MCN Direct Newswire

Vol. 3 No. 34, 4 October 2004

This issue is sponsored by:

InterSystems, iGrafx and Cognos

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This issue news

1. PA takeover called off
2. Capgemini seeks US partner
3. Capita claims excellent prospects
4. BT takes second penalty in NHS programme
5. Acuera signs up first customers
6. Further information - feedback/pass on to a colleague/remove from mailing list

Sponsor

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1. PA TAKEOVER CALLED OFF

PA Consulting's planned acquisition by US-based science and technology group Science Applications International (SAIC) has failed.

The two companies began talks in June but recently ran into trouble when it came to due diligence and efforts to make detailed arrangements for the takeover (MCN Direct 3-31).

Neither side would disclose the exact reasons for the failure, but PA confirmed: "The two companies were unable to find mutually agreeable terms for the deal, so the discussions have been terminated."

The consultancy went on to claim: "PA continues to be as successful as ever. Our consulting business is growing and profits are substantially up on last year. This provides us with a strong foundation for sustained growth and confidence in the future."

SAIC's failure to acquire PA leaves it looking elsewhere for an open door into the European market - and leaves PA vulnerable to further acquisition approaches.

2. CAPGEMINI SEEKS US PARTNER

Capgemini is seeking a partner for its flagging US business after its first-half revenues from the region fell 22%.

Capgemini said it intends to revitalise its systems integration operations in the US and confirmed that it will stay in the US market, adding: "A partner is one possibility to revive the systems integration business. One of our group senior executives is looking for a partner."

Capgemini's American business has long been a drain on finances and resources, with revenue deteriorating over the past four years and despondent staff being poached by competitors. Chell Smith, the fourth CEO of the region to be appointed in five years, has offered heartening words to the company's 6,000 US staff but has yet to turn around the loss-making business.

The US is a serious concern for Capgemini, but global first-half losses well in excess of analysts' expectations suggest this is just one of a number of problems the company needs to overcome if it is to return to consistent growth.

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3. CAPITA CLAIMS EXCELLENT PROSPECTS

Capita has secured three new contracts worth more than £200 million.

In a trading update, the business process outsourcing and services group said it had won a £13 million, seven-year deal with Canada Life to administer a range of unit trust funds valued at £1.5 billion, and a 10-year savings administration contract with HBOS expected to generate revenues of £46 million.

Separately, Capita detailed a £177.5 million, five-year contract with the Department for Education & Skills to support National Strategies, a programme to raise the quality of teaching and learning of children aged 3-16 years.

About 300 staff from the National Strategies team, including educationalists and experts in operational services, will join Capita Strategic Education Services at the start of the contract on 1 April 2005.

So far this year, Capita has won work totalling £1.19 billion - £1.15 billion in new contracts and £33 million in extensions to existing contracts. Last year, it reported a net profit of £121.2 million on turnover of £1.1 billion.

The company said its £2.6 billion bid 'pipeline' - where it is down to the last four bidders or better - showed particular buoyancy in the private sector insurance and life and pensions businesses.

For the full year, Capita said it is confident that shareholders will be pleased by its performance, adding: "The prospects for future growth remain excellent."

Sponsor

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4. BT TAKES SECOND PENALTY IN NHS PROGRAMME

BT has been punished for a second time for failing to meet targets in contracts supporting the NHS' £6 billion National Programme for IT (NPfIT).

BT's services business, which is the biggest supplier to the programme, admitted the NHS withheld £300,000 in July - around 30% of the monthly payment on the national application service provider contract - because BT failed to meet a target of 99.8% availability for the national data spine.

BT clarified that the missed target related to availability within the testing environment rather than to clinical availability of the data spine, for which targets have been met.

An NPfIT executive explained: "The reduction in payments to BT should be seen in the context of much early success in the national programme, which is highly complex and remains firmly on track to deliver benefits to patients and clinicians alike. The spine issues have not had a fundamental impact on implementation plans."

BT commented: "If you don't meet a service level agreement, the terms of the contracts say you will lose money. But if you later outperform, you can earn the money back - the NPfIT calls this the carrot and stick approach. We are confident that we can outperform and earn the money back."

BT suffered its first penalty in June, when it failed to meet two deadlines in the initial rollout of the £530 million N3 national health service network (MCN Direct 3-22). To date, none of the other suppliers working on NPfIT contracts have been penalised for failure to deliver to targets.

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5. ACUERA SIGNS UP FIRST CUSTOMERS

A Manchester-based IT services consultancy led by former PwC, Andersen Consulting and IBM directors has won its first UK customers. Acuera Consulting has signed UK automotive and retail sector clients after opening its doors for business earlier this year.

The consultancy offers service sourcing and management to help clients reduce IT costs and improve performance. Managing director David Muir - who founded PwC's European applications outsourcing business, later integrated with IBM's European outsourcing operations after PwC Consulting's acquisition - explained: "The Acuera team has personal experience of delivering business-critical IT services and understands the commercial objectives from both the buyer and supplier side."

From a standing start early this year, Acuera has employed three new associates and is expected to continue recruiting as the business grows.

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