The Cabinet Office has axed ITNET from an £83m
datacentre hosting contract it only signed last July.
ITNET was the only supplier left at the end of the bidding
process following withdrawal by Fujitsu Services and
SchlumbergerSema
The Birmingham-based outsourcer said, it is "extremely
disappointed to receive this communication in circumstances when it
is making good progress in delivering the contract in accordance
with milestones revised to reflect significant changes to the
customer's requirements".
Ovum Holway analyst Georgina O'Toole suggested, "It looks as
though ITNET has failed to show the flexibility required by the
customer" in rolling out the datacentre and implementing the
technology needed.
ITNET said the first of the three contracted services had been
delivered after commissioning of the datacentre in January
2004.
Already, ITNET has spent £15.2m on the fixed assets of the
datacentre (for which it has received a pre-payment of £5m),
approximately £10m on the implementation of the datacentre, and has
made further commitments in relation to software maintenance and
other contracts.
Oliver Whitehead, ITNET chairman, said, "Although this
development is clearly very disappointing we are committed to
making full recovery of the costs we have incurred on this
contract. We remain confident of our prospects for growth in the
future."
ITNET said that although the outcome of any legal process cannot
be predicted with certainty, the contract provides for
reimbursement by the customer of expenditure both incurred and
committed.
ITNET admitted that the contract loss would hit its operating
profits, and the stock market’s immediate response to the news was
to slash the company’s share price by 28%.