Brave EDS move could backfire

Most governments would look to go into the Christmas holidays with a whimper rather than a bang. This administration is doing...

Most governments would look to go into the Christmas holidays with a whimper rather than a bang. This administration is doing things the other way round with its decision to drop EDS, the incumbent IT supplier at the Inland Revenue, and replace it with a consortium led by Cap Gemini Ernst & Young.

It is a brave attempt to cut the Gordian knot of supplier lock-in. Many observers of public sector IT outsourcing, including this publication, doubted the government's willingness, or ability to break the grip of a supplier that has been in place for a decade.

But if the decision to drop EDS and to undertake the UK's biggest transfer of IT systems and staff is brave, it is also highly risky. The Inland Revenue faces critical challenges in the immediate future. The end of January is the deadline for income tax self-assessment. This is a time when the Revenue needs all of its systems to work efficiently.

In April it will update its tax credit systems with a software release that is many times more complex and far reaching than the one that proved so disastrous in April 2003. While all this is going on, EDS and Cap Gemini will be in the throes of a six-month transition to transfer the Revenue's complex technology and more than 3,000 staff between the two companies.

The top management at EDS and Cap Gemini will be determined to make the transition as smooth as possible. They want to be seen as reliable partners when they bid for future IT outsourcing contracts with the Ministry of Defence, other government departments and the health service.

Whether good intentions will be enough remains to be seen. EDS is contracted to transfer key job titles to the new supplier. It cannot force individual employees to move, but persuading a few dozen of the US-based firm's top technologists to transfer could be crucial to the success of the project.

To further complicate matters, the civil servants who decided to break with EDS will not be around to manage the handover. Nicholas Montague, chairman of the Inland Revenue, retires in March 2004. This is half way through the transition period. John Yard, director of the Revenue's business services, retires in June. Meanwhile, the contracts of Peter Gershon, chief executive of the Office of Government Commerce, and Andrew Pinder, the e-envoy, who played a crucial role in devising the Revenue's IT procurement strategy, end in April.

As with the health service, billions of pounds of taxpayers' money is being spent but who will be held accountable if things go wrong? The answer, as always, is nobody.

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