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\o I
Qo
Memorandum benefits a
POST
OSA oFFice
agency See
To: Peter Crahan From: Chris Mann
Pat Dugdale
Pat Kelsy
Address: BA/POCL
Third Floor Terminal House
52 Grosvenor Gdns
London
SW1WOAB
Date: 15/11/96
cc:
SUBJECT: Visit of Mr Yakamoto, Chairman of Fujitsu to Secretary of State
TIMING: Comments by 22 November please
1. Mr Yakamoto the Chairman of Fujitsu is visiting London from 3 - 4 December 1996, during
which time he plans to meet Secretary of State.
2. Please find attached a first draft brief for the meeting, I would be grateful for your comments
by Friday 22 November please.
3. Tan Magee recently met Keith Todd and the Fujitsu No 3 (Mr Akikusa), any relevant feedback
will be added.
Chris Mann
BA/POCL Parliamentary Business
3rd Floor Terminal House
govbiz/yakamoto/15/1 1/96 page 1 of 1 Chris Mann
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BA/POCL Programme
Briefing for Secretary of State’s meeting with Mr Yamamoto - Chairman of
the Board Fujitsu Ltd
Contents
Biography 2
The ICL/Fujitsu relationship 3
ICL Pathway Ltd 4
ASSIST 6
BA/POCL Programme 7
Procurement History
The Contract
Lines To Take
ANNEX 1 - Letter From Mr Yamamoto to Rt Hon Ian Lang MP
ANNEX 2 - ITSA Vendor Management Report ICL(UK) Ltd
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Biography Of Takuma Yamamoto
Born
Education
Present Position
Professional Career
April 1949
May 1975
March 1976
March 1979
June 1981
June 1990
Positions in Public Organisations
May 1984 - May 1986
July 1987 - July 1989
May 1987
May 1988 - May 1994
December 1990 - May 1995
April 1993 - September 1996
April 1993 - Mar 1995
June 1993 - September 1996
June 1994
September 1994
October 1996
Honours
April 1984
September 1986
Personal Interests
- 11 September 1925 - Kumamoto, Japan
- Air Academy (December 1943 - March
1945)
-Bachelor of Electrical Engineering
University of Tokyo (March 1949)
- Chairman of the Board of Fujitsu and
Representative Director
~ Joined Fujitsu
- Board Director
- Managing Director
- Executive Director
- President and Representative Director
- Chairman of the Board and Representative
Director
- Chairman, Communication Industries
Association of Japan
- Chairman, Japan Electronic Industry
Development Association
- Chief Director, Foundation for
International Information Processing
Education
- Chairman, Committee on International Co-
ordination of Economic Policies,
KEIDANREN
- Vice Chairman, the board of Councillors,
KEIDANREN
- Chairman, Multimedia Association of Japan
- Chairman, Intellectual Property
Association of Japan
- Chairman, Nicograph Association
- Chairman National Federation of
UNESCO Associations in Japan
- Chairman, Program Council, City TV
Nakano
- Chairman Multimedia Contents
Association of Japan
- Blue Ribbon with Medal of Honour
- Doctor of Humane letters (Chaminade
University of Honolulu)
River Fishing, Golf, Gardening
n
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THE ICL/FUJITSU RELATIONSHIP
e ICL PLC operates as an autonomous company within the Fujitsu federation of
companies
© The Fujitsu group employs 164,364 people in over 400 technology, software and
service companies. Fujitsu ltd employs 51,208 people (March 95)
¢ Fujitsu Group has 23 overseas factories, 15 Japanese factories, 22 overseas
representative offices and about 100 overseas subsidiaries.
© In 1995 Fujitsu’s net sales were nearly $37billion, its operating income was
nearly $2billion. Fujitsu was founded in 1935 and is the worlds second largest
computer company.
© Fujitsu is the majority shareholder in ICL with 84.4% of ICL’s shares. Although
the share holding will decrease when ICL is floated on the London Stock
Exchange Fujitsu have stated hat they intend to maintain a majority
shareholding.
e ICL’s relationship with Fujitsu exists on 4 levels:
- the ICL/Fujitsu technology agreement
+ Fujitsu as a supplier to ICL
- ICL asa supplier to Fujitsu
- Fujitsu’s shareholder relationship with ICL
e The ICL/Fulitsu technology agreement dates originally from 1981 and is based
on a mutual willingness to share skills and technology. The agreement aims to
maximise cooperation on research and development activities.
© This year ICL created a global PC and server business in partnership with
Fujitsu. The combined business will capitalise on Fujitsu’s global presence.
¢ Fujitsu is a supplier of components and other equipment to ICL eg electronic
point of sale systems, but it does so in competition with other suppliers.
© ICL (UK) Ltd, as a supplier of services to DSS, are reported on by ITSA Vendor
Management. A copy of the current report is attached at Annex 2
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ICL PATHWAY
¢ Pathway was initially set up as a consortium of companies specifically for the
BA/POCL Programme.
© In May 1996 the consortium became ICL Pathway Ltd, a wholly owned
subsidiary of ICL
© As part of the procurement process, the Programme requested proof of the ICL
Pathway Ltd’s financial stability. On 26 April 1996 Mr Yakamoto wrote
personally to the President of the Board of Trade giving assurance of Fujitsu’s
full support. A copy of this letter is at Annex 1.
¢ ICL is one of the world’s major suppliers to the retail market. ICL has
implemented the CHOTS project for Ministry of Defence involving the
installation of some 27,000 terminal in MOD offices. An Post have already
automated 600 offices in the Republic of Ireland using similar hardware and the
same software base. ICL rolled out all the Camelot terminals in UK and trained
in excess of 30,000 users.
© The following services are provided by ICL Pathway Ltd and its submission
contractors
ICL - Operation of Central Systems
- Maintenance services
- Training
- Site Preparation
- Overall Project Management
SUBCONTRACTOR
GIROBANK - Operation of Help Desks
- Fraud Risk Management
DE LA RUE - Production of Benefit payment cards
AN POST - Counter Automation Systems
- Post Office Consultancy
ESCHER GROUP - Counter Automation Systems
- Network Systems Design & Consultancy
McCANN-ERICKSON _ - Advertising and Promotion Material
BT - Telecommunications network
ORACLE - Development of Central Systems
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MICROSOFT - Provision of Windows NT Software
2 80% of the products and services are from the U.K with an additional 10% from
Europe.
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ASSIST
¢ DSS has an ongoing contractual disagreement with ICL in relation to a contract
awarded in January 1993 to ICL to build and operate a statistical analysis system
(ASSIST).
¢ The contract for ASSIST (in consortium with Hoskyns) was terminated on 19
October 1994 and DSS issued a writ alleging misrepresentation and breach of
contract on 19 May 1995. ICL served its defence and counterclaim in December
1995.
¢ Preliminary hearings have taken place in High Court, mainly on procedural
issues. Hearings on the main issues are not scheduled to begin until April 1998
and may run to the year 2000.
LINE TO TAKE
Note - This is unlikely to be raised but any reference to the ASSIST issue should be
dealt with as follows.
The matter is currently the subject of litigation and therefore I cannot comment on
the details. However I and the DSS are confident that ICL Pathway Ltd and its
subcontractors will deliver a successful result for the BA/POCL Programme.
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BA/POCL PROGRAMME
PROCUREMENT HISTORY
In accordance with Government policy this project is being pursued as a Private
Finance Initiative thus Benefits Agency and Post Office Counters Ltd are working
with a private sector organisation that is contracted to develop, finance and manage
the new automated system. The PFI is about developing a partnership between the
public and private sectors, for the benefit of both. The benefits of taking the project
forward in this way are that the private sector will bring its expertise to the public
sector while at the same time genuinely assuming risk .
On 17 August 1994 a contract notice was placed in the Official Journal of the
European Community inviting companies to register their interest. The
advertisement prompted a heavy response with some 90 organisations initially
expressing interest. In April 1995 after lengthy and detailed negotiations, Benefits
Agency and Post Office Counters Ltd reached agreement and signed a
memorandum of understanding. This was an important milestone as commercial
principles were agreed enabling the automation programme to progress.
Following the signing of the memorandum of understanding, on 13 April 1995 a
Statement of Service Requirement was released to the companies which survived an
initial sift. The statement is a lengthy and complex document which details what
the system will be required to do. In July 1995, following a continual process of
evaluation, three consortia were chosen by the programme evaluation team to
remain in the competition to provide the systems infrastructure and services for
Post Office Counters Ltd and the Benefits Agency. The consortia were:
CardLink U.K. - A consortium led by Andersen Consulting and Unisys
LB.M.
Pathway - A wholly owned subsidiary of ICL.
An Invitation to Tender was issued at the end of February 1996. The three
consortia submitted their tenders which were evaluated by the Evaluation Board.
On Wednesday 15 May 1996, the Secretary of State for Social Security, Peter
Lilley, announced that Pathway had been successful in its bid to automate post
offices and benefit payments.
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THE CONTRACT
¢ ICL Pathway’s revenue will depend on volumes of benefit transactions and post
office business over the next 8 years. On present projections we expect revenues
to be in excess of £1000 million over the contract period.
© The contract is for five years from the completion of roll-out (expected to be 3
years) and will be subject to re-competition on its termination.
e Inthe event that ICL Pathway Ltd fail to provide a satisfactory level of service,
there may be penalties related to the costs to the stakeholders of making good
the relevant operational areas and the stakeholders may also terminate the
contract.
© If BA/POCL decide to cancel the contract with no ICL Pathway Ltd fault, the
cost of abandoning the contract with ICL Pathway Ltd could be up to
£128million depending on the circumstances. £128million being the termination
charge for the year up to February 1998.
e A delay to the roll out will mean a postponement of benefit savings. In addition
we have guaranteed the contractor minimum volumes of traffic for which we
will be charged regardless of delays.
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LINES TO TAKE
Why did the programme award the contract to Pathway?
Line
Because its bid represented the best overall value for money. In reaching a
judgement on that, we looked at the total cost of taking the service (i.e. direct
charges by ICL Pathway plus indirect costs such as training and stationery) and
suppliers’ performance against ten non-monetary ‘value factors’ (e.g. acceptability
of the proposed service to the public). We also took account of the nature of the
contract into which bidders were prepared to enter.
Does selecting ICL Pathway mean they were the cheapest?
Line
ICL Pathway was selected because they offered the best value for money, taking
account of price, quality, risk transference and other factors.
Was there a delay in awarding the contract to Pathway?
Line
It is accepted that there was a two month delay against a very aggressive timetable for
completion of the early phase of the project due to the complexity of the contract
which covers Post Office services as well as the development of the benefit payment
card. Naturally, all of the interests of the three parties to the contract had to be taken
into account.
How did the delay in reaching a decision on the successful supplier affected the
cost of the programme?
Line
The procurement process that has been followed has been subject to the negotiated
procedures of the Services Directive. The Programme have conducted these
negotiations, evaluated tenders and awarded contracts in line with the dates agreed
with Ministers and within the programme budget.
Weren’t the suppliers landed with enormous project costs because of the delays
you experienced through the procurement?
Line
The Invitation to Tender was issued some 6 weeks later than the timetable given to
suppliers in the Statement of Requirements; this reflected the complexity of the
project and the desire of all suppliers to negotiate the issues comprehensively. In
planning the project significant regard was paid to suppliers costs; suppliers were
involved in the planning and invited to suggest ways in which costs could be
reduced.
Is the problem that the Departmental procedures are too bureaucratic?
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Line
No, but we are three very different organisations who are working together to
bring technology to post offices and benefit payments. Whilst the programme has
joint aims, Post Office Counters Ltd, the Benefits Agency and Social Security
Agency (Northern Ireland) each has its own set of priorities. Balancing each of the
three businesses needs against the joint project goals and, of course, customer
expectations, is challenging but not impossible and we are all working and
communicating very effectively together.
What caused the delays?
Line
The timetable was influenced by the complexity of the services involved, the need
to secure a clear price agreement between BA and POCL on the financial terms
between them and the need to negotiate the issues with suppliers.
What guarantees can you give that the evaluation and selection of the
contractor was conducted fairly?
Line
Before receipt of tenders the evaluation process and model were fully documented,
approved by an Evaluation Board consisting of representatives of the sponsor
organisations and lodged with the Programme lawyers. The operation of the
process was subject to monitoring by the audit units of the sponsors during the
evaluation.
Who had input into the selection process and what qualifications did these
people have to conduct this task?
Line
The evaluation team consisted primarily of representatives of the sponsor
organisations who had been involved in earlier stages of the procurement and were
well-versed in the various elements (e.g. technical, contractual). They were
supported by a number of external staff with skills in particular areas, e.g. legal,
financial modelling, procurement management.
Given the complex tendering process and the bidding costs, what consideration
is being given to compensating the unsuccessful suppliers?
Line
All suppliers agreed to meet their own bidding costs as is normal for Government
IT contracts.
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Fre ud
16-06-98 E14 FRSC 7 Vamads rt
BIBO
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2
,
s) ” Fujitsu
FUJITSU LIMITED
home, Chiyods-ku, Tokyo 100.
‘Telex: 322833 Faceimi
Rt. Hon. lan Lang MP
Preaident of the Board of Trade
& Seoretary of State for Trade and Industry I I
Department of Trade and Industry : :
1 Victoria Street ! '
London SW1H OBT ' !
26 April, 1996
Dear President, \
I wish to assure you of Fujitsu's full support for the tender submitted by Pathway for the
BA/POCL Programme: Bringing Technology to Post Offices and Benefit Payments.
Pathway Group Ltd is a wholly owned subsidiary of ICL and the services proposed by
Pathway are fully in line with the ICL corporate strategy of focusing on the provision of
As part of our investment Programme, we have recently committed to fully underwrite 6
2 200M rights issue for ICL and are planning substential further inward Investment into
the UK. The major one being Phase {I of the Microe‘ectronics plant in Durham where we
have a plan to invest a further £800M during the next couple of years and creating
more than 1000 additional Manufacturing based jobs. Including this programme,
Fujitsu's total amount of investment in the UK exceeds 22 billion to date.
We continue to see ICL, and our other UK based businesses, an important trading routes
into continental Europe and Fujitsu welcomes all the support we havo had from the UK
Government.
Yours sincerely,
Chairmari-or the Board
Fujitsu Limited
1
}
Hi
t
I
2 haY "96 17:48 @81 738 4124 PAGE.ag2
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ICL(UK)LTD
Company REPORT
PRODUCED BY
ITSA VENDOR MANAGEMENT
i DATE OF PRODUCTION: 1st November 1996
(v) PREVIOUS VERSION : 17 June 1996
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Please Note
Company reports give background information on core vendors who provide IT
goods and services to the DSS. The documents are produced in line with a
meetings schedule specifically created for the ITSA Chief Executive, the
regularity of which depend upon the value and significance of the business that
the company generates with the DSS.
The information found in this report is of a restricted - commercial nature and
should be treated as such at all times.
This report contains factual information collated from a number of sources
including various parts of the Department of Social Security and the media. It
is only through the co-operation of these information sources that ITSA Vendor
Management has been able to produce this report. Should you be aware of any
further information which we may find of use or if you wish to pursue any
matters further, please contact ITSA Vendor Management, Room GZ2, Lytham
St.Annes on extension 64392.
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CONTENTS
Page
Company Overview... 0.0... ce ee eee eens 4
Company Finances 2... eee eee 7
Business Developments... 2... 0.20... cece eet eee ee eee 8
DSS/ITSA Business 9
Focus 95 ..... 10
ITPOP Lot 1 10
ITPOP Lot 2 10
Computer & Related Services Framework 10
BA/POCL 1... 2. ee ee eee eee 10
CA Debt Management .... 0.0... ee ee eee 10
Original STAP Agreement . : bee . - il
ASSIST 000 eee ee eee 11
Future Business Opportunities 2.2... ee eee 12
Departmental Change Programme ........ 12
Video Conferencing Service for CSA 12
Peel Park Phase 2a................. 12
Information Sources... 1... 6... eee eee 13
3
vy) Ref: G:\..\ICL\Nov96 Page 3 of 13 Issued: 1 November 1996
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1. Company Overview
Introduction
1.1. ICL was acquired by the Fujitsu group of companies in 1990, establishing closer links
within a partnership that had existed in some areas for more than ten years. The Fujitsu
Group's combined turnover makes it the world's second largest computer firm after IBM.
ICL operates independently of Fujitsu in the majority of its business areas, rather than as a
subsidiary, and employs over 22,000 staff in 70 countries.
1.2 The company began its metamorphosis from a mainframe manufacturer to a
‘downsized’ systems and services group at the start of the 1990's, in a response to a slump
in margins as the market moved from proprietary to open systems products, and away from
mainframes to client/server computing. Since then, ICL has spent £400m restructuring the
business, turning the company into a customer-driven, international operation with an
established position in the fast growing computer systems and services business. Financial
Times analysts state that group has built up a particularly strong position in the retail in-store
systems and financial services sector, which it now operates across Europe.
1.3 ICL is organised into nine functional units in all, illustrated in Figure 1 below. The
most recent appearance is that of Fujitsu ICL Trading UK which took over responsibility for
ICL Volume Products, the PC arm of the business, in March 1996.
Fujitsu ICL
Trading UK
Chief Executive I Fe
KeithTodd
I ic
ICL Retail TL Outsourcing I I {ICL High Performance
L____Systeme I CPM) I Systems
I"
a ae
I ICL Enterprises
ICL Sorbus I
Figure 1 Source : ICL Company Literature
1.4 _ ICL is now one of Europe's largest systems-integration businesses, competing with
EDS, IBM and Andersen Consulting. Initially, ICL Chief Executive Keith Todd said that the
company is ‘targeting the number three slot’ in each of its main markets: specialist systems
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integration, complex systems integration for large customers, multi-vendor services and
outsourcing across Europe and multi-vendor distribution in the UK.
DSS Account Organisation
1,5 DSS interfaces with a number of ICL divisions. This is illustrated in Figure 2 below,
which also shows the manager responsible for DSS business in each area.
(Group Sues Director
> ‘Torsten Vieth
Performance I Technology pe =) sovtus I
Director Director Director” DSS ACCOUNT Manager” Director
David Teague I Marianne Van Ingen Chief Exec. Richard Livesey-Haworth John Shoemaker David Mills
ii f Paul Witwam fi
i i i
[DSS Sales Manager I DSS Client Manager i Account Manager}
Beverley D'Alessio ‘Sarah Bland i Alan Millen
{ Enterprises I
“Outsourcing! Director
[Sxtsewreing "I Dave Smith DSS Client Director
Nigel Hartnell . ‘Tim Gibson
Business Development
‘Manager
George Whitley
DSS Client Manage
“> Bruce Merrett
Figure 2 Source : ICL
The divisions have responsibility for different areas of DSS business:
ICL. Sorbus A multi-vendor services company which aims to provide the advice and
support to enable customers to exploit their systems to the full. Sorbus is the service
provider for Focus 95 Lot D.
* ICL_Enterprises consists of a Systems Integration and a Professional Services sector.
The Systems Integration sector provides services to ICL customers in Industry and
Government with responsibility in DSS for managing the ITPOP Catalogue contract
and the ITPOP Framework Agreement for Core Strategic Products, including MFS
‘96. I The Professional Services sector provides project management and systems
development and support skills.
* Technology ple is one of the country's largest resellers of multi-vendor IT products.
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The product range includes PCs, servers, application software, networking and
comms, and peripherals and other computer consumables. Tpic was the delivery
channel for PCE 94 and is the service provider of the Catalogue Distributor element
of STAP Forward.
* ICL High Performance Systems is responsible for the design, marketing and sales of
ICL's corporate systems hardware and operating software. MD is David Teague
* Peritas is a commercial consultancy and education organisation providing IT training
and management courses, technology based learning systems and facilities
management of client training operations.
* Fujitsu ICL Trading UK replaces the ICL Volume Products business. Hardware and
components from Fujitsu ICL Trading are delivered via Technology plc.
Company Strategy
1.6 In November 1995, Keith Todd succeeded Peter Bonfield as ICL's Chief Executive.
Prior to this appointment Mr Todd was the company's finance director with responsibility for
business strategy. Mr Todd has a five point plan for ICL which is to :
* focus on systems and services;
demerge the PC & server business;
sell D2D, ICL's manufacturing arm;
create a global business in partnership with Fujitsu to sell TeamWare groupware; and
create an interactive services business.
ee RH
1.7 Since formulating this plan, progress has been made in all areas:
* The most recent success, winning the BA/POCL contract for automation of DSS
benefit payments (through the ICL-led Pathway consortium), helps to strengthen its
focus on systems and services.
* ICL's volume products business, which mainly sells PCs and servers, has been
transferred to Fujitsu, with ICL retaining a 15 - 19% stake. Only a year ago, ICL
announced it was moving into the fiercely competitive market for consumer PCs with
a range of machines sold under the Fujitsu ICL label. The volume products PC
business managed to boost its sales, mainly in Britain and Scandinavia, but faced
mounting losses.
* In groupware, the industry view is that ICL has a good product suite in Teamware.
It was originally developed by Nokia and bought by ICL in 1991. Fujitsu has had
some success with Teamware in Japan, but with Lotus, Microsoft and Novell fighting
high profile battles for the market, it is difficult to envisage an Anglo-Japanese group
succeeding with a Finnish product in the US.
* ICL has been investing in multimedia on-line services, becoming involved in
innovative projects with media industries such as BSkyB and the Innovations
Catalogue and the BBC.
* On 1st October 1996 Keith Todd announced the appointment of Nigel Hartnell as
President of Outsourcing. The appointment will enable ICL to focus on developing
further the Outsourcing business which has already shown significant market growth.
As part of the ongoing review of ICL Headquarters Keith Todd has decided to
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restructure some of the roles and responsibilities undertaken there. Torsten Vieth is
now responsible for Quality and Customer Care activities together with marketing,
external communications and strategic sales activities. These activities have been
brought together to ensure a totally integrated approach to customer related activities
as a critical aspect of ICL's future success continues to be their ability to deliver
quality products and services to their customers.
Industry Analysis
1.8 Industry analysts, Gartner Group, anticipate increased joint distribution with Fujitsu
in the future, with ICL becoming a mid-range systems distributor for Fujitsu rather than
pursuing its own lines. It has a sound marketing base in Europe (and elsewhere) that will be
very useful to Fujitsu, which has also made previous attempts to enter the Australian market
place, but with limited success.
1.9 The analysts perceive ICL as having too large a stake in the mainframe market to let
it drop, even though this only accounted for 5% of revenue in the last financial year.
However a lot will depend on the outcome of EDS now being responsible for the DSS (and
Inland Revenue) mainframe estate. These developments mean that EDS has the ability to
reduce ICL’s mainframe market significantly.
1.10 Gartner, along with other industry analysts, believe that flotation of ICL on the Stock
Exchange will still go ahead - there have been statements of intention to float in the past, but
these have never come to fruition. However, analysts do not see floatation as being likely for
another 4 or 5 years. This view is in line with ICL's own predictions on the subject.
Short Term Aims
1.11 Over the next year, ICL will be looking to expand it new business areas; further
extend the global partnership with Fujitsu to exploit the TeamWare product; and expand the
interactive services business. It will also be building on current success in the outsourcing and
systems and services arena.
2. Company Finances
Recent results
2.1 During 1995, ICL generated £3.1bn revenue (turnover), a growth of 17% over 1994
figures, most of which was organic, rather than acquisition related. The decline in gross
margins continued in 1995 resulting in a loss before tax of £188.3m (including an overall
operating loss of £31.2m) against a profit of £28.4m in 1994. Keith Todd, lists three factors
that contributed to achieving a lower gross margin than expected: a highly competitive
market; failure to sell on value rather than price; and cost base too high.
Five Year Trend
2.2 Figure 3 illustrates the trend in ICL revenue and profit (loss) before tax over the past
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decline, culminating in last year's loss of £188m.
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2.3 The financial consequences of Todd's decision to clean up the remainder of ICL's
legacy and pay the costs of downsizing the company, will be met by Fujitsu, which has
agreed to inject up to £200m by underwriting a rights issue for that amount. This will be
important for customers looking for a strong partner to whom they can entrust large and
complex systems development programmes or the day-to-day running of their IT operations.
ICL will continue with its existing mainframe operations, although these accounted for only
5% of turnover for last year and were responsible for £30m of the drop in operating profit
for the systems and services business.
ICL Five Year Turnover and Profit
1991 - 1995,
3500
iaas
3000 rd
an 246035 26565 woe”
2s00 I ans ms sas
2000 [EIS 2 Lap. Profit before ta
Hi “ ¢. Tumover
E1500
fe
f* 1000 }.
soo I.
624 £386 m4 284
0 I m. a. = = ss
soo Lu 1 f 1 :
1991 1992 1993 1994 1995
Tax Years
Figure 3 Source : ICL Annual Report 1995
3. Business Developments
3.1 Computing reported on 24th October 1996 that Brighton and Hove Unitary Authority
had awarded a contract for a £500,000 financial management system to ICL without inviting
tenders from other potential suppliers. Although Brighton and Hove claimed that the product
could only be provided by one supplier, a rival supplier of financial systems said it could
have offered a feasible solution on a suitable environment.
3.2 Another report in Computing on 24th October 1996, said that ICL is to run its
corporate Internet service, ICLnet, over the Energis telecoms network, in a deal worth £2.5m
a year. The initial contract will run for 15 months. ICLnet will provide the " BBC Online”
service. This follows an earlier FT report, dated 20 September which revealed that ICL
promised to put up "many millions of pounds" to develop BBC Online. Keith Todd, reported
that a revenue-sharing deal had been agreed between ICL and BBC Worldwide, the
commercial arm of the BBC.
es
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3.3. On 24th October 1996, Computing reported that the future of the mainframe at one
of ICL's largest local government sites is under review following London borough of
Camden's move to a distributed financial management system. Camden has signed a £1m
contract with QSP who beat off a joint ICL/Oracle bid.
3.4 On 20th September 1996 the Financial Times reported that ICL promised to put up
“many millions of pounds" to develop BBC Online, a new commercial service for the
Internet. Keith Todd, ICL's chief executive, said a revenue-sharing deal had been agreed
between ICL and BBC Worldwide, the commercial arm of the BBC.
4. DSS/ITSA Business
DSS/ITSA Spend
4.1 Asat25 October 1996, payments for the current financial year, made by ITSA to ICL
and its subsidiaries, total £19.4m, broken down as follows:
* ICL Sorbus £15.2m
* Technology pic £1.9m
* ICLE £1.8m
* Workplace Technologies £0.4m
* Peritas £0.07m.
Figure 4 illustrates ITSA spend with ICL for the past three financial years.
Total ITSA Spend with ICL
1993-1996 (as at 31/03/96)
180
160 £1455M
140
1993/94 1994/95 1995/96
Tax Years
Figure 4 Source : ITSA Finance
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Neen:
Current Business
4.2 Focus 95 It was announced on 31 May 1995 that ICL had been awarded a 5-year
contract for Lot D, Distributed Systems (Central). It had registered bids for all lots available
(in partnership with De La Rue for the data centres), Since taking responsibility, ICL Sorbus
has demonstrated a good performance:
bd Service levels have improved from those recorded prior to outsourcing, initiatives
have been instigated to improve areas of poor performance and active steps have been
taken to address organisational problems.
* Completion of the Preston Voice re-design project has been noted as a success.
* Sorbus has demonstrated good interworking relationships with the other Focus service
providers.
On the contract side, performance has also been good. ICLS has been successful in gaining
new business - the Core Financial Replacement Project - under this contract. The value of
the business is estimated at £150,000 but includes £75,000 third party costs. It will also be
involved in the implementation and support of the 'Independent Tribunal Service' Generic
Appeals Processing System (ITS GAPS), Customer Account Payment System Financial
Control System (CAPS FCS) and Invalid Care Allowance Northern Ireland (ICA NI).
However, still under the Focus contract, ICLS was not successful in the competition for the
BA Printer Retrofit project. Its bid of approximately £75k was rejected in favour of one
from SEMA Group.
43 POP Lot 1 ICL (Tplic) won the catalogue supplier contract. From award of
business to the end of September 1996, approximately 3,600 orders have been placed (55,000
items) with a total value of some £9m. The bulk of this spend, some £6.5m actually occurred
during the first few months of the contract. Improvements have been noted in increased
delivery performance and expansion of the product range, plus an overall decrease in prices.
Arrangements are currently being made to include telephony products on the catalogue.
4.4 ITPOP Lot 2 MFS '96 - ICL UK Ltd was awarded the contract to provide multi-
function servers (MFS'96) under this Lot in the STAP Forward agreement. ICL Enterprises
is the subsidiary company responsible for delivering the server. To date no MFS 96s are in
use. Testing of this product is still underway but is expected to be completed imminently.
4.5 Computer & Related Services Framework ICL has been successful in retaining its
place on this framework, which was renewed effectively from Ist July 1996. Although no
new contracts have been awarded as yet to ICL under this framework, is still retains
responsibility for contractor/consultancy support for INDEPOL Call-off, 19/2/96 - 21/2/97,
£212,000 (max).
4.6 BA/POCL This business was awarded to the ICL-led consortium, Pathway, in May
1996. The consortium also includes Girobank, De La Rue and the Irish Post Office An Post.
The computer press have valued this contract to be worth £1bn over the eight year period,
although no official figure has been released.
4.7 CA Debt Management This was originally two contracts, Supply and Services
and Maintenance and Support services, with a total value of £1.38m. There have been
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development and delivery problems. Expected go-live date is November 1996,
4.8
The final
figures for expenditure have been
released. Figure 5 illustrates the spend per STAP supplier over the duration of the contract.
(29.7%) SNI
STAP Contract Analysis I
1991 - 1996 (as at 31/03/96 I
(29.8%) IBM
Figure 5 Source : Procurement Services
This can be broken down as:
Year
1991/92
1992/93
1993/94
1994/95
1995/96
Percentage
of STAP Business
46%
50%
51%
39%
8%
Value
£18.1m
£30.1m
£31.8m
£22.04m
£2.5m
giving a total expenditure with ICL of £104.4m over the contract period. In total £249.5m
was spent under STAP, with ICL winning the greatest proportion of business.
4.9 ASSIST The service contract for this project (in consortium with Hoskyns) had an
approximate value of £24.7 million for period January 1993 - January 2003. On 19 October
1994, the Department formally decided to terminate the contract due to alleged breaches by
ICL. A writ was served on ICL by the Department on 19 May 1995 and an ICL counterclaim
lodged in December 1995. Preliminary hearings have taken place in the High Court, mainly
on procedural issues, but hearings on the main issues are not scheduled to begin until April
1998 and run to the year 2000.
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5. Future Business Opportunities
ICL has an interest in a number of opportunities currently available within DSS. These
include:
5.1 Departmental Change Programme ICL is aware of DCP and anticipates business
opportunities arising from it. It has expressed strong interest in participating in the
programme. and is amongst the suppliers who have been sent a copy of the Statement of
Requirements for the Accord Project.
5.2 Video Conferencing Service for CSA ICLS are to be invited to tender along with
other FOCUS and Telecomms SPs.
5.3. Peel Park Phase 2a As part of the Focus contract, ICLS will be responsible for the
infrastructure implementation.
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6. Information Sources
The following information sources have provided input to this report:
Company Overview
Company Finances
Recent News Items
Current DSS/ITSA Business
Potential/Future Business
Opportunities
Dun & Bradstreet International
Computer Press
Gartner Group
Procurement Services
Company Literature
ICL Corporate Review for 1995
Computer Weekly
Financial Times
Computer Weekly
Computing
Financial Times
Procurement Services
Service Supply Group
IRG CA Business Management
Procurement Services
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