Service providers involved in the six NHS contracts worth a combined total of $11bn first showed signs of sickness in April when Accenture warned that its contracts would make a loss of between $110m and $150m in the current fiscal year, and that losses would continue in 2006.
In the same month, Tata Consultancy Services, which partners on the Fujitsu contract, blamed delays on product configuration by an unnamed product vendor for its disappointing revenue in the first three months of the year. Fujitsu’s decision seems to indicate that IDX was the cause of the offending delay.
The NHS’s National Program for IT, which is being renamed Connecting for Health, is one of the most expensive and ambitious public sector projects in the world. It involves a total overhaul of its IT and the introduction of an electronic patients records system to enable doctors and hospital clinicians to access patient information from anywhere in the country.
Richard Granger, director general of NHS IT, split the project into five different regions, and gave two contracts to Accenture, and one each to BT Group, CSC, and Fujitsu, with BT also overseeing the creation of a nationwide database.
IDX had been developing clinical records software called Carecast which was to be used by both Fujitsu in the Southern cluster of England and BT Group which is the lead service provider for the London cluster. Despite Fujitsu’s decision, BT will continue to use IDX in London.
IDX’s CEO, James Crook, said Fujitsu’s decision had been disappointing but said it expects to begin installation of the Carecast system in the coming weeks. He said he expects to see a rapid acceleration of deployments to trusts in the next 12 months.
As a result, IDX said it expects to take a charge of between $2m and $4m in the second quarter of 2005, and 2006 revenue is now expected to be between $670m and $690m down from its previous guidance of $700m to $720m, with earnings per share expectations down to $1.50 to $1.60 from $1.65 to $1.75.
IDX is the first company to be kicked off the NHS project, but might not be the last. The UK government is determined that the contracts do not suffer the same fate as so many of its major IT awards in the past, and analysts contend that Granger has been ruthless in his negotiations with suppliers. UK public sector contracts have become synonymous with cost overruns, and the government has suffered the embarrassment of high-profile failures at a number of its departments including the Child Support Agency and the Inland Revenue.
Granger’s determination to ensure that the NHS is not added to this list means it is service providers and not the NHS that will pay the price for delays and cost overruns.
