MCN Direct Newswire

Vol. 3 No. 10, 8 March 2004

This issue is sponsored by:

Sage and InterSystems

This issue news

1. EDS sues NHS over broken contract
2. LogicaCMG ready for more acquisitions
3. Axon has happy 10th birthday
4. Xansa and Barclaycard extend partnership
5. DiData shuffles top team
6. Further information - feedback/pass on to a colleague/remove from mailing list

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1. EDS SUES NHS OVER BROKEN CONTRACT

EDS is suing the National Health Service for £11 million after NHS IT director general Richard Granger pulled the plug on a £90 million email contract last week.

Granger decided to stop the project after complaints about the EDS system - side-stepping the usual arbitration process and not invoking a standard clause that would allow the contract to be terminated at the NHS's convenience if its needs had moved on.

The £11 million compensation EDS is claiming is reportedly the sum that will cover its costs rather than future profits on the 10-year contract.

The cancellation is a significant blow to EDS in the public sector. The company failed to secure any of the orders awarded under the £6 billion NHS National Programme for IT and recently lost its hold on the Inland Revenue when the £3 billion Aspire contract went to Cap Gemini Ernst & Young.

Granger's move is also a shot across the bows of winning suppliers in the NHS's IT programme, suggesting he will if necessary invoke contractural 'step-in' rights that allow another supplier to be brought in if the incumbent is failing to deliver on target.

The cancelled EDS contract was set up in September 2002 to deliver a directory and email service for the NHS's 1.2 million staff (MDN Direct 50), but it has only been taken up by 65,000 employees.

Its end looks like being as controversial as its start. When the deal was signed, competitors cried foul because EDS started working with the NHS towards the contract after being chosen as the preferred bidder in May 2002 - undermining any hopes competitors still harboured before the contract was finalised.

2. LOGICACMG READY FOR MORE ACQUISITIONS

LogicaCMG closed its first year as a merged company at the top end of its financial expectations, leading group chief executive Martin Read to suggest the company is ready for further acquisitions.

The result of a December 2002 merger, LogicaCMG remained in the red for a second year running in 2003, but says it is set to return to growth this year.

The company's pre-tax loss for 2003 was £33 million, reducing a loss of £734 million in the prior year. Revenue was £1.6 billion, down 6.4% from £1.8 billion in 2002.

Commenting on the results, Read said: "Our first year as a merged company exceeded our original expectations. We saw signs of improvement in all our major IT services markets except Germany, where revenues continued to decline. The wireless networks business returned to revenue growth and profitability in the second half of 2003."

In line with its aim to push outsourcing revenue to 30% of total, LogicaCMG said outsourcing represented 20% of group revenues in 2003, up from 16% in 2002. As a whole, its IT services revenue stabilised in the second half, particularly on the basis of a strong UK performance in the public sector and outsourcing.

"Overall, the IT services market environment is gradually improving, tempered by continuing constraints on capital expenditure and with outsourcing offering the best growth opportunity. We enter 2004 confident that we are strongly positioned to further leverage the benefits of the merger and take market share in both IT services and wireless telecoms, while improving our financial performance," Read said.

Separately, LogicaCMG said it had secured a three-year, £30 million extension to a contract with Elexon to provide core services to support the wholesale electricity trading arrangements in England and Wales.

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3. AXON HAS HAPPY 10TH BIRTHDAY

Business transformation consultancy Axon has celebrated its 10th birthday with a return to financial growth and an acquisition that will strengthen its offshore capabilities.

The company has changed itself from a simple SAP consultancy to a business transformation specialist working with $1 billion-plus corporations using SAP as their strategic platform. Axon said this process is now complete and reorganisation costs that stifled financial growth through 2001 and 2002 have tailed off.

All Axon's activities - business consulting, solutions implementation and applications management - grew revenues in 2003, with the business mix for 2004 expected to show implementation contributing 50% of group turnover, business consulting contributing 20% and application management 30%.

With customers across the UK, Europe, the US and Asia-Pacific, Axon set up an offshore support and development centre at its Middle East headquarters in Dubai Internet City last year. Building on this offshore strategy, the company has signed heads of agreement to buy 51% of an Asian offshore services provider for an initial £500,000. The deal is expected to close next month, with the remaining 49% of the business being purchased by Axon for a similar sum in two tranches in 2006 and 2007.

Axon closed 2003 with pre-tax profit up 62% to £4 million, on turnover up 17% to £50 million. It entered 2004 with both the largest order book and sales pipeline in its history.

Commenting on the financial results, Axon chairman and chief executive Mark Hunter said: "We have delivered growth in what is an otherwise flat market. We are confident that we can consolidate the progress made in 2003 and deliver a good performance in 2004."

4. XANSA AND BARCLAYCARD EXTEND PARTNERSHIP

Xansa has won a £10 million, three-year extension to its work with Barclaycard, under which it will provide integrated business process and IT services.

The business process contract follows up a fraud chargeback programme that Xansa has been delivering to Barclaycard for over two years. The IT services provided will be an extension of the Xansa Barclaycard Partnership set up in 2002. This joint venture, which transferred 450 Barclays staff to Xansa, is a five-year contract aimed at saving £58 million - or 26% - of Barclaycard's total costs through productivity gains and the integrated delivery of IT services from the UK and India.

Additional IT services offered under the extended contract include programme and project development, applications support and maintenance, and consultancy services for key business platforms.

David Curd, Barclaycard IT and operations director, said: "We chose Xansa because of its flexible approach, coupled with its track record of providing complex back-office processes that deliver real value to the bottom line beyond simple cost reduction."

5. DIDATA SHUFFLES TOP TEAM

Dimension Data has split the role of chairman and CEO, elevating chief operating officer Brett Dawson to CEO while former chairman and CEO Jeremy Ord becomes group chairman.

The IT infrastructure solutions and services company said it decided to make the change to align the group with global regulatory and corporate governance best practice, adding: "The appointment of a CEO coincides with the group's increased focus on growth strategies during a time of growing market opportunity."

Dawson joined Dimension Data in 1997 and held a number of financial positions before becoming chief operating officer in 2002.

The reshuffle also affects chief financial officer Malcolm Rutherford who joined Dimension Data in 1991. He has decided to relinquish his CFO role, but will remain as a non-executive board member. Rutherford is replaced by David Sherriffs, who has been with the group since 1997.

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