MCN Direct Newswire

Vol. 3 No. 42, 29 November 2004

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This issue news

1. EDS fails on another government contract
2. Detica on top form in first half
3. Capgemini strengthens management team
4. IBM builds outsourcing strength
5. BearingPoint loses second top executive
6. Further information - feedback/pass on to a colleague/remove from mailing list

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1. EDS FAILS ON ANOTHER GOVERNMENT CONTRACT

EDS is under the cosh again after its IT systems failed at the Department for Work and Pensions (DWP).

The systems crashed last Monday afternoon, taking out 30,000-35,000 of the department's 100,000 desktops. A team from EDS, Microsoft and the DWP was scrambled from across Europe and managed to restore most of the functionality by Thursday morning.

The problem came just a week after EDS was identified as the culprit behind the Child Support Agency's failure to pay 88% of its claimants. A £456 million system introduced by EDS in March 2003 failed to meet demand and was lambasted by MPs in the House of Commons. The problem was central to the resignation of Doug Smith from the chief executive's role at the agency.

EDS will now start a period of root-cause analysis into the DWP systems crash. Any demands from the DWP for compensation from EDS are expected to flow from the results of that analysis.

However, EDS defended itself, saying that in any large organisation there will always be a time when IT systems are not fully functioning.

The DWP also claimed that "the impact on customers has been minimal" - though it admitted that there were delays dealing with new or amended claims because many staff were not able to access their systems.

The DWP said: "The problem has been blown out of all proportion. We had problems with a routine software upgrade affecting desktop PCs. The business systems themselves were not affected. For regular pensions and benefits payments it is business as usual and customers are continuing to get their money."

2. DETICA ON TOP FORM IN FIRST HALF

Detica has reported a strong first half on the back of growth in both its government and commercial businesses.

The IT consultancy reported pre-tax profit for the six months to 30 September up 21% on last year's comparable period at £3.9 million - after investments in its StreamShield internet content security business (MCN Direct 3-32) and its new US office in Washington DC.

Revenue rose 46% to £32.6 million. The company matched last year's comparable operating margin of 14% and said it expects to see good full-year growth.

Set up as a specialist in national security and customer relationship management, Detica has moved to offer broader propositions. It said government business in the first half rose 43% to £20.8 million, with national security work rising 37% to contribute £17 million. Its commercial business performed better than expected, with revenue rising 52% to £11.8 million.

Detica chief executive Tom Black said: "The outlook for the full year remains encouraging. Our government business, with its enduring client relationships and increasing base of longer-term contracts, is set to see strong growth. Our commercial business is also expected to see good full-year growth."

Black said Detica's investments in StreamShield and the US office are both of a longer-term nature and are not expected to produce benefits this year.

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3. CAPGEMINI STRENGTHENS MANAGEMENT TEAM

Capgemini has lured a top executive from BT to reinforce its management after a poor first half.

Pierre Danon, managing director of BT Retail and a high-profile player in IT and telecoms markets, will leave BT in the new year and take on the role of chief operating officer at Capgemini on 1 March 2005.

Capgemini's current chief operations officer, Alexandre Haeffner, will step aside and take up other responsibilities alongside chief executive Paul Hermelin.

Capgemini commented: "Pierre Danon will bring to the group his substantial international experience and confirmed expertise in the technology and services sector."

Danon began his professional career with Xerox, where he spent 20 years, most recently becoming Xerox' chairman of Europe. He joined BT in October 2000 and is director of the board, a member of the executive committee and managing director of BT Retail.

His appointment follows a promise from Paul Hermelin to strengthen Capgemini's senior management team (MCN Direct 3-31).

BT said Danon's departure was not caused by disagreement with chief executive Ben Verwaayen but by the offer of a more lucrative package from Capgemini. Verwaayen paid tribute to Danon saying: "Pierre Danon has done a superb job at BT Retail and he will make an outstanding contribution as chief operating officer at Capgemini."

4. IBM BUILDS OUTSOURCING STRENGTH

IBM is building up its business process outsourcing (BPO) services for the insurance market through the acquisition of Liberty Insurance Services (LIS), a 700-strong insurance subsidiary of the Royal Bank of Canada's RBC Insurance.

Katherine Hegmann, general manager of global business transformation outsourcing at IBM, commented: "Life insurance processing and managed operations are expected to represent a $2 billion market globally by 2005. This acquisition, combined with IBM's business consulting and technology skills, significantly expands our business transformation capabilities for insurance providers worldwide."

Financial terms have not been disclosed, but the deal is expected to be finalised by the end of the year and includes a long-term contra-deal under which IBM will provide business processes to RBC Insurance's US operations.

IBM plans to include LIS' 700 staff in a new subsidiary that will focus on delivering life insurance and annuity processing and administration services, integrating these with its consulting and technology capabilities to optimise the business of life insurance clients.

When the acquisition is completed, the new subsidiary will be responsible for life and annuity policy processing for more than a dozen life insurance companies worldwide. In the UK, it is likely to compete against insurance BPO market leader Capita.

* Capita has boosted its own insurance services portfolio by paying £5 million for Brownsword, a 100-strong provider of claims investigation services. As part of the deal, Capita gets an exclusive 10-year licence to use Digilog's voice analysis software - which indicates whether information is valid or potentially fraudulent - in outsourced solutions for the insurance and financial services industries.

5. BEARINGPOINT LOSES SECOND TOP EXECUTIVE

BearingPoint chief financial officer Robert Falcone has retired from the firm just weeks after chairman and CEO Rand Blazer quit the company (MCN Direct 3-40).

Falcone, who joined BearingPoint as CFO in April 2003, will leave at the end of this month. The company would give no reason for his departure but said it was not connected to Blazer's resignation.

However, such major fallouts at the top of the company have led to industry speculation about BearingPoint's future, with some analysts suggesting it is an acquisition target.

Rod McGeary, who took over as interim chairman and CEO after Blazer's departure, is reported as saying that while changes must be made, he is under no pressure from shareholders to sell the company.

Commenting on Falcone's retirement, McGeary said: "We appreciate Bob Falcone's services as CFO during an important transitional time for the company."

While the search for a replacement continues, BearingPoint has bolstered its finance team by moving Jeffrey Anderson from head of the global financial services practice to lead finance and administration, with Thomas Wilde moving from leadership of the company's managed services solutions business to head finance operations.

Tagging a financial note onto Falcone's departure, BearingPoint once again confirmed fourth-quarter guidance of expected revenue of $850-870 million.

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