations in 170 countries. IBM will support its IT infrastructure, taking responsibility for IT production operations and management, user support, technical support, solution industrialisation and distribution of servers, workstations, PCs, software and production applications.

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