COMPANY SECRET
Minutes of a Meeting of the Fujitsu Services Management Committee
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FUJITSU SERVICES HOLDINGS PLC
FUJITSU SERVICES LIMITED
FUJITSU SERVICES (INVESTMENTS) LIMITED
(the “Companies”)
of the Boards of Directors of the Companies
Held at 9.00 am on Thursday, 26 August 2004
by video link between
26 Finsbury Square
London EC2A 1SL
and
Fujitsu Solution Square
1-17-25 Shinkamata, Oota-ku
Tokyo 144-8588
London: Mr. R. Christou (Chairman)
Mr. D. Courtley
Mr. B. Harris
Mr. A. Nagai
Tokyo: Mr. T. Adachi
Mr. H. Madarame
Mr. H. Hirata
Mr. T. Moriya
Mr. T. Yurino
Mr. K. Nozoe
L (Secretary)
Mr. H. Kubo
Mr. T. Matsuoka
Introduction
The Chairman welcomed those present to the Meeting.
Minutes of Meeting held on 9 June 2004
The Chairman asked if there were any comments on the draft minutes of
the 9 June 2004 Meeting. The Meeting approved the minutes and it was
agreed that they should be signed on behalf of the Meeting by the
Chairman.
Chief Executive Officer’s Report FSMC/04/36
Mr Courtley presented this paper. There were no questions.
Chief Financial Officer’s Report FSMC/04/37
Mr Harris made a presentation by reference to the papers before the
Board, namely, those comprised in the Q1 Actuals and in the Q3 Budget
2004/2005, including the attachments and the paper entitled “Q3 Budget
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- Commentary.”
There were no questions.
Major Bids Report FSMC/04/38
Mr Courtley presented this paper, adding that he would comment
generally, not on every project.
Item 1, Ministry of Defence, Defence Information Infrastructure — This bid
had the potential to have a beneficial long-term impact on the UK part of
the business. FS was teaming with EDS (the “Atlas consortium’) and
was in competition with a combination of CSC and BT. There was no
doubt that FS and EDS were the stronger team, but CSC was fighting
hard. A final offer would be submitted in October, and the decision itself
would take some months. Price was still an issue. There were also some
technical issues on security that were being addressed.
Item 2, Lloyds TSB — Here the competitors were IBM, the incumbent
supplier, and Siemens. FS’s bid was innovative and was being
considered seriously by the customer. This was an example of the need
in the present market to take business from a competitor. An important
factor was to understand the competitive landscape.
Item 4, Home Office IND — FS had lost this bid to Atos. Mr Courtley
believed that this was a political decision connected with IND wishing to
assert its autonomy from the main part of the Home Office where FS
was the incumbent chief supplier. FS did, however, have a good
relationship with the latter and Mr Courtley did not fear further
encroachment.
Item 5, Metropolitan Borough of Walsall — This was a big opportunity in
the local government area. Care was needed - it involved business
process outsourcing (BPO) and therefore involved an extension to FS’s
traditional lines of business. FS was teaming with companies which were
capable of delivering the process elements — Vertex, which would
provide the BPO and CapGemini, which would provide change
management. The structure of the bid was not yet finalised - as FS
would be prime contractor, a strong commercial and project
management regime was needed. Mr Courtley added that bids of this
kind, subsuming the IT element, were becoming more common and he
believed that FS had no choice but to tackle them.
Item 9, Northem Ireland Government — This was a project similar to
Walsall, though with a different collaborator, Capita, which was very
strong in the UK. Together, they would be competing with Accenture.
The items under Newly emerged bids disclosed interesting activity with
telecoms companies. The relationship with FTEL was improving and the
two organisations were looking at opportunities together, with FS taking
the lead (at FTEL’s invitation) as such opportunities were service-led.
Item 16, Foreign and Commonwealth Office - FS had not been selected
as one of the final two bidders here. Although it had had a good
proposal, as a non-incumbent bidder it had not possessed a sufficient
understanding of the way that the FCO operated around the world.
In response to Mr Courtley’s invitation to ask questions, Mr Hirata
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enquired about the possible need for parent company guarantees
(PCGs) on the MoD and Walsall bids; and whether the self-assessment
form had been completed on the MoD bid. Mr Nagai replied that Mr
Gilbert and Mr Allnutt had dealt with the self-assessment form. So far as
PCGs were concerned, a PCG would be requested from Fujitsu Limited
for the MoD bid, where a best and final offer was required in October,
and a decision on such a PCG would therefore be required before that. If
a PCG was required for the Lloyds TSB bid, Fujitsu Services Holdings
PLC (“FSH”) would offer one. With regard to the Walsall bid,
consideration was being given to whether a Fujitsu Limited or FSH
guarantee should be sought — a decision on this would be needed at the
end of September. An FSH PCG would be given on the Transport for
London bid (item 6) and a decision on what to do about the Northern
Ireland bid would be made in due course.
Mr Madarame commented that, with the number of bids increasing, it
was becoming more difficult to see the overall picture and any trend that
might be developing. FS needed, in the medium term, to adopt a more
focused approach to what it could offer — for example, in the financial
services sector.
Mr Courtley replied that the reports prepared for these meetings were
meant to deal with the major bids in hand and their progress (this was
both to provide information and by way of good governance). The
reports did not give a full picture of developing trends — they only hinted
at that subject. Much clearer trends were, in fact, emerging in the
organisation at present, both in the vertical sectors and as offerings
changed. He agreed that there was a need to be very clear in the mid-
term plan about strategies by offering as well as by major bid including
competitive positions, and how they would work.
Major Projects Report FSMC/04/39
Mr Courtley presented this report to the Board. He explained that he
proposed to make a few brief comments:-
e Post Office - This was going well. It was expected that a self-
imposed amber alert would be lifted shortly.
e Inland Revenue — Transition had gone well in July and the customer
was very pleased. Extra orders were being received. The proposed
merger of the Inland Revenue with HMCE was expected to give FS
the opportunity to win new business. The new chairman, David
Varney, would start in September, and both Mr Courtley and Mr
Christou had met him.
e NHS — There had been some sub-contractor problems with
development. The sub-contractors in question, BT and IDX, were
working to manage those problems. There had been some delay to
milestone deliveries, partly due to specification changes by the
customer. Mr Courtley was confident that FS could find a way
through these issues with the NHS, although care would be needed
with the commercial implications.
e Home Office — Generally, service delivery was going well. The
results of the recent benchmarking exercise had, however,
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presented a problem and it would be necessary to reduce prices to
the customer, although FS was working with the customer to recover
the position. The adverse consequences this year would be covered
by improvements elsewhere. The HMCE contract also contained a
benchmarking clause, but it was less onerous and FS was better
prepared, so it was hoped that there would be less impact.
Items for noting and questions FSMC/04/40-43
The Meeting noted the papers on the reorganisation of South Africa,
major disputes and HR Manpower. There were no questions.
With regard to the appointments to the FSMC, the Chairman welcomed
Mr Moriya (who was present) and Mr Yurino to the Committee and noted
that the Board resolutions to appoint them with effect for and from this
Meeting were being circulated for signature. He extended his
congratulations to them and wanted to say that he was personally
delighted by their appointments, which he felt would help FS. He also
wanted to note Mr Kodama’s resignation and to place on record his
thanks for all Mr Kodama’s contributions.
Mr Moriya thanked the Chairman for his welcome and support. He
added that Fujitsu Limited was at present compiling its budget for the
second part of the fiscal year and was pleased to say that FS had
provided all the necessary figures, which was a good start.
The Chairman also referred to the agreement that there should be a
brief conversation at this Meeting on progress with the development of a
Long Term Incentive Plan for FS. He had reviewed progress and felt that
the working party had done a very good job so far. Both he and Mr
Madarame needed time to study the detail, recognising that setting
some of the target numbers in the plans depended on the outcome of
strategy discussions which were planned for November. He suggested
that these studies proceeded in parallel with work on the Medium Term
Plan and that at the meetings in November there should be, in addition
to the Meeting of this Committee, a meeting of the Directors’
Remuneration Committee to discuss strategy. Mr Madarame said that he
was, in principle, in agreement with this. It was helpful, so far as the
work on the Medium Term Plan was concerned, that FS had firmed up
its business and he agreed that it would be helpful to look at strategy,
which was, of course, very important. He would like to exchange views
before the November meetings. The Chairman commented that the
growth of FS must be seen as a part of the growth of Fujitsu Group as a
whole. In this context, Project Family was, of course, in everyone’s mind,
but until FS heard from the other party (this was expected by October
2004), it was not possible to speculate. He would see that preparatory
work started and perhaps engage in talks in Tokyo before November.
Other business
Mr Madarame said that he had been asked by Mr Akikusa to pass a
message to the Chairman that Mr Akikusa was interested in Russia and
would like to make a visit there with the Chairman. The Chairman said
he would be delighted to join in such a visit and would agree a date with
Mr Akikusa.
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There was no other business
Date and location of next meeting
The next Meeting of the Committee would be held face to face in
November. The venue would be Tokyo.
There being no further business, the Meeting ended.
Chairman