MCN Direct Newswire

Vol. 3 No. 8, 23 February 2004

This issue is sponsored by:

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This issue news

1. BT takes last slice of NHS pie
2. MCA forecasts improving fortunes
3. ITNET promises step change in growth
4. Atos Origin banks $200m from Standard Chartered
5. Capita builds property business
6. Further information - feedback/pass on to a colleague/remove from mailing list

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1. BT TAKES LAST SLICE OF NHS PIE

BT has beaten Cable & Wireless to a £530 million National Health Service contract to provide a broadband network linking every NHS site in the UK.

The seven-year deal was initially contested by a 'long-list' of eight consortia or single companies, before a shortlist of BT, Cable & Wireless and EDS was drawn up last September. EDS subsequently withdrew from the bidding when the NHS added voice traffic to the initial specification for data transmission (MDN Direct 3-6).

The win adds to the £620 million NHS national application service provider contract BT clinched late last year and its £996 million London local service provider contract (MDN Direct 2-47). With total contracts valued at £2.1 billion, BT has taken the most out of the National Programme for IT (NPfIT) - ahead of Accenture with two local service provider contracts worth just over £2 billion.

The NHS' New National Network - or N3 as it is known - will provide a network that will run the IT systems being delivered by the NPfIT and increase the number of sites covered from 10,000 to 18,000.

BT will act as an integrator, rather than providing the broadband service itself, buying connectivity from the regional aggregation bodies set up by the Department of Trade and Industry to co-ordinate demand for broadband from public sector organisations as the government pushes towards extensive coverage in 2005.

Richard Granger, director general of NHS IT, explained: "Our innovative contract is radically different to previous deals for broadband services. It will require BT to act as an integrator, purchasing connections from a constantly updated set of national and local telecoms companies that have competed to provide the service at best value."

Granger claims the new contract will generate savings of up to £900 million over seven years for the NHS, compared to the cost of procuring the same capacity through existing NHSnet contracts.

2. MCA FORECASTS IMPROVING FORTUNES

The UK's Management Consultancies Association (MCA) has reported a 9.4% gain in 2003 revenues to £5.1 billion and expects the industry's fortunes to improve throughout 2004 as orders, fee rates and employee numbers increase.

Outsourcing was the main driver in fourth-quarter 2003 revenue growth of 1.5% to a total of £1.3 billion.

Outsourcing revenues climbed 4.8% quarter-on-quarter to reach £412 million. Management consulting revenue quarter-on-quarter was flat at £631 million, while IT consultancy and systems development edged up 0.3% to £293 million.

On the basis of this data from its members, the MCA reckons that the total UK consultancy market broke the £10 billion barrier for the first time in 2003.

MCA executive director Bruce Petter commented: "While we did not expect a return to double-digit growth in 2003, the increase in IT and outsourcing consultancy over the past 12 months has supported a return to significant growth after a tough year in 2002. MCA members are expecting the sales cycle for IT work to shorten in the next quarter, which suggests the growth trend will continue through 2004."

The MCA's optimism is reflected in a wider report by the European Information Technology Observatory (EITO). After 0.8% growth in the Western European IT and telecoms (ICT) market in 2003, EITO expects growth of 3.1% in 2004.

EITO noted an ongoing squeeze on budgets for IT services, but forecast 2004 services revenue growth of 3%, in line with software growth, and ahead of an expected 1.1% gain in hardware revenue.

* PA Consulting led the winners' parade at this year's MCA Best Management Practice Awards. PA won the prime platinum award for its work with Westminster City Council and also carried off gold trophies for its work in outsourcing consultancy and technology exploitation. Other winners included Edengene as best small firm and winner of the operational performance category, RightCoutts for business strategy, Trilogy for change management, Unisys for electronic trading and Mercer HR Consulting for human resources.

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www.consultants-advisory.com/2004/january

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3. ITNET PROMISES STEP CHANGE IN GROWTH

ITNET is forecasting "a step change in revenue growth" following a year of improvement and investment in its selected sectors of local and central government, services and transport.

ITNET reported a 145% gain in 2003 pre-tax profit to £17.9 million - much of the increase is attributed to significant goodwill impairment in 2002 - on turnover up 5% at £188.5 million.

Its local government turnover rose 8% to £91.7 million, with commercial revenues up 3% at £81.2 million, supported by a gain of 22% in transport turnover to £29 million and services turnover up 14% at £12.2 million.

ITNET did not break out results for its central government business, saying it was too early to do so but noting that it won its largest single contract to date in the sector - an £83 million, five-year contract from the Cabinet Office. Neither did it detail the finances of its change and programme management consultancy French Thornton, saying only that the business continued to provide services to The Royal Mail and added new clients including HBOS, the Department of Trade and Industry and NHS IT Procurement through the year.

ITNET's order book stands at £357 million, with recent wins including a new £8.1 million contract with the National Air Traffic Service and a £1 million deal to provide server hosting and network management services to supply chain specialist TDG.

Looking forward, the ITNET board said: "We are confident that we can achieve a step change in revenue growth above the growth of the past three years as we realise the opportunities in our chosen sectors and as market conditions improve. New orders and the sales pipeline support the board's view that we will show good growth in 2004."

4. ATOS ORIGIN BANKS $200M FROM STANDARD CHARTERED

Atos Origin has made an early gain from its merger with SchlumbergerSema through a $200 million, seven-year outsourcing contract at Standard Chartered Bank.

SchlumbergerSema was bidding for the contract before the announcement of its acquisition by Atos Origin, but did not make the bank's shortlist. After the merger agreement, it was reinstated - and went on to win a contract that will be staffed by a mixed team of Atos Origin and erstwhile SchlumbergerSema employees.

Under the terms of the agreement, Atos Origin will revamp the bank's services in the Asia-Pacific region in a bid to improve performance and cost of operation through the deployment of new technology, standardisation of processes and consolidation.

Standard Chartered described the contract as a "long-term partnership", while Atos Origin chairman Bernard Bourigeaud said: "This deal underlines the combined strength and the complementary operations of the new Atos Origin organisation."

5. CAPITA BUILDS PROPERTY BUSINESS

Outsourcing and consultancy firm Capita has extended its reach in the property market through the acquisition of Symonds Group for an initial cash sum of £29.9 million and £1 million in deferred target-related payments.

Capita has also grown its insurance services business through a two-year contract with the Department of Trade and Industry (DTI) to administer miners' personal injury liability claims.

Symonds, a provider of consultancy, project management and design services for the property and infrastructure markets, will be merged with Capita's existing property consultancy to create Capita Symonds, a company with 2,700 employees - 700 from Symonds - and revenues of £160 million a year.

Symonds reported an operating profit of £4 million on turnover of £51 million in 2003 and is involved in contracts including the refurbishment of Wimbledon All England Tennis Club and the development of the Bristol Broadmead centre and Dibden Container Terminal. The company was also involved in the technology design used in the London congestion charging scheme that is administered by Capita.

Commenting on the acquisition, Capita executive chairman Rod Aldridge said: "This continues our strategy of acquiring small to medium-sized companies where they complement or extend our existing core services. Increasingly in our major sales opportunities, property is playing a wider role in our propositions."

Capita's contract with the DTI was won after a competitive process and due diligence. Previous incumbent Aon will transfer 1,250 employees to Capita, and Capita will pay £8 million cash to Aon for the underlying contract infrastructure and assets.

Capita estimates revenues of £125 million will be generated over the term of the contract. Aldridge claimed the contract makes Capita Insurance Services the largest employer of claims handlers in the UK.

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