The Hamilton, Bermuda-based company has been looking for a way out of the CfH program for some time, as it became clear that the rigid terms of the contracts would make it difficult for it to make a profit on them. It will hand over control of both the North East and East and East Midlands regions to CSC by January 8, 2007, which will be paid 1.9bn pounds ($3.7bn) over the next nine years, if it can avoid any penalties.
Accenture was one of the project’s four principal suppliers, alongside CSC, BT Group, and Fujitsu Ltd. It won its two contracts at the end of 2003, worth a combined total of 2bn pounds ($3.8bn), as part of ambitious plans to completely overhaul the IT of the NHS in England.
The contracts involved huge investment by the vendor with revenue paid only upon completion of major milestones. Delays at its subcontractor iSoft, which is developing the key application, meant that Accenture was unable to bill significant amounts of revenue to the NHS, and earlier this year it took a $450m charge on its profits, due to future deployment losses on the contracts.
Accenture and CSC began a detailed study on iSoft’s performance, and the resulting report concluded that there is no well defined scope and therefore no believable plan for releases of iSoft’s flagship Lorenzo software suite, and Accenture began to seek a way out of the contracts.
It was reported that CfH was threatening to impose a 1bn-pound ($1.9bn) penalty on Accenture should it decide to walk out, but instead it appears that Accenture will just pay back 63m pounds ($118m) of the 173m pounds ($324m) it had received from the NHS so far.
In Accenture’s fourth-quarter conference call yesterday, CEO William Green said the NHS contract negatively impacted Q4 revenue by $339m, but that this top-line hit corresponded with a decrease in service costs. In the end, there was no negative impact on operating income or EPS for the quarter, Green said. The company also said the unloading of the NHS contract bumped its FY2007 guidance up two cents, to a range of $1.77 to $1.82.
Accenture COO Steve Rohleder said that of the 500 Accenture employees working on the NHS project, some 300 will transfer over to CSC, and the rest will transfer to other Accenture UK projects.
Guy Hains, president of CSC’s European operations, told ComputerWire that the new contracts were on the same terms and conditions as its existing agreement for the North West region. CSC has not released any details of how much revenue that contract has brought in as yet, but Hains said that it has worked for us financially.
Last year, the director general of CfH, Richard Granger, infamously compared vendors to huskies pulling a sled, declaring that it they failed to deliver, they would be chopped up and fed to the other dogs.
The remark was a telling insight into the vendorclient relationship. In an age where ‘partnership’ and ‘trust’ are glibly spewed out by vendor marketing departments, there’s something rather admirable in Granger’s old-school confrontational approach. While the vendors, rather than the UK taxpayers, have carried the can for delays, achieving the initial goals of the project seem to have moved further and further away.
Rather than be fed to the dogs, iSoft shares were up 15% yesterday, as the CfH announcement said that any litigation relating to the deals between it and Accenture has been annulled, and CSC said it would keep iSoft onboard.
iSoft are absolutely instrumental to our program, said Hains. We are committed to the Lorenzo product and to iSoft on all three of our regions.
