BT
Global Seviceshas been reviewing its largest
and most complex contracts including its work for theNHS's National Programme for IT
(NPfIT).
It comes as the company seeks to cut costs in the light of
disappointing financial results. Global Services is the BT
division that manages large contracts with multinational
organisations and the NHS, for IT, outsourcing and telecoms
services.
The reviews have involved contracts with the NHS, Swisscom,
Reuters, Inbev, Credit Suisse, Nestlé, Visa, Fiat, Unilever,
Procter and Gamble and the Department for Work and Pensions.
BT says it has reviewed 15 of 17 major contracts and has written
off £340m as a result. It is not saying what contracts are the
subject of the write-off.
The write-off was announced in a company trading update statement
yesterday, which led to a drop in its share price of about 9%.
The share price was down a further 2% this morning.
BT has yet to review two other contracts, one of which is its
£1bn deal as a local service provider to the NHS as part of the
NPfIT. The review could lead to further write-offs by BT.
Its contract to supply unified systems to the NHS in London has
been dogged by years of delays.
Some of the London trusts that have taken from BT the Cerner
Millennium Care Records Service have had disruption to the running
of the hospitals, and to the care and treatment of patients, after
go-live. The problem sites include the Royal Free, Barts and The
London and Barnet and Chase Farm.
Trusts are putting on hold deployments of new hospital systems
from BT while the lessons from the Royal Free are learned.
A further potential issue for BT on its NHS work is that
semi-autonomous foundation trusts in London may produce business
cases to buy outside of the NPfIT - and not necessarily from BT.
Most if not all acute trusts in London are expected to become
foundation trusts.
In 2003 when BT signed contracts with the NHS, the Department of
Health had been working on the assumption that all hospitals in
London would install BT's systems. Despite the lack of deployments,
BT has invested in advance in systems for trusts. It is paid only
after trusts accept its systems.
Another local service provider,
Accenture, has already quit the NPfIT with large losses, and
Fujitsu, the local service provider for the south of England, has
had its contract ended. Fujitsu's losses are said to run into
millions of pounds.
If BT and the Department of Health were to part company over the
London local service provider contract that would leave CSC as the
only remaining local service provider. Already there are concerns
about whether CSC and BT can cope with their workloads under the
NPfIT.
A BT spokesman confirmed that the NHS is included in its list of
17 major projects that have been reviewed or have yet to be.
The spokesman said that the reviews involve challenging
assumptions made when the contracts were signed and the cost
savings that were hoped to be delivered.
Specialists working on the NPfIT say BT is likely to have made
money on the N3 network, the data spine and supplying "community"
health systems to support services such as child health.
Analyst Richard Holway of Techmarketview quotes in his blog
today an editorial in The Times, which said: "It appears that for
the past three to four years, the global services arm [of BT]
underpriced contracts, overestimated the cost savings it could make
and then failed to deliver them"
Holway added: I think that's pretty much exactly what
happened."