MCN Direct Newswire

Vol. 8 No. 4, 16 March 2009

This issue is sponsored by:

Symantec and NCC

This issue news

1. EDS offender project slammed by audit office
2. Atos Origin slips behind competitors
3. Satyam up for auction
4. Logica defies recession
5. EDS wins $1 billion mega deal
6. Further information - feedback/pass on to a colleague/remove from mailing list

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1. EDS OFFENDER PROJECT SLAMMED BY AUDIT OFFICE

A government project designed to build a single offender IT management system for the prison and probation services has been slated by the National Audit Office (NAO) and the House of Commons public accounts committee for failing to deliver value for money or the planned end result.

Suppliers EDS and Canadian application developer Syscom Justice Systems were not blamed directly for the failure of C-Nomis but, according to the NAO, "main supplier contracts were designed in such a way that sufficient pressure could not be brought to bear on suppliers to deliver to time and cost".

The suppliers were brought onto the prisons and probation contract from an initial contract covering only a prison inmate information system.

C-Nomis, the National Offender Management Information System, began development in 2004 and was due to be introduced in 2008. It had an approved lifetime cost of £234 million to 2020. But by July 2007, £155 million had been spent on the project, it was two years behind schedule, and estimated lifetime project costs had risen to £690 million.

The Government called a halt and in January 2008 the National Offender Management Service began work on a re-scoped programme with an estimated lifetime cost of £513 million and a delivery date of March 2001.

But according to the NAO, the financial impact of delays in delivering even a cut-down solution will be at least £41 million.

Tim Burr, head of the NAO, said: "The initiative to introduce a single offender management database has been expensive and ultimately unsuccessful. These problems could have been avoided if the National Offender Management Service had established realistic budgets, timescales and governance for the project."

Edward Leigh, chairman of the public accounts committee, was more scathing, describing the project as a "master-class in sloppy project management" and saying: "The litany of failings in this case are in a class of their own. All of this mess could have been avoided."

2. ATOS ORIGIN SLIPS BEHIND COMPETITORS

Atos Origin has reported a 52% drop in net profit for 2008, down to €23 million (£21 million), on revenue rising 6% to €5.5 billion. Poor operational performance left the IT services firm with a 4.8% operating margin, adrift of competitors who have achieved margins nearer 7%.

To increase its margin in 2009, Atos Origin has set up a new organisation within its senior management to turn the company into a global and integrated group. It has also initiated a Total Operational Performance (Top) programme with more ambitious savings plans scheduled to be achieved faster than those targeted by previous cost reduction schemes.

Commenting on the results, Atos Origin chairman and CEO Thierry Breton said: "Despite solid growth, especially of our recurring activities, Atos Origin's operational performance remained at 4.8%, below the benchmark of our competitors. With a new organisation and the immediate implementation of the Top programme, Atos Origin has taken the decisions and the actions to face the strong economic slowdown, but also to increase significantly its operating margin in 2009."

Atos Origin said all service lines contributed to its 2008 revenue growth with consulting growing by 1% to €349 million, systems integration up 5% to €2.2 billion and managed operations up 6% to €2.9 billion. All the company's geographies, with the exception of the Netherlands, also achieved growth, with UK revenue rising 10% to a total of €950 million.

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3. SATYAM UP FOR AUCTION

Satyam Computer Services, the Indian offshoring firm hit by a scandal caused by former chairman Ramalinga Raju creating fraudulent financial returns, has put 51% of the company up for auction.

Bidders had to register their interest late last week and those intending to pursue the auction will have to prove they have access to a minimum of $290 million (£207 million) to support their bids.

The new Satyam board, which was appointed by the Indian Government after the fraud was discovered, has previously valued India's fourth-largest IT services firm at $1 billion. But its exact value has yet to be determined as new auditors KPMG and Deloitte have replaced incumbent PricewaterhouseCoopers and are working on a re-statement of the accounts.

Satyam has not disclosed which companies are bidding for the 51% stake but analysts suggest a number of large Indian firms, and perhaps software and outsourcing company HCL Technologies, may be interested.

US and European IT services firms and consultancies that have yet to reach critical mass in India are also expected to be involved. Among analysts' tips for bidders are IBM, CSC and Fujitsu.

The deal will be arranged by issuing 31% in new equity in Satyam to the selected bidder, with the winner then making an open offer to the public for a further 20% of the enlarged company.

4. LOGICA DEFIES RECESSION

Logica has achieved the financial targets it set for 2008 under the leadership of CEO Andy Green, who joined the company early last year.

Logica's revenue growth for the year was ahead of guidance at 5%, reaching a total of £3.6 billion. Its operating profit rose 14% to £267 million, with operating margin up from 6.9% in 2007 to 7.5%.

Green commented: "Logica had a successful 2008, achieving the financial targets set out for shareholders, while strengthening management capability, implementing our strategy and transforming the business around our key European customers. Our spread of customers and geographies, high penetration of more defensive sectors and strong financial discipline position us well to weather the economic downturn.

"We remain confident of our ability to outperform the IT services market in 2009, which is forecast to decline modestly."

Logica's revenue growth was led by the UK and the Nordics, with the public sector and energy & utilities being the most robust market sectors. Revenue from outsourcing reached 32% of the group total.

Logica reported that its Programme for Growth instigated by Green is on track, with a strong customer focus helping to improve its order pipeline and produce wins at customers including Michelin, KPN, Elexon, BT and the UK Home Office.

5. EDS WINS $1 BILLION MEGA DEAL

EDS has beaten competitors to a $1 billion (£700 million) data centre services contract with insurance giant Aviva - formerly Norwich Union.

The contract requires EDS to transform and manage two data centres based in Norwich that serve Aviva businesses in the UK, India, France and Ireland. The aim is to reduce Aviva's operational costs, improve information access and increase flexibility.

Igal Mayer, CEO of Aviva's UK general insurance business, commented: "After a thorough evaluation, we chose EDS over other global service providers because of its collaborative approach and its unmatched reliability, security and value."

About 300 Aviva employees will transfer to EDS to modernise the data centres and manage the insurer's mainframe, mid-range and Windows servers. HP and Cisco will provide tools, technologies and resources to EDS in support of the contract.

In an economic climate that is hostile to mega deals, EDS needs to perform well at Aviva as any slips will not go unnoticed by the insurance company or EDS's rivals for the project.

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Written by Sarah Underwood. Copyright 2010 NCC (UK) Ltd.

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