Hard line could backfire on NHS

When one of the world's leading IT services companies announces it is taking a £260m hit on a government contract, something has gone badly wrong, not just for the company, but for the project as a whole.

When one of the world's leading IT services companies announces it is taking a £260m hit on a government contract, something has gone badly wrong, not just for the company, but for the project as a whole.

Accenture's announcement last week that it was taking a £260m charge for losses on its work as prime contractor to the NHS national programme for the North and East of England raises fundamental questions about the IT-led modernisation of the NHS and, more widely, how IT users get the right balance of risk and reward when awarding contracts.

Giant IT services companies usually expect and achieve a rate of return on their investments that are simply unattainable in other sectors of the economy.

The UK public sector has, in particular, produced fabulous profits for IT suppliers, which too often produced systems that failed to deliver what was required.

Director of NHS IT Richard Granger pledged to change that when awarding the contracts on the national programme. He insisted on contracts where payment to the supplier was based on delivery and use of the systems.

Granger was, he said, determined to deliver value for money for the taxpayer, and he reiterated this last week when faced with Accenture's losses and a call to renegotiate its contracts.

Unless the other prime contractors to the NHS IT programme - BT, CSC and Fujitsu - were in the same financial straits, he said, there would be no renegotiation.

This is tough talk, but whether it ultimately delivers value for money to the taxpayer is a moot point. With a project as large and complex as the national programme for IT in the NHS, there has to be give and take on both sides.

The danger faced by Granger is that if he sticks rigidly to the letter of the contract, the suppliers will do the same. If the suppliers believe they cannot make a decent return on investment, their commitment will falter, the best developers and project managers will be moved to more lucrative work, and the prospect of failure will increase.

Although no one forced Accenture to sign up to the NHS IT programme, and some of its rivals, notably IBM, walked away from the terms and conditions demanded, it is worth remembering that sometimes tough talk might not be the best way out of a tough spot.

Read article: Accenture calls for 'resolution' after £260m loss on NHS work

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