Two years after a critical report into its IT functions,
the Financial Services Authority has signed an eight-year
outsourcing deal with Fujitsu worth £80.8m. The IT services
firm will provide infrastructure service support and a technology
refresh.
Xansa, under a separate £5.1m deal, will provide application
support and maintenance to the financial watchdog for three
years.
The contracts are the latest developments in the FSA's push to
improve its IT performance. The FSA launched the three-year
programme in August 2005 after the results of a review into its IT
operations. Consultancy firm Orbys conducted the review for the FSA
and found its information services to be "very immature".
On seven criteria that Orbys believes determine whether an IT
function is successful, the FSA's IT department was ranked "poor"
or "very poor". The worst score was for the department's ability to
identify business opportunities.
The FSA's IS director, Darryl Salmons, believes the two new
contracts will help the FSA achieve an IT performance that more
than matches industry standards. By the end of 2008, the plan is to
become best-in-class, said Salmons.
Salmons is confident that its outsourcing contracts will
transform FSA IT. "The fact that we are outsourcing the commodity
aspects of IT forces more strategic thinking internally to build
new systems, manage partners, and build relationships with the
business," he said.
The project has been driven by growing regulatory changes, which
have seen demand for new systems, such as technology for filing
online regulatory reports, exceed what can be satisfied
in-house.
The FSA has worked with analyst firm Gartner to develop an index
that will measure the success of these contracts in improving IT
performance, based on IT Infrastructure Library standards. Gartner
will also assess end-user perception of IT performance, Salmons
said.
The outsourcing contracts were larger and later than first
anticipated by the FSA. A tender notice published in August 2005
estimated a contract of between £15m and £20m, well below the
current £81m contract. The notice suggests that the project, which
was originally expected to run between April and July 2006, is a
year behind schedule.
Despite these problems, Phil Morris, CEO of outsourcing
consultancy Morgan Chambers, said the FSA's approach to outsourcing
was "right on market trend", and has followed what the market has
learned about best-in-class outsourcing.
"It all looks sensible. They have chosen partners capable of
doing a solid job. There was a lengthy process of tendering and a
deliberate effort to evaluate a large number of suppliers," he
said.
The FSA's IT department has recruited new IT staff with the
experience and skills needed to manage each outsourcing contract
effectively and improve its understanding of business needs.
Morris said success for the FSA's IT department would depend
heavily on the new staff's skills and expertise. "They need to make
sure there is a good relationship and communication between the
suppliers. If not they can start to work in their own little
silos."
He also said that the relationship with Xansa could suffer in
the long term because it is just maintenance. If Xansa does not get
any development work, then IT professionals on the contract could
become demotivated, he said.
The two new contracts build on the FSA's four-year deal with
Capgemini, Tata Consultancy and Xansa to outsource five application
development programmes, which was the first step in the
programme taken in August 2006.
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