MCN Direct Newswire

Vol. 3 No. 11, 15 March 2004

This issue is sponsored by:

SPSS and Annual Consultants' Forum - 27 April 2004

This issue news

1. NHS chastises EDS over £11m lawsuit
2. LogicaCMG outsourcing chief leaves
3. CGI pays C$1.1bn for AMS
4. CSC doubles business wins
5. Xansa finds strategy leader
6. Further information - feedback/pass on to a colleague/remove from mailing list

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1. NHS CHASTISES EDS OVER £11m LAWSUIT

The National Health Service has lashed out at EDS for going public on its £11 million compensation lawsuit, after NHS IT director Richard Granger cancelled an email contract with the IT services supplier (MDN Direct 3.10).

An official at the NHS' National Programme for IT (NPfIT) said: "The parties are moving to mediation, as prescribed in the contract, and it is therefore regrettable that EDS has chosen to discuss these issues publicly and potentially undermine the confidentiality of the contract and the effectiveness of the mediation process itself."

In a written statement, the NPfIT confirmed that the NHS Information Authority's email and directory services contract with EDS had been terminated, adding: "EDS' delivery of the contract has been the subject of ongoing concerns including unacceptable delivery delays, issues in the functionality of the services and service capacity. There has been a low take-up of the services and therefore the contract is not delivering the value previously hoped for."

The NPfIT and NHS Information Authority added that, on the advice of lawyers, they would make no further comment except to deny press coverage that suggested the NHS unfairly portrayed the service as failing and failed to promote the service without good cause.

The NPfIT official said: "The NHS is committed to providing a cost-effective and high-quality email and directory service to its users. The NHS came to the view after due and proper consideration that EDS has failed in its delivery of such a service and it was for this reason that the NHS took the decision to terminate EDS' contract in accordance with its contractual provisions."

2. LOGICACMG OUTSOURCING CHIEF LEAVES

LogicaCMG has lost its international outsourcing practice leader Bob Fawthrop to Morgan Chambers, an independent advisor on sourcing IT and business process services.

A veteran of the IT services market, Fawthrop joined Logica in 1997 after working for Unisys, EDS and Perot Systems. He made a pivotal contribution to developing LogicaCMG's blended outsourcing model, building its offshore presence and pushing the company's outsourcing business from almost nothing to 20% of global revenues - with a target to increase this to 30% by 2005.

Fawthrop has been replaced at LogicaCMG by Oscar Boesenach, another IT services veteran with over 20 years' experience in the market. He joined from Accenture, where he was responsible for outsourcing in the Netherlands, after a long career with IBM.

Fawthrop said he left LogicaCMG to spend more time with his family, rather than whizzing around the world building the company's international outsourcing presence. At Morgan Chambers he has become CEO, taking over from founder Robert Morgan who remains on the board and takes responsibility for new business and brand development.

Commenting on his appointment, Fawthrop said: "After 15 years in the outsourcing market I believe I have a sound understanding of the drivers, customer needs and, after experience with a number of suppliers, knowledge of what the outsourcing services market can and should offer."

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3. CGI PAYS C$1.1bn FOR AMS

Montreal-based IT services firm CGI has reached agreement to acquire American Management Systems (AMS) - fortifying forecasts of increasing consolidation in the global IT services market.

CGI will pay an initial C$1.1 billion (£460 million) for AMS, but this will be reduced to approximately C$586 million when a second sale of AMS' US defence and intelligence group is made for C$549 million to CACI International.

CGI claims the acquisition will add critical mass to its US and European operations - where it has bases in the UK and France serving the financial services and insurance sectors - as well as add vertical expertise in defence to its Canadian operation.

In the US, CGI hopes that by adding an established brand and market presence it will qualify for more large systems integration, consulting and outsourcing contracts.

The business CGI is acquiring from AMS had revenues of C$927 million in 2003, leading the company to forecast 2004 revenues for the merged CGI-AMS of C$3.3-3.6 billion and net profits of C$210-233 million.

CGI chairman and CEO Serge Godin said: "This acquisition completely supports our growth strategy and it meets all of our disciplined criteria for creating shareholder value. By joining forces with AMS, we will become a billion-dollar player in the US. We have a very solid history of successful acquisitions."

AMS will add about 6,500 employees to CGI's global total of 20,000 before the sale of the defence and business intelligence group to CACI.

4. CSC DOUBLES BUSINESS WINS

CSC is on course for record business wins in fiscal 2004, a further sign that the international outsourcing and systems integration markets are easing.

CSC said business awards so far for the fiscal year to 2 April total $16.8 billion, more than double last year's total of $7.7 billion and beating the company's previous record of $11.4 billion set in fiscal 2002.

Some 57% of the new business is from the commercial sector - also a record - with 43% emanating from the US federal government and supported by CSC's March 2003 acquisition of Dyncorp.

CSC chairman and CEO Van Honeycutt said: "We are very pleased with our fiscal year-to-date business awards. As these demonstrate, our well-balanced portfolio of services, coupled with our experience and record of delivering results, positions us well to compete in the IT services market."

The company's recent wins in Europe include a $147 million extension to a contract with retailer Bhs (MDN Direct 3-7) and a $205 million contract won in conjunction with Warsaw-based Prokom Software for business transformation services at Poland's largest insurance company, PZU.

5. XANSA FINDS STRATEGY LEADER

David Leigh has been appointed to the newly-created post of strategy director at IT services firm Xansa.

He joins from ipValue Management, a business process outsourcing (BPO) firm backed by Goldman Sachs, Boston Consulting Group and General Atlantic Partners. He was previously with McKinsey & Co, having begun his career as a corporate lawyer at Herbert Smith.

Xansa decided to create the strategy leadership role following the integration of its BPO and IT services businesses, which made client directors responsible for both BPO and IT elements of customer relationships (MDN Direct 3-5).

In an effort to stay ahead of the market, Leigh will lead a team working both internally with client directors and externally with customers to accelerate and support the convergence of BPO and IT services. He reports to Xansa chief executive Alistair Cox.

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