MCN Direct Newswire

Vol. 4 No. 27, 5 December 2005

This issue is sponsored by:

Geac and The Evaluation Centre

This issue news

1. Capita beats IBM to £424m council deal
2. Detica buys Evolution Consulting for £8.5m
3. Xansa forecasts turnover turnaround
4. Charteris maintains pace
5. Wipro and Tata extend global reach
6. Further information - feedback/pass on to a colleague/remove from mailing list

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Geac

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1. CAPITA BEATS IBM TO £424m COUNCIL DEAL

Capita has been chosen over IBM as Birmingham City Council's preferred strategic partner for a 10-year IT services contract expected to be worth over £424 million.

Capita bid for the contract with the support of SAP business transformation consultancy Axon, which will benefit from business transformation projects outside the scope of the IT services contract.

Under the terms of the deal, Capita and Birmingham City Council will set up a joint venture company called Service Birmingham Partnership. This will be majority owned by Capita and include up to 450 IT staff seconded from the council, leaving about 25 within the council to act as an 'intelligent client'.

Commenting on the arrangement, Birmingham deputy council leader Paul Tilsley said: "The council will benefit from the expertise that Capita can bring in contributing to major changes at complex public organisations. We have estimated that the partnership can potentially help us to achieve savings of £1 billion over the 10-year term. Capita will create a new business centre in Birmingham and has guaranteed to bring hundreds of new jobs into the city during the deal."

Birmingham is the largest local authority in Europe and is intent on taking a lead in the Government's national strategy to transform and e-enable services to citizens.

The recommendation to work with Capita awaits ratification from the council's cabinet next week and, if approved, will see the strategic partnership begin operations in April next year.

2. DETICA BUYS EVOLUTION CONSULTING FOR £8.5m

Detica Group has agreed to acquire Evolution Consulting, a provider of IT consulting and systems integration to companies in the capital markets sector.

Detica will pay £8.5 million for the consultancy, which has 105 employees and last year turned in pre-tax profits of £600,000 on revenues of £8.8 million. Evolution will be integrated with Detica's financial services business, which will be managed by former Evolution chief executive Steve Mitchell.

Commenting on the deal, Detica chief executive Tom Black said: "This is an important step for Detica and is consistent with our strategy of building our commercial business through a focus on the financial services and telecoms, media and technology sectors."

The acquisition was announced as Detica reported stellar first-half financial results showing group pre-tax profit up 18% on last year's comparable period at £4.6 million, on revenues rising 35% to £43.5 million. Revenue from the company's government business rose 44% to £30 million, with the commercial sector up 17% to contribute £13.5 million.

Detica's nascent US operation made headway in the six months to 30 September, starting its first direct contract with a US national security client and negotiating additional deals. StreamShield Networks, Detica's internet content security business, also showed a return on investment, winning customers and development partners.

The consultancy completed the integration of customer relationship management consultancy Extraprise UK in the first half and grew headcount to 694, up from 529 a year ago.

Looking forward, Tom Black said: "The group is trading well and our investments continue to show significant promise. The board remains confident of another good year."

Sponsor

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3. XANSA FORECASTS TURNOVER TURNAROUND

Xansa is predicting a return to revenue growth in the second half of fiscal 2006 after year-on-year declines since the second half of 2002.

The company's prediction is based on first-half results showing a 16% gain in pre-tax profits to £7.8 million, on revenues down 7% at £175.9 million. The revenue decline is attributed to an increasing amount of work being moved to Xansa's operations in India - which are expected to reach the point of employing more staff than its UK operations in the second half of the year.

The decline masks an increase in the operating margin, from 5.6% in last year's comparable period to 7.2% in the six months to 31 October. Contract wins in the public sector include Ofcom, The Metropolitan Police, Jobcentre, the Foreign Office, Peterborough City Council and Cornwall County Council.

Xansa said its joint venture with the Department of Health to provide shared IT services to health authorities is progressing ahead of expectations, contributing to total public sector revenue rising 31% and accounting for 18% of group revenue.

In the private sector, Xansa signed contracts with the National Grid, Lloyds TSB, Boots, British Gas and Renault Formula 1 in the first half, but saw turnover fall 13% year-on-year as it moved work offshore to India.

Xansa chief executive Alistair Cox commented: "We are part way through the shift in our business model. Progress is very encouraging and margins have continued to improve. Additionally, our earlier investments are beginning to yield benefits and we expect to see revenue growth in the second half. Our objective of creating a high-margin and growing business is on track."

4. CHARTERIS MAINTAINS PACE

Charteris has secured two new clients and extended a contract with an existing customer in the first quarter of fiscal 2006, building on strong progress in the previous year.

The new clients are Boots and Croydon Borough Council. Charteris will help Boots deliver strategic IT projects, while it will support improvements in Croydon's performance information systems and assist in the long-term development of its management information systems.

Among existing clients, Macquarie Bank has appointed Charteris to set up IT operations for a recent acquisition, Red Bee Media, formerly BBC Broadcast.

Charteris has also strengthened its management team with the appointment of Derek Kemp to lead its financial services and media practices. Its positive start to fiscal 2006 builds on a year of growth in which it pushed pre-tax profit up 65% to £891,000, on revenue rising 40% to £19.3 million.

Speaking at the company's annual general meeting, Charteris chairman David Mann said: "Trading in the first quarter of the current financial year has been in line with our expectations. Market conditions have generally remained challenging, but we have continued to develop new client relationships and win important assignments in both the public and private sectors."

5. WIPRO AND TATA EXTEND GLOBAL REACH

Indian IT services firms Wipro and Tata Consultancy Services are setting up new bases in Europe to get closer to their markets as offshore competition from alternative low-cost countries begins to build.

Wipro, India's third largest software and services firm, plans to open a software development and outsourcing centre in Bucharest, Romania to service clients in France and Germany. It also plans a similar centre in the Far East to deliver services to regional clients. These centres add to its existing 13 operations in low-cost countries.

Tata, parent of IT services firm Tata Consultancy Services (TCS), is extending its reach to capitalise on new ideas in technology and automotive engineering in the UK and Europe. The company is planning a development centre in the Midlands that will allow it "to plug into technology at a higher level than is possible in India". While the centre's focus will be on the automotive sector, it will also be a knowledge base for TCS, India's largest IT services provider and a keen competitor for the UK's IT and business process outsourcing market.

In describing Wipro's extended global reach, its chairman Azim Premji also underlined the continuing cost benefits offered by India: "It costs $7,500 to hire an engineer in India, while the same costs $55,000 in the US. India churns out 350,000 engineers a year, while the US turns out 70,000. India will continue to reign in terms of competitiveness."

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