The decision by the Department for Work and Pensions (DWP) to cancel a £300m desktop support deal with Fujitsu before it even began will lead many in the public sector to question some IT suppliers' ability to deliver on their sales pitch.
The DWP ended the six-year contract, signed in February 2010, earlier this week. Fujitsu had been chosen over the incumbent HP but, since the deal was agreed the new supplier has failed to meet its transition targets, according to a source close to the deal. A phased transition from HP was originally expected to see Fujitsu assume responsibility for the service on 1 September 2010.
DWP and Fujitsu would not comment other than confirming that the deal had ended, but Computer Weekly has learned that Fujitsu's inability to take on services from HP led to the DWP losing confidence.
Our source says transition targets were missed. "Fujitsu never managed to give the DWP confidence that it could do the job," he said.
Confidence had been dwindling for months and Fujitsu received extensions to some deadlines.
Fujitsu's failure to meet transition targets should act as a message to government CIOs to ensure suppliers deliver what they promise, when they promise it. They need to make sure exit plans are clearly laid out for the incumbent.
The DWP decision rounded off a bad week for Fujitsu atfter it was criticised in a National Audit Office report (NAO) on the UK Border Agency (UKBA). "The UKBA believes that Fujitsu underestimated the complexity of the project and did not have the right staff in place for a fast start-up, although this is disputed by Fujitsu," said the NAO report.
Meeting transition deadlines
The transition phase of an outsourcing contract involves the movement of the service from the customer or incumbent supplier to the new supplier. This means moving people, processes and technology.
Mark Lewis, partner and head of outsourcing at law firm Berwin Leighton Paisner, says it would be shocking if a major outsourcing service provider failed to transfer the service. "It would be very embarrassing for a supplier to have a major contract terminated because it could not even transition."
He says it is more common for problems to occur in the service delivery, which comes after the transition. A failure to meet transition deadlines could be a reason that would enable the DWP to terminate a contract, he adds.
An industry source said, "Most customers are willing to accept delays of a month or two but when you get to six months you have to accept it might not be possible. It is not always the case that a supplier can not do it, but often they do not want to do it the way originally planned because they realise it's not economical."
Public sector services IT suppliers must be realistic
Robert Morgan, director at sourcing broker Burnt-Oak Partners, says sub-contracting means this type of scenario is not as surprising as it may appear.
"Suppliers often cannot do all the work, but sub-contract some of it. This is typical of what is happening in outsourcing and clients do not realise the suppliers that put the bids in cannot do the work themselves," he said.
The DWP desktop deal was an attractive one because of its size and transformational nature. The DWP has 140,000 desktop devices across more than 1,000 locations in the UK and the deal would have seen Fujitsu introduce thin-client technology to cut costs.
Two major public sector IT contracts have been terminated since the change of government in 2010: the £750m e-Borders deal and the £225m Firecontrol project.
In September 2010, the government also scrapped much of the remainder of NHS National Project for IT. The programme had been plagued by suppliers failing to meet targets, including Fujitsu, whose £896m NHS contract was cancelled in 2008..
If these experiences were not enough of a signal for suppliers to be more realistic when bidding in the public sector, perhaps the DWP's decision will emphasise the point.