MCN Direct Newswire

Vol. 4 No. 18, 28 June 2005

This issue is sponsored by:

TeleWare, Trinity and The UK Consulting Industry 2004/5

This issue news

1. EDS plans sale of AT Kearney
2. LogicaCMG scoops £40m in orders
3. Northgate triples annual profit
4. Accenture makes ground in Japan
5. Atos Origin warms up for winter Olympics
6. Further information - feedback/pass on to a colleague/remove from mailing list

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1. EDS PLANS SALE OF AT KEARNEY

EDS has made another U-turn on the future of its consulting subsidiary AT Kearney after failing to conclude talks with partners in the firm on a management buyout.

EDS chairman and CEO Mike Jordan recently said he hoped to spin off the business to its partners before the end of this year (MCN Direct 4,15) - but the failure of this approach has led EDS to put the business up for sale. And while EDS has yet confirm talks, it is widely believed to be negotiating with consulting and investment firm The Monitor Group about the purchase of ATK.

Jordan identified ATK as a non-core business after joining EDS in 2003, but it has taken this long to dispose of the business because ATK has continued to lose talent - the main attraction for a potential purchaser - and money. In its recently reported first quarter, ATK showed a loss of $11 million (£6 million) on revenue down 12% at $204 million.

EDS has declined to put a value on ATK, but the consultancy is thought to be worth less than $500 million. When Jordan discussed a management buyout of the business last month, he suggested the price would not exceed $700 million.

• EDS faces court action in the UK if it fails to settle a financial dispute with HM Revenue & Customs - the result of merging HM Customs & Excise with the Inland Revenue - over last year's tax credits disaster in which EDS' IT systems played a part. The HMRC is trying to recover £600 million of over-payments it claims were lost through IT systems failures, and has said court action will begin "if and when discussions do not satisfactorily resolve the dispute".

2. LOGICACMG SCOOPS £40m IN ORDERS

LogicaCMG has won contracts with Thames Water and Metronet Rail worth a total of £40 million.

The Thames Water deal is valued at £22 million over seven years and requires LogicaCMG to deliver outsourced IT services to the water company to support its billing and income services arrangement with Welsh Water. Included in the contract are applications management, development and support, mainframe and server hosting, and data and voice network management services. These will be delivered from LogicaCMG's outsourcing centre in Waterton, Wales.

LogicaCMG will also implement cost reduction strategies across the business. Its initial aim is to consolidate servers and carry out a renewal programme throughout the remainder of the year.

The company's £18 million win at Metronet Rail, which is contracted to maintain and upgrade two-thirds of the London Underground network, covers a six-year period. LogicaCMG will act as a strategic IT partner to Metronet, providing round-the-clock IT support and increased user productivity through improved service levels, including high system availability and first-time resolution targets. LogicaCMG has taken over the support and management of Metronet's data centre and will provide services from remote and local offices.

Metronet said LogicaCMG was selected for its understanding of the transport industry, particularly in London, and its proven ability to deliver quality of service to industry best-practice standards. IT director Charles Marks said: "Metronet's main aims of taking on a new outsourcing provider are to reduce operation costs while increasing quality of service."

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Trinity

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3. NORTHGATE TRIPLES ANNUAL PROFIT

IT services and software company Northgate Information Solutions has reported full-year financials at the top end of market expectations and is forecasting "another satisfactory outcome in the current year".

Pre-tax profit in the year to 30 April more than tripled to £12.4 million, on turnover rising 51% to £205.7 million. Northgate also said revenue from continuing activities excluding acquisitions grew by 46% to £198.5 million, but it expects to drive value out of acquisitions and deliver organic growth in the current year.

Having acquired RebusHR in January 2004, Northgate has this year focused its acquisitive nature on the public services sector, completing three takeovers: Sx3, a player in local authority housing and revenues & benefits applications; MVM Holdings, a developer of software for local government and utility customers; and CIM Systems, a supplier of integrated communications systems to public safety organisations.

In fiscal 2005, Northgate's HR division signed more than 70 new clients, public services signed 25 and managed services added 21. The company's order book showed £370.3 million worth of outstanding work at the close of the year, up from £185.5 million a year ago and with £157.4 million falling in the year to April 2006.

Company chairman Nick Irens said: "Northgate is well positioned to meet the changing needs of our clients and thereby deliver value for shareholders. Each division is profitable, cash generative and is benefiting from increasing customer demand. Management's priorities are clear: extracting value from our acquisitions, delivering organic growth and exploiting cross-selling opportunities. The current year has started well and we anticipate another satisfactory outcome."

Sponsor

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4. ACCENTURE MAKES GROUND IN JAPAN

Accenture has made inroads into Japan's emerging outsourcing market, signing a seven-year contract with Tokyo-based chip maker Elpida Memory. Financial details of the deal were not disclosed.

Accenture will develop a global supply chain system and provide enterprise-wide IT management for the dynamic random access memory supplier. It will also run systems to support finance, procurement, customer relations and knowledge management, and help Elpida develop IT skills through training and access to Accenture's global capabilities.

Tohru Murayama, Accenture country managing director for Japan, explained: "A growing number of Japanese companies are recognising the benefits of outsourcing IT to specialists in order to reduce costs, improve efficiency and focus on core competencies. The impact on the bottom line can be dramatic, particularly for companies operating in a fiercely cost-competitive industry and distributing products via a highly integrated supply chain."

5. ATOS ORIGIN WARMS UP FOR WINTER OLYMPICS

Atos Origin is in the throes of a major testing programme that will prove whether its IT systems are as fit as the athletes who will compete in next year's winter Olympics in Torino.

The company's contract with the International Olympic Committee is the largest sports-related deal in the world. It stretches back to an original deal between SchlumbergerSema and the IOC to provide IT for the games in Salt Lake City in 2002, and forward to Torino in 2006, Beijing in 2008, Vancouver in 2010 and the summer games - potentially in London - in 2012.

As the worldwide IT partner for the Olympic Games, Atos Origin is carrying out lengthy testing in preparation for Torino, including user acceptance tests of its commentator information systems, resilience tests of the games management and information diffusion systems, a multi-sport test that simulates the games to discover the overall performance of the systems, and ongoing 'homologation' tests designed to ensure that systems and interfaces meet user requirements.

Such a high-profile contract is clearly not to be fumbled, as Claude Philipps, Atos Origin programme director for the Torino games, acknowledged: "As we have only one chance to get it right, we test, test and test again our systems and applications under intense conditions. After these tests are complete, the next step is the technical rehearsals which will take place in October and are designed to assess whether the technology, people and processes are all ready."

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Written by Sarah Underwood. Copyright 2012 PMP (UK) Ltd.