Best wishes for a Merry Christmas and, perhaps more importantly, a prosperous New Year to all our readers.
We will be in the UK over the Xmas/New Year break, so will be around to report on anything significant (I can only see the results of the Constellation/Gladstone bid being announced - but who knows what may happen.....). But frequent posts will restart from 5th January.
Tuesday 23 December 2008
Monday 22 December 2008
FiReControl – success or failure?
One question I was asked following my blog post on Fatally flawed Audit Commission report on Fire Services, given my experience in supplying mobilisation systems to Fire Brigades when in IAL, what was for my view on the current FiReControl project to close 46 emergency fire control rooms in England and move to 9 high-tech regional centres?
I think it’s too early to say whether the project is a success or not. Operationally, I think there is a very strong argument for having just 9 regional centres. Given the likely use of leading edge technology, and availability of specialised, well-trained control room staff, in the long term the project should both improve operational efficiency and save on annual running costs (although the Government appears to have now conceded that costs will actually increase by over £3.5m per annum).
However, the project itself smacks of Government’s usual inability to follow best practices when procuring new IT systems. As with the current ill-fated NHS computerisation projects, I’m told it has failed to involve key users in its design early enough, initially imposed a massively optimistic timescale for implementation, and seemingly failed to allow any contingencies in its plans and budgets.
The project is currently way over budget and running some 3 years behind schedule, such that there is now a serious risk that it will not be completed in time for the 2012 Olympics. As I understand it the design of some of the key software is still at a prototype stage, a stage which is throwing up serious gaps between the initial statement of requirements and what operational users actually need.
Apart from the obvious problems of getting systems from several suppliers working properly together, the main problem appears to be with the core Mobilisation & Resource Management System (MRMS), which records incidents, identifies and mobilises appropriate resources, and supports these resources during the incident. Although the MRMS is already in use with the Swedish Emergency Services and all police forces in Romania and Spain, it apparently lacks exposure to the UK market. So I wouldn’t be surprised to see even more delays announced...
So, overall, my answer is that long term FiReControl should be a success, but in the short-term I predict further delays, significant technical and operational problems during the first months of operation, and consequent pressure from interested parties to stop the roll-out. I just hope that I’m wrong, the technology works, and that the project is successful – we need it to work.
I think it’s too early to say whether the project is a success or not. Operationally, I think there is a very strong argument for having just 9 regional centres. Given the likely use of leading edge technology, and availability of specialised, well-trained control room staff, in the long term the project should both improve operational efficiency and save on annual running costs (although the Government appears to have now conceded that costs will actually increase by over £3.5m per annum).
However, the project itself smacks of Government’s usual inability to follow best practices when procuring new IT systems. As with the current ill-fated NHS computerisation projects, I’m told it has failed to involve key users in its design early enough, initially imposed a massively optimistic timescale for implementation, and seemingly failed to allow any contingencies in its plans and budgets.
The project is currently way over budget and running some 3 years behind schedule, such that there is now a serious risk that it will not be completed in time for the 2012 Olympics. As I understand it the design of some of the key software is still at a prototype stage, a stage which is throwing up serious gaps between the initial statement of requirements and what operational users actually need.
Apart from the obvious problems of getting systems from several suppliers working properly together, the main problem appears to be with the core Mobilisation & Resource Management System (MRMS), which records incidents, identifies and mobilises appropriate resources, and supports these resources during the incident. Although the MRMS is already in use with the Swedish Emergency Services and all police forces in Romania and Spain, it apparently lacks exposure to the UK market. So I wouldn’t be surprised to see even more delays announced...
So, overall, my answer is that long term FiReControl should be a success, but in the short-term I predict further delays, significant technical and operational problems during the first months of operation, and consequent pressure from interested parties to stop the roll-out. I just hope that I’m wrong, the technology works, and that the project is successful – we need it to work.
Friday 19 December 2008
FiReControl – success or failure?
One question I was asked following my blog post on Fatally flawed Audit Commission report on Fire Services, given my experience in supplying mobilisation systems to Fire Brigades when in IAL, what was for my view on the current FiReControl project to close 46 emergency fire control rooms in England and move to 9 high-tech regional centres?
I think it’s too early to say whether the project is a success or not. Operationally, I think there is a very strong argument for having just 9 regional centres. Given the likely use of leading edge technology, and availability of specialised, well-trained control room staff, in the long term the project should both improve operational efficiency and save on annual running costs (although the Government appears to have now conceded that costs will actually increase by over £3.5m per annum).
However, the project itself smacks of Government’s usual inability to follow best practices when procuring new IT systems. As with the current ill-fated NHS computerisation projects, it has failed to involve key users in its design early enough, initially imposed a massively optimistic timescale for implementation, and seemingly failed to allow any contingencies in its plans and budgets.
The project is currently way over budget and running some 3 years behind schedule, such that there is now a serious risk that it will not be completed in time for the 2012 Olympics. As I understand it the design of some of the key software is still at a prototype stage, a stage which is throwing up serious gaps between the initial statement of requirements and what operational users actually need.
Apart from the obvious problems of getting systems from several suppliers working properly together, the main problem appears to be with the core Mobilisation & Resource Management System (MRMS), which records incidents, identifies and mobilises appropriate resources, and supports these resources during the incident. Although the MRMS is already in use with the Swedish Emergency Services and all police forces in Romania and Spain, it apparently lacks exposure to the UK market. So I wouldn’t be surprised to see even more delays announced...
So, overall, my answer is that long term FiReControl should be a success, but in the short-term I predict further delays, significant technical and operational problems during the first months of operation, and consequent pressure from interested parties to stop the roll-out. I just hope that I’m wrong, the technology works, and that the project is successful – we need it to work.
I think it’s too early to say whether the project is a success or not. Operationally, I think there is a very strong argument for having just 9 regional centres. Given the likely use of leading edge technology, and availability of specialised, well-trained control room staff, in the long term the project should both improve operational efficiency and save on annual running costs (although the Government appears to have now conceded that costs will actually increase by over £3.5m per annum).
However, the project itself smacks of Government’s usual inability to follow best practices when procuring new IT systems. As with the current ill-fated NHS computerisation projects, it has failed to involve key users in its design early enough, initially imposed a massively optimistic timescale for implementation, and seemingly failed to allow any contingencies in its plans and budgets.
The project is currently way over budget and running some 3 years behind schedule, such that there is now a serious risk that it will not be completed in time for the 2012 Olympics. As I understand it the design of some of the key software is still at a prototype stage, a stage which is throwing up serious gaps between the initial statement of requirements and what operational users actually need.
Apart from the obvious problems of getting systems from several suppliers working properly together, the main problem appears to be with the core Mobilisation & Resource Management System (MRMS), which records incidents, identifies and mobilises appropriate resources, and supports these resources during the incident. Although the MRMS is already in use with the Swedish Emergency Services and all police forces in Romania and Spain, it apparently lacks exposure to the UK market. So I wouldn’t be surprised to see even more delays announced...
So, overall, my answer is that long term FiReControl should be a success, but in the short-term I predict further delays, significant technical and operational problems during the first months of operation, and consequent pressure from interested parties to stop the roll-out. I just hope that I’m wrong, the technology works, and that the project is successful – we need it to work.
Capita/IBS – Competition Commission sets timetable
The Competition Commission has published the timetable for their investigations into Capita’s acquisition of IBS. The target is to publish their final report by the end of April 2009.
Unfortunately, the main terms of reference for the CC investigation and report are for the CC to answer the question of whether or not the merger has resulted, or may be expected to result in a substantial lessening of competition. Personally, I don’t think it will take long to conclude that there has been a substantial lessening.
However, as I noted in my blog post Capita/IBS – OFT’s final text - what next? I believe that there is much more to be considered by the CC – if only it was allowed to. Given the specialist nature of the R&B market and the control that central government retains over it, the CC should make a rapid decision to allow the acquisition to proceed with some levels of protection as offered by Capita in its submissions to the OFT.
I still believe that it will require a senior government decision, taken quickly, to resolve this situation – and that seems unlikely at the moment.
Unfortunately, the main terms of reference for the CC investigation and report are for the CC to answer the question of whether or not the merger has resulted, or may be expected to result in a substantial lessening of competition. Personally, I don’t think it will take long to conclude that there has been a substantial lessening.
However, as I noted in my blog post Capita/IBS – OFT’s final text - what next? I believe that there is much more to be considered by the CC – if only it was allowed to. Given the specialist nature of the R&B market and the control that central government retains over it, the CC should make a rapid decision to allow the acquisition to proceed with some levels of protection as offered by Capita in its submissions to the OFT.
I still believe that it will require a senior government decision, taken quickly, to resolve this situation – and that seems unlikely at the moment.
Thursday 18 December 2008
Constellation fires last(?) salvo in battle for Gladstone
Constellation has issued what I suspect will be its last letter to shareholders about its current bid for Gladstone. The letter makes it clear that the 25p offer is final and will not be increased unless a competitive situation arises.
The letter makes no new points, but re-emphasises the existing arguments. Quoting from the RNS:
“the Gladstone Board has failed to provide Gladstone shareholders with any quantitative assessment of what the future might hold. In particular the Gladstone Board has:
· made NO forecast for profits in the future
· given NO quantitative assessment of the future trading potential that will result from its 'significant investment programme'
· given NO quantitative support to its statement that 'Gladstone has excellent growth prospects'
· given NO specific timing for the commencement of dividend payments
· produced NO details about any possible alternative offer for Gladstone”
Again, no one can dispute their points. But likewise, I don’t think anyone can dispute Gladstone’s Board’s view that the bid is “opportunistic and wholly inadequate”.
As noted in my previous posts, with acceptances – at 11.5 % above Constellation’s current 29.9% shareholding - it seems likely that their offer will not succeed at its current level.
My expectation is that the current bid will lapse, the share price will drop back to c 18p, but that later in 2009 there will be another bid, either from Constellation, or another company that has been able to acquire Constellations 29.9% shareholding (always assuming that Constellation is willing to sell it). If Gladstone’s Board get their act together, this could be for significantly more that 25p – or if not, Constellation may get Gladstone at even less than the 25p currently bid.
The letter makes no new points, but re-emphasises the existing arguments. Quoting from the RNS:
“the Gladstone Board has failed to provide Gladstone shareholders with any quantitative assessment of what the future might hold. In particular the Gladstone Board has:
· made NO forecast for profits in the future
· given NO quantitative assessment of the future trading potential that will result from its 'significant investment programme'
· given NO quantitative support to its statement that 'Gladstone has excellent growth prospects'
· given NO specific timing for the commencement of dividend payments
· produced NO details about any possible alternative offer for Gladstone”
Again, no one can dispute their points. But likewise, I don’t think anyone can dispute Gladstone’s Board’s view that the bid is “opportunistic and wholly inadequate”.
As noted in my previous posts, with acceptances – at 11.5 % above Constellation’s current 29.9% shareholding - it seems likely that their offer will not succeed at its current level.
My expectation is that the current bid will lapse, the share price will drop back to c 18p, but that later in 2009 there will be another bid, either from Constellation, or another company that has been able to acquire Constellations 29.9% shareholding (always assuming that Constellation is willing to sell it). If Gladstone’s Board get their act together, this could be for significantly more that 25p – or if not, Constellation may get Gladstone at even less than the 25p currently bid.
Wednesday 17 December 2008
Fatally flawed Audit Commission report on Fire Services
The Audit Commission has released a new report, Rising to the Challenge in which it claims that fire and rescue services could save as much as £200m a year without threatening the safety of firefighters or the public.
Michael O'Higgins, chairman of the Audit Commission, said: "There is no doubt that firefighters do a great job but the best services have shown they can respond to incidents more efficiently without jeopardising safety. The rest must follow their example."
The report is, I fear, a typical finance person’s view of an emergency service that believes it can be represented by efficiency targets, KPI’s and utilisation rates. It is, in part, a worthy review of the historic statistics and finances, but should represent only one of the views that government, both local and central, uses to decide on the future direction of the Fire Service. The idea that an emergency service can be run just like a business – matching future resources to historic numbers of incidents – is positively frightening, as are the following quotes from the report:
‘What is needed now is a system which deploys the resources of people and equipment so they are prepared to deal with the most likely risks of fire in the most cost-effective way” – surely we’re more concerned with saving lives than money?
“capacity substantially exceeds the likely call on it” – good, long may it continue
“Fire services can do more to reconcile the mismatch between the availability of resources and the time when those resources are required.” – really, and which glass ball should they use to predict where/when the next major fire will occur?
What absolute balderdash – we need a fire service that can deal with incidents and emergencies that are, by their very essence, unplanned and incapable of being predicted accurately. Unusually for once, I concur with a union view, as expressed by Matt Wrack, the Fire Brigades Union General Secretary:
“It is clearly written by people with no knowledge whatsoever of firefighting... whose only interest is in finding ways to penny-pinch on public safety”
“It is true that you can strip fire stations of their night cover, so long as you are willing to risk lives because firefighters cannot get to fires fast enough. We know that the public wants to go to sleep at night knowing firefighters are ready if they are needed. But the Audit Commission does not seem to care what the public wants.”
“ .... more firefighters are being killed at fires than at any time for 30 years. I find it incredible that, in the face of this information, they still put forward proposals which will place firefighters in even greater danger.” (In the five years since 2003, at least 22 firefighters have died while on duty, significantly more than in the previous five years.)
In the face of a 10%+ growth of the population in the UK, firefighter numbers have remained unchanged. The report rightly points to the more efficient use of firefighters – the numbers staying roughly the same but with around 1,000 firefighters moving from full-time to retained – and with more flexible rostering.
But the report chooses not to investigate nor report on the several major incidents which have highlighted shortages of personnel and equipment that has lead to inadequate responses by the fire services to those events and, in some cases, to the deaths of firefighters.
Throughout the majority of its 108 pages, the report focuses on front-line firefighters numbers and efficiencies, whilst avoiding any investigation of the 35% growth in non-firefighting members of staff over the past 7 years. A major omission - why? Surely this is an area where efficiency savings can be made without affecting the front-line services? Or is one set of civil servants trying to protect another? When/if I need the fire service I’d like to have a properly trained firefighter please – not another pen pusher.
Turning back to inappropriate comments from the Audit Commission, Michael O'Higgins said: "In today's financial climate the fire service, like the rest of the public sector, must rise to the efficiency challenge."
But, according to the report, “expenditure by individual fire services in England varied from just under £30 per head of population to just under £60 per head”, and is exhorting the fire services to save a further 10% of their costs. At a time when Central Government is throwing £1,000’s per head of population into the banks, I’m happy to pay the extra £6-£12 per annum to have a fire service that is more likely to be there quickly if/when I may need it.
Michael O'Higgins, chairman of the Audit Commission, said: "There is no doubt that firefighters do a great job but the best services have shown they can respond to incidents more efficiently without jeopardising safety. The rest must follow their example."
The report is, I fear, a typical finance person’s view of an emergency service that believes it can be represented by efficiency targets, KPI’s and utilisation rates. It is, in part, a worthy review of the historic statistics and finances, but should represent only one of the views that government, both local and central, uses to decide on the future direction of the Fire Service. The idea that an emergency service can be run just like a business – matching future resources to historic numbers of incidents – is positively frightening, as are the following quotes from the report:
‘What is needed now is a system which deploys the resources of people and equipment so they are prepared to deal with the most likely risks of fire in the most cost-effective way” – surely we’re more concerned with saving lives than money?
“capacity substantially exceeds the likely call on it” – good, long may it continue
“Fire services can do more to reconcile the mismatch between the availability of resources and the time when those resources are required.” – really, and which glass ball should they use to predict where/when the next major fire will occur?
What absolute balderdash – we need a fire service that can deal with incidents and emergencies that are, by their very essence, unplanned and incapable of being predicted accurately. Unusually for once, I concur with a union view, as expressed by Matt Wrack, the Fire Brigades Union General Secretary:
“It is clearly written by people with no knowledge whatsoever of firefighting... whose only interest is in finding ways to penny-pinch on public safety”
“It is true that you can strip fire stations of their night cover, so long as you are willing to risk lives because firefighters cannot get to fires fast enough. We know that the public wants to go to sleep at night knowing firefighters are ready if they are needed. But the Audit Commission does not seem to care what the public wants.”
“ .... more firefighters are being killed at fires than at any time for 30 years. I find it incredible that, in the face of this information, they still put forward proposals which will place firefighters in even greater danger.” (In the five years since 2003, at least 22 firefighters have died while on duty, significantly more than in the previous five years.)
In the face of a 10%+ growth of the population in the UK, firefighter numbers have remained unchanged. The report rightly points to the more efficient use of firefighters – the numbers staying roughly the same but with around 1,000 firefighters moving from full-time to retained – and with more flexible rostering.
But the report chooses not to investigate nor report on the several major incidents which have highlighted shortages of personnel and equipment that has lead to inadequate responses by the fire services to those events and, in some cases, to the deaths of firefighters.
Throughout the majority of its 108 pages, the report focuses on front-line firefighters numbers and efficiencies, whilst avoiding any investigation of the 35% growth in non-firefighting members of staff over the past 7 years. A major omission - why? Surely this is an area where efficiency savings can be made without affecting the front-line services? Or is one set of civil servants trying to protect another? When/if I need the fire service I’d like to have a properly trained firefighter please – not another pen pusher.
Turning back to inappropriate comments from the Audit Commission, Michael O'Higgins said: "In today's financial climate the fire service, like the rest of the public sector, must rise to the efficiency challenge."
But, according to the report, “expenditure by individual fire services in England varied from just under £30 per head of population to just under £60 per head”, and is exhorting the fire services to save a further 10% of their costs. At a time when Central Government is throwing £1,000’s per head of population into the banks, I’m happy to pay the extra £6-£12 per annum to have a fire service that is more likely to be there quickly if/when I may need it.
Will 3i’s financial woes affect Civica?
In the Telegraph today entitled 3i tumbles amid fears over its future, Ben Harrington notes that JP Morgan Cazenove analyst Christopher Brown yesterday warned: "There is clearly a risk that 3i – like any geared company – could go bust if current conditions persist for several years and refinancing is no longer possible."
However, whilst 3i’s carries high levels of debt, it seems unlikely that there will be any major problem much before the end of 2010, when there is a major debt repayment due. By then, hopefully, we will be seeing the light at the end of the tunnel and nearing the end of the current recession (depression?). It would appear that all 3i’s need to do is to ensure that its cash generation is on target, and that it is able to maintain current cash levels.
But will that suggest that its companies, including Civica, will not have access to significant funds to make further acquisitions? Certainly they’ll be under pressure to generate cash from their existing businesses, but further significant acquisitions may be off the agenda for the next couple of years.
Which might make it difficult for Civica to bid for IBS should it come back onto the market (and should Capita allow Civica to bid for it – something that I noted in yesterday’s blog post is unlikely to happen). This would be a major blow to Civica, which has grown successfully out of well timed and executed acquisitions.
However, whilst 3i’s carries high levels of debt, it seems unlikely that there will be any major problem much before the end of 2010, when there is a major debt repayment due. By then, hopefully, we will be seeing the light at the end of the tunnel and nearing the end of the current recession (depression?). It would appear that all 3i’s need to do is to ensure that its cash generation is on target, and that it is able to maintain current cash levels.
But will that suggest that its companies, including Civica, will not have access to significant funds to make further acquisitions? Certainly they’ll be under pressure to generate cash from their existing businesses, but further significant acquisitions may be off the agenda for the next couple of years.
Which might make it difficult for Civica to bid for IBS should it come back onto the market (and should Capita allow Civica to bid for it – something that I noted in yesterday’s blog post is unlikely to happen). This would be a major blow to Civica, which has grown successfully out of well timed and executed acquisitions.
Tuesday 16 December 2008
Just how bad is Civica’s Revs & Bens offering?
That was one of the questions raised after my blog item commenting on the OFT’s full text of their decision to refer Capita’s acquisition of IBS to the Competition Commission.
Yes – I was the Director responsible for Civica’s Revenues & Benefits products (for a short time) and yes, in my defence, my main business recommendation on what to do with the R&B developments was not accepted by the Board. But no - I’m not about to reveal confidential information about my previous employer.
All I will say is that, immediately after acquiring responsibility for the products I met with (amongst others) two authorities that used the same Civica R&B products on the same day. One loved the product, the other didn’t. The one that loved the product spent little more than the annual maintenance fee with Civica, the other entered into projects worth £100k’s – showing just how unpredictable customers can be.
I gave up responsibility for the R&B products some two years ago and I don’t know how they have progressed since my departure - other than the OFT’s comment that it found that “third party responses did raise serious questions in relation to Civica's position in the market, highlighting its limited intentions with regard to competing for new work and perceived shortcomings in the quality of the product on offer which would require significant investment.”
So, I can but recommend that you talk to Civica’s existing customers (more than one) to find out about the products.
However Civica, like Anite with Pericles, lacks the market share and apparently the reputation to succeed in pure R&B applications – witness the lack of new sales activity identified in the recent OFT reports. In the Local Government market the saying goes that “good news travel slowly, whilst bad news travel like wildfire”. Both are/were in the same boat.
But should Capita be forced to divest IBS, I would guess that Civica could potentially be in pole position to pick it up, were a trade sale route followed. With Comino’s successful workflow and document management applications in R&B departments, a Civica/IBS R&B offering would be serious competition for Capita and Northgate – perhaps another reason why Capita will fight to retain IBS (and if not, to ensure it doesn’t fall into Civica’s hands)?
Yes – I was the Director responsible for Civica’s Revenues & Benefits products (for a short time) and yes, in my defence, my main business recommendation on what to do with the R&B developments was not accepted by the Board. But no - I’m not about to reveal confidential information about my previous employer.
All I will say is that, immediately after acquiring responsibility for the products I met with (amongst others) two authorities that used the same Civica R&B products on the same day. One loved the product, the other didn’t. The one that loved the product spent little more than the annual maintenance fee with Civica, the other entered into projects worth £100k’s – showing just how unpredictable customers can be.
I gave up responsibility for the R&B products some two years ago and I don’t know how they have progressed since my departure - other than the OFT’s comment that it found that “third party responses did raise serious questions in relation to Civica's position in the market, highlighting its limited intentions with regard to competing for new work and perceived shortcomings in the quality of the product on offer which would require significant investment.”
So, I can but recommend that you talk to Civica’s existing customers (more than one) to find out about the products.
However Civica, like Anite with Pericles, lacks the market share and apparently the reputation to succeed in pure R&B applications – witness the lack of new sales activity identified in the recent OFT reports. In the Local Government market the saying goes that “good news travel slowly, whilst bad news travel like wildfire”. Both are/were in the same boat.
But should Capita be forced to divest IBS, I would guess that Civica could potentially be in pole position to pick it up, were a trade sale route followed. With Comino’s successful workflow and document management applications in R&B departments, a Civica/IBS R&B offering would be serious competition for Capita and Northgate – perhaps another reason why Capita will fight to retain IBS (and if not, to ensure it doesn’t fall into Civica’s hands)?
Monday 15 December 2008
Decision time for Gladstone shareholders
It’s decision time for Gladstone shareholders. Constellation has announced a final, extension (to 30 December) for its bid for Gladstone and has made it clear that the 25p offer is final and will not be increased unless a competitive situation arises.
Acceptances – at 11.5 % - have not grown dramatically, and with Constellation’s own 29.9% holding, amount to just over 41% - so it seems likely that their offer will not succeed at its current level. Given the time of year, I would be surprised by anyone else entering the bidding now, so it looks as if shareholders have to accept either 25p now, or face the share price dropping back – to, say, 18p – after the bid lapses.
It will be interesting to see what Constellation does with its 29.9% shareholding if their bid lapses – my guess is that it will retain it, wait 6 months to see how the current Gladstone Board manages the business in a declining market, and possibly bid again if the Board does badly.
Yes – they might be persuaded to part with the holding for a short-term profit (and most probably an immediate bid from the purchaser), but my guess is that they’re in this for the long-term.
Acceptances – at 11.5 % - have not grown dramatically, and with Constellation’s own 29.9% holding, amount to just over 41% - so it seems likely that their offer will not succeed at its current level. Given the time of year, I would be surprised by anyone else entering the bidding now, so it looks as if shareholders have to accept either 25p now, or face the share price dropping back – to, say, 18p – after the bid lapses.
It will be interesting to see what Constellation does with its 29.9% shareholding if their bid lapses – my guess is that it will retain it, wait 6 months to see how the current Gladstone Board manages the business in a declining market, and possibly bid again if the Board does badly.
Yes – they might be persuaded to part with the holding for a short-term profit (and most probably an immediate bid from the purchaser), but my guess is that they’re in this for the long-term.
Ten or more layers of management
Friday saw Newcastle City council announced that it is to shed 270 management jobs to save over £9m next year.
The council explained further that it “employs around 10,000 staff (excluding teaching staff, which are not covered by these plans), of whom around 1,400 are managers. Over half of these 1,400 manage four or fewer people, and in some areas the Council has ten or more layers of management between the Chief Executive and front-line staff directly serving the public. The new plans intend that managers will each lead teams with a minimum of seven staff each, and often up to 12.”
One can but wonder how such a management structure was allowed to grow, but full marks to the council for addressing it – always assuming that it actually achieves it, and doesn’t just retain the staff but in the same job roles without the title “manager”.
From my experience there are many larger authorities – Mets, Unitaries and London Boroughs that can follow Newcastle’s example and shed several layers of (unnecessary) management. With the proper implementation of modern technology it is possible to have much flatter management structures; most times with faster, better communication that older, more hierarchical structures.
Surprisingly, from my experience, I believe that many counties also have more efficient structures (except possibly in the larger departments of Education and Social Services), and district councils have, in general, already taken such steps and have much better management structures.
It will interesting to see how many larger authorities bite the bullet and follow Newcastle’s lead....
The council explained further that it “employs around 10,000 staff (excluding teaching staff, which are not covered by these plans), of whom around 1,400 are managers. Over half of these 1,400 manage four or fewer people, and in some areas the Council has ten or more layers of management between the Chief Executive and front-line staff directly serving the public. The new plans intend that managers will each lead teams with a minimum of seven staff each, and often up to 12.”
One can but wonder how such a management structure was allowed to grow, but full marks to the council for addressing it – always assuming that it actually achieves it, and doesn’t just retain the staff but in the same job roles without the title “manager”.
From my experience there are many larger authorities – Mets, Unitaries and London Boroughs that can follow Newcastle’s example and shed several layers of (unnecessary) management. With the proper implementation of modern technology it is possible to have much flatter management structures; most times with faster, better communication that older, more hierarchical structures.
Surprisingly, from my experience, I believe that many counties also have more efficient structures (except possibly in the larger departments of Education and Social Services), and district councils have, in general, already taken such steps and have much better management structures.
It will interesting to see how many larger authorities bite the bullet and follow Newcastle’s lead....
Saturday 13 December 2008
Thursday 11 December 2008
Capita/IBS – OFT’s final text - what next?
The OFT has finally published the text covering their decision to refer Capita’s acquisition of IBS to the Competition Commission.
In my mind, the text does little to change my views expressed in my earlier blog item that, based on the criteria used by the OFT, it had little choice but to refer the acquisition to the CC on the basis of the reduction in competition. However, there is some interesting narrative on the various arguments and discussions that have clearly taken place during the investigation period.
One such discussion was clearly about Civica’s position in the Revenues & Benefits market and the competitive nature of their offering. “Capita submitted that Civica is a longstanding competitor in the market for R&B software services and that 3i Investments plc's recent acquisition of Civica would give Civica access to substantial capital for business development. Capita also stated that the Civica product has received good ratings and therefore has good referenceability.”
However, in discussions with others, OFT found that “third party responses did raise serious questions in relation to Civica's position in the market, highlighting its limited intentions with regard to competing for new work and perceived shortcomings in the quality of the product on offer which would require significant investment. The OFT has no evidence on which to conclude that Civica is likely to present an increased competitive constraint in the future. [REDACTED].”
(By the way redacted – I had to look it up – means ‘confidential information that has been removed from a document’). I can but guess at the further information, presumably about Civica’s product, that was removed.
Further on there is discussion about new entrants to the market:
“Capita considered that the most likely new entrants to the market are companies which already supply software, particularly financial software, to local government. Capita also stated that providers of software for use in social care have the necessary expertise to enter. Capita estimated the costs of entry for these players to be in the region of [<£2 million] as they already have the necessary expertise. It argued that a new entrant could enter the market within a year to 18 months given the pool of available staff.”
However, “the OFT's investigations have cast significant doubt on the potential for new entry into the R&B segment. Specifically, the OFT has been made aware that the costs and time involved in entering the market with a new product are significant at around £2-10m and two years respectively.”
Having had personal exposure to the costs of developing both financial and R&B systems, I would put the estimate at close to the £10m upper limit quoted by the OFT, and most probably an elapsed time well in excess of the two years quoted.
Given that there will be very few new tenders over the coming years (most Pericles customers will no doubt try to stay with Northgate, leaving only a small number of Pericles sites and the Civica sites yet to purchase new systems – Capita estimated “that the value of contracts expected to come up for renewal (where the OFT's concerns lay) was £[1-2] million for 2009”), I can’t see anyone producing a business plan that would be approved in a normal financial environment let alone the current financial climate.
However, an even bigger concern for new entrants (and existing suppliers considering a major speculative investment in the R&B market) is the serious risk that Central Government will totally change one or more of the areas (I suspect that the area of Housing Benefits is the one causing the most concern), potentially destroying the future market for new systems overnight.
And what would Central Government do if it were to introduce a new method of collecting revenue or supplying benefits (e.g. to replace HB)? Bearing in mind that many of the replacement R&B systems over the past few years have been largely funded by Central Government, no supplier is likely to start any development without their support. Given the current government’s apparent preference for single suppliers in such situations, no doubt there would be a competitive tender for a single supplier (I can’t see Central Government funding two or even three suppliers to develop competing systems to fulfil the same requirements).
So perhaps having two strong suppliers of R&B (i.e. Northgate/Sx3/Anite and Capita/IBS) is a luxury compared to the future of potentially having a single supplier....
Meanwhile, there will undoubtedly be many months (years?) of uncertainty before the CC rules on the acquisition and, if it rules against it, decides and agrees on the remedies. Then we may have a new government, possibly new R&B policies, and a whole new ballgame. In the meantime we will have one supplier hobbled with the costs of running two sales teams and maintaining separate teams with Chinese walls – inevitably incurring increased costs that will eventually be passed onto the customer....
Given the specialist nature of the R&B market and the control that central government retains over it, the CC should make a rapid decision to allow the acquisition to proceed with some levels of protection as offered by Capita in its submissions to the OFT. As with the OFT decision, my concern is that the CC will be constrained in what it is allowed to do, and that it will require a senior government decision, taken quickly, to resolve this situation – and that seems unlikely at the moment.
In my mind, the text does little to change my views expressed in my earlier blog item that, based on the criteria used by the OFT, it had little choice but to refer the acquisition to the CC on the basis of the reduction in competition. However, there is some interesting narrative on the various arguments and discussions that have clearly taken place during the investigation period.
One such discussion was clearly about Civica’s position in the Revenues & Benefits market and the competitive nature of their offering. “Capita submitted that Civica is a longstanding competitor in the market for R&B software services and that 3i Investments plc's recent acquisition of Civica would give Civica access to substantial capital for business development. Capita also stated that the Civica product has received good ratings and therefore has good referenceability.”
However, in discussions with others, OFT found that “third party responses did raise serious questions in relation to Civica's position in the market, highlighting its limited intentions with regard to competing for new work and perceived shortcomings in the quality of the product on offer which would require significant investment. The OFT has no evidence on which to conclude that Civica is likely to present an increased competitive constraint in the future. [REDACTED].”
(By the way redacted – I had to look it up – means ‘confidential information that has been removed from a document’). I can but guess at the further information, presumably about Civica’s product, that was removed.
Further on there is discussion about new entrants to the market:
“Capita considered that the most likely new entrants to the market are companies which already supply software, particularly financial software, to local government. Capita also stated that providers of software for use in social care have the necessary expertise to enter. Capita estimated the costs of entry for these players to be in the region of [<£2 million] as they already have the necessary expertise. It argued that a new entrant could enter the market within a year to 18 months given the pool of available staff.”
However, “the OFT's investigations have cast significant doubt on the potential for new entry into the R&B segment. Specifically, the OFT has been made aware that the costs and time involved in entering the market with a new product are significant at around £2-10m and two years respectively.”
Having had personal exposure to the costs of developing both financial and R&B systems, I would put the estimate at close to the £10m upper limit quoted by the OFT, and most probably an elapsed time well in excess of the two years quoted.
Given that there will be very few new tenders over the coming years (most Pericles customers will no doubt try to stay with Northgate, leaving only a small number of Pericles sites and the Civica sites yet to purchase new systems – Capita estimated “that the value of contracts expected to come up for renewal (where the OFT's concerns lay) was £[1-2] million for 2009”), I can’t see anyone producing a business plan that would be approved in a normal financial environment let alone the current financial climate.
However, an even bigger concern for new entrants (and existing suppliers considering a major speculative investment in the R&B market) is the serious risk that Central Government will totally change one or more of the areas (I suspect that the area of Housing Benefits is the one causing the most concern), potentially destroying the future market for new systems overnight.
And what would Central Government do if it were to introduce a new method of collecting revenue or supplying benefits (e.g. to replace HB)? Bearing in mind that many of the replacement R&B systems over the past few years have been largely funded by Central Government, no supplier is likely to start any development without their support. Given the current government’s apparent preference for single suppliers in such situations, no doubt there would be a competitive tender for a single supplier (I can’t see Central Government funding two or even three suppliers to develop competing systems to fulfil the same requirements).
So perhaps having two strong suppliers of R&B (i.e. Northgate/Sx3/Anite and Capita/IBS) is a luxury compared to the future of potentially having a single supplier....
Meanwhile, there will undoubtedly be many months (years?) of uncertainty before the CC rules on the acquisition and, if it rules against it, decides and agrees on the remedies. Then we may have a new government, possibly new R&B policies, and a whole new ballgame. In the meantime we will have one supplier hobbled with the costs of running two sales teams and maintaining separate teams with Chinese walls – inevitably incurring increased costs that will eventually be passed onto the customer....
Given the specialist nature of the R&B market and the control that central government retains over it, the CC should make a rapid decision to allow the acquisition to proceed with some levels of protection as offered by Capita in its submissions to the OFT. As with the OFT decision, my concern is that the CC will be constrained in what it is allowed to do, and that it will require a senior government decision, taken quickly, to resolve this situation – and that seems unlikely at the moment.
Wednesday 10 December 2008
Insurance cover to end for HIPs search data
On Monday, Margaret Beckett, Minister of State (Housing), announced the ending transitional insurance cover provision for provision of search information in a HIP. She stated:
“This provision was intended to enable the private sector to conduct property searches in local authorities where access to relevant data were (sic) restricted. But in practice, too many search providers are using this provision even where the data are readily available. Lacking the relevant information, in some cases buyers have had to pay for a second search to be carried out by the local authority. This is not acceptable. Wherever possible, consumers need information rather than insurance; and they should not have to pay for it twice.
The Under-Secretary, my hon. Friend Mr. Wright, has already laid provisions introducing a new charging regime for local authority property searches data. As charges become fairer, private sector searchers will have easier access and should therefore not need this insurance cover, which will end on 6 April 2009, coinciding with the introduction of the property information questionnaire.
I want to make sure that consumers find property searches as informative and helpful as possible. I have asked Ted Beardsall, former deputy chief executive of the Land Registry, to convene a working group to consider how these might be made simpler and more easy to use.”
In practice, this date for ending is some 3 months later than expected – a short-lived reprieve for Personal Search Companies (PSCs).
What will be more interesting to see will be how Local Authorities price access to data for PSC’s compared to their own “official search” price. Now LA’s are able to use cost-recovery to increase greatly their charges for access to un-refined data (via the Internet or Personal Search companies), and drive down the differential in price between a Personal and an Official search (e.g. East Staffs BC apparently proposes to change their Personal Search Fee from £11 to £61 whilst reducing their Official Search fee from £90 to £75).
With Central Government having bottled out of setting charges centrally, and leaving LA's to set their own, I envisage a battle on pricing. But with the Local Authorities having the data (possession being nine tenths of the law), and the housing market in serious decline – unless Central Government steps in (I suspect not) - I wonder how much PSC’s will choose to fight rather than just fade away. One way or another I suspect that PSCs will be on their way out ....
P.S. I still think that HIPS will eventually be canned to be replaced by a much reduced requirement for an energy certificate, the newly announced PIQ and other minor bits of information – the only question in my mind is when?
“This provision was intended to enable the private sector to conduct property searches in local authorities where access to relevant data were (sic) restricted. But in practice, too many search providers are using this provision even where the data are readily available. Lacking the relevant information, in some cases buyers have had to pay for a second search to be carried out by the local authority. This is not acceptable. Wherever possible, consumers need information rather than insurance; and they should not have to pay for it twice.
The Under-Secretary, my hon. Friend Mr. Wright, has already laid provisions introducing a new charging regime for local authority property searches data. As charges become fairer, private sector searchers will have easier access and should therefore not need this insurance cover, which will end on 6 April 2009, coinciding with the introduction of the property information questionnaire.
I want to make sure that consumers find property searches as informative and helpful as possible. I have asked Ted Beardsall, former deputy chief executive of the Land Registry, to convene a working group to consider how these might be made simpler and more easy to use.”
In practice, this date for ending is some 3 months later than expected – a short-lived reprieve for Personal Search Companies (PSCs).
What will be more interesting to see will be how Local Authorities price access to data for PSC’s compared to their own “official search” price. Now LA’s are able to use cost-recovery to increase greatly their charges for access to un-refined data (via the Internet or Personal Search companies), and drive down the differential in price between a Personal and an Official search (e.g. East Staffs BC apparently proposes to change their Personal Search Fee from £11 to £61 whilst reducing their Official Search fee from £90 to £75).
With Central Government having bottled out of setting charges centrally, and leaving LA's to set their own, I envisage a battle on pricing. But with the Local Authorities having the data (possession being nine tenths of the law), and the housing market in serious decline – unless Central Government steps in (I suspect not) - I wonder how much PSC’s will choose to fight rather than just fade away. One way or another I suspect that PSCs will be on their way out ....
P.S. I still think that HIPS will eventually be canned to be replaced by a much reduced requirement for an energy certificate, the newly announced PIQ and other minor bits of information – the only question in my mind is when?
Tuesday 9 December 2008
Who's next for nationalisation?
Regular readers will be aware of my views on the banks – after the sub-prime mortgages, CDOs and toxic loans, then the rusty car loans, we will have the rancid corporate loans. My view remains that most major banks in this country will wind up being fully nationalised – but what of major businesses?
I don’t believe in Government bailing out major companies. For instance I believe it is a major mistake by the US government to bail out any of their car manufacturers – they have become large organisations that are out-of-touch with their consumers and pursuing business strategies that were always destined to fail – credit crunch or no. As in nature, the rule of “survival of the fittest” is the best rule for businesses as well - artificially keeping weak businesses alive will, in the longer term, cause more problems than are solved by supporting them short-term.
But the UK Government seems destined to nationalise several major business over the next few months, many unintentionally. I believe that many highly leveraged organisations will shortly be defaulting on their loans to banks that will by then be partly- (or I believe fully) nationalised. Government will have difficult political decisions to make – let the companies fail, with the consequent loss of jobs amongst the electorate – or bail them out. In some situations the banks will have no choice but to take on ownership to try to recover some of their losses, but in a nationalised banking environment where politicians will undoubtedly make many of the decisions, I suspect more will pass into public ownership than would normally.
On Monday, Jon Mouton wrote an article in the FT about the £20bn of debt in the pub industry that he believes is currently “unsustainable”. One can but agree with his assessment that “the capital structures for a lot of pub companies have become desperately inappropriate in a falling market,” and that “the highly leveraged business model pioneered by the likes of Punch Taverns and Enterprise Inns was looking increasingly untenable”. Will the pub industry – so close to many of Labour’s supports – follow the automotive industry in seeking government funding?
What about other sectors? The retail sector is always one of the first to feel the effects of a recession – Woolworths and MFI had flawed business strategies and were early casualties – but even businesses with strong business strategies but deeply in debt may not survive. For example, Boots reputedly has c £8bn in debt – will it survive any downturn? – if not, there is little doubt that it would have to continue trading – but in whose ownership?
Yes - there will be several “vulture” debt funds in the Private Equity sector, but I don’t think their pockets will be deep enough for all the distressed debt that will be around next year. No – my money’s on several “nationalisations” during 2009....
I don’t believe in Government bailing out major companies. For instance I believe it is a major mistake by the US government to bail out any of their car manufacturers – they have become large organisations that are out-of-touch with their consumers and pursuing business strategies that were always destined to fail – credit crunch or no. As in nature, the rule of “survival of the fittest” is the best rule for businesses as well - artificially keeping weak businesses alive will, in the longer term, cause more problems than are solved by supporting them short-term.
But the UK Government seems destined to nationalise several major business over the next few months, many unintentionally. I believe that many highly leveraged organisations will shortly be defaulting on their loans to banks that will by then be partly- (or I believe fully) nationalised. Government will have difficult political decisions to make – let the companies fail, with the consequent loss of jobs amongst the electorate – or bail them out. In some situations the banks will have no choice but to take on ownership to try to recover some of their losses, but in a nationalised banking environment where politicians will undoubtedly make many of the decisions, I suspect more will pass into public ownership than would normally.
On Monday, Jon Mouton wrote an article in the FT about the £20bn of debt in the pub industry that he believes is currently “unsustainable”. One can but agree with his assessment that “the capital structures for a lot of pub companies have become desperately inappropriate in a falling market,” and that “the highly leveraged business model pioneered by the likes of Punch Taverns and Enterprise Inns was looking increasingly untenable”. Will the pub industry – so close to many of Labour’s supports – follow the automotive industry in seeking government funding?
What about other sectors? The retail sector is always one of the first to feel the effects of a recession – Woolworths and MFI had flawed business strategies and were early casualties – but even businesses with strong business strategies but deeply in debt may not survive. For example, Boots reputedly has c £8bn in debt – will it survive any downturn? – if not, there is little doubt that it would have to continue trading – but in whose ownership?
Yes - there will be several “vulture” debt funds in the Private Equity sector, but I don’t think their pockets will be deep enough for all the distressed debt that will be around next year. No – my money’s on several “nationalisations” during 2009....
Monday 8 December 2008
Solid set of numbers from IDOX
IDOX has today published its results for the first full year with its CAPS acquisition and 8 months with Plantech. The results to 31 October 2008 show revenues up 65% to £34.0m (2007: £20.6m), and pre-tax profits up 267% to £6.6m (£1.8m). Normalised EPS is up 80% to 1.62p (0.90p) with basic EPS up 122% to 1.40p (0.63p).
Delving into the accounts shows that the company has used its two acquisitions to help maximise the profits reported – through the release of £0.6m provision from the CAPS acquisition and a £1m operating profit from the first 8 months of running Plantech (compared to the £149k profit in the 4 months prior to acquisition, and £294k for the last completed financial year prior to acquisition). On the basis that there’s not more in the accounts that I’ve failed to pick up in my quick review, these are not in my mind excessive – I’ve seen far worse in other acquisitive companies.
More importantly, IDOX now has net cash of around £1M and recurring revenues at 46% of core software revenues, a good position to be in today’s difficult financial climate.
IDOX is a company that has been able to successfully reposition itself on the back of a good acquisitions. For the first few years of its life it struggled to find a niche – now it is a dominant position in the Local Government land & property market – and despite growing pains from its acquisition of CAPS (now apparently overcome) it has made some significant contract wins in its own name over the past 12 months.
Unfortunately, its original core business units seem to be struggling. Although claiming 9% organic growth in core software business, its solutions business has declined in revenue and fallen into loss, and whilst its recruitment business is reported as “remaining stable”, I can’t believe that it won’t be hit significantly by the current financial climate. Personally, I would not be surprised to see the Solutions and Recruitment businesses sold off (perhaps to their management?), and for IDOX to become an almost “pure play” in the land & property market (most probably retaining its document management applications).
As I publish this blog item, the IDOX share price sits unchanged at 8.25p - a P/E of less than 6 - valuing the company at £28m, or approx. 80% of revenues – although this morning’s analyst’s meeting has yet to finish. In a normal credit market I would have expected IDOX to be under offer from one of the larger players in the Local Government market, or the possible subject of an MBO. I still think this is likely, but I suspect that potential predators will sit back and wait to see how IDOX manages the slow-down in its markets.........
P.S. I am a shareholder in IDOX.
Delving into the accounts shows that the company has used its two acquisitions to help maximise the profits reported – through the release of £0.6m provision from the CAPS acquisition and a £1m operating profit from the first 8 months of running Plantech (compared to the £149k profit in the 4 months prior to acquisition, and £294k for the last completed financial year prior to acquisition). On the basis that there’s not more in the accounts that I’ve failed to pick up in my quick review, these are not in my mind excessive – I’ve seen far worse in other acquisitive companies.
More importantly, IDOX now has net cash of around £1M and recurring revenues at 46% of core software revenues, a good position to be in today’s difficult financial climate.
IDOX is a company that has been able to successfully reposition itself on the back of a good acquisitions. For the first few years of its life it struggled to find a niche – now it is a dominant position in the Local Government land & property market – and despite growing pains from its acquisition of CAPS (now apparently overcome) it has made some significant contract wins in its own name over the past 12 months.
Unfortunately, its original core business units seem to be struggling. Although claiming 9% organic growth in core software business, its solutions business has declined in revenue and fallen into loss, and whilst its recruitment business is reported as “remaining stable”, I can’t believe that it won’t be hit significantly by the current financial climate. Personally, I would not be surprised to see the Solutions and Recruitment businesses sold off (perhaps to their management?), and for IDOX to become an almost “pure play” in the land & property market (most probably retaining its document management applications).
As I publish this blog item, the IDOX share price sits unchanged at 8.25p - a P/E of less than 6 - valuing the company at £28m, or approx. 80% of revenues – although this morning’s analyst’s meeting has yet to finish. In a normal credit market I would have expected IDOX to be under offer from one of the larger players in the Local Government market, or the possible subject of an MBO. I still think this is likely, but I suspect that potential predators will sit back and wait to see how IDOX manages the slow-down in its markets.........
P.S. I am a shareholder in IDOX.
Friday 5 December 2008
Disc failure
Not a good week - first the burglar alarm develops a mind of its own (faulty door sensor eventually traced and replaced), then the hard disc on my laptop gives up the ghost.
Fortunately I take a daily backup and, after the local Dell engineer turned up to replace the disc, I've been able to recover all my data and e-mail. (I use Microsoft's Live OneCare product across all our PC's - and this is the second time I've had to reload from its backup - each time I've been able to recover everything successfully, including e-mail, tasks, calendar entries, Internet favourites, iTunes music, etc ... - however, it does take an overnight run to complete the recovery of my 130,000+ files).
But now the reloaded Outlook doesn't want to connect to my Office Live e-mail account, and I'm having to access my e-mail directly through my browser (the second beta of IE8 - which continues to perform so much better than IE7).
So, apologies for a lack of blog entries over the past couple of days. Hopefully I'll be back to full connectivity and productivity later today.....
Fortunately I take a daily backup and, after the local Dell engineer turned up to replace the disc, I've been able to recover all my data and e-mail. (I use Microsoft's Live OneCare product across all our PC's - and this is the second time I've had to reload from its backup - each time I've been able to recover everything successfully, including e-mail, tasks, calendar entries, Internet favourites, iTunes music, etc ... - however, it does take an overnight run to complete the recovery of my 130,000+ files).
But now the reloaded Outlook doesn't want to connect to my Office Live e-mail account, and I'm having to access my e-mail directly through my browser (the second beta of IE8 - which continues to perform so much better than IE7).
So, apologies for a lack of blog entries over the past couple of days. Hopefully I'll be back to full connectivity and productivity later today.....
Tuesday 2 December 2008
Gladstone and Constellation slug it out
Unsurprisingly, Constellation has gone on the attack (see here for the text of its letter to shareholders) to try to support its low-ball offer of 25p for Gladstone, which has been extended to 12 December.
Much as I suspected in my previous post, the main attack has been on Gladstone’s poor cash generation, showing how net cash flow from operations (post-capitalised development expenditure) has declined from £1.4M in 2005 to £0.5M in 2008. Also, that “Gladstone has provided minimal returns to shareholders” and “has paid no dividend for the past five years”.
Constellation has also gone for the “fear and uncertainty” factor by pointing to the likely drop in Gladstone’s share price should Constellation’s bid lapse, and that despite the Gladstone Board stating that it is 'in discussions with interested parties about the possibility of an alternative offer for the Group', no offer has been forthcoming.
But I still feel that the 25p offer remains too low to win sufficient shareholder support for the bid to succeed at the current level. Yes – Constellation will undoubtedly drive the company to deliver better returns over the coming years – but those increased rewards will not be seen by the existing shareholders if their bid succeeds. As I noted previously the bid seems destined to fail at its current level, but I believe that Constellation will up its bid – 30p might succeed, but if they only bid the expected 28p then I suspect it won’t.
Seconds out ... let round 2 begin.....
P.S. I remain a shareholder in Gladstone.
Much as I suspected in my previous post, the main attack has been on Gladstone’s poor cash generation, showing how net cash flow from operations (post-capitalised development expenditure) has declined from £1.4M in 2005 to £0.5M in 2008. Also, that “Gladstone has provided minimal returns to shareholders” and “has paid no dividend for the past five years”.
Constellation has also gone for the “fear and uncertainty” factor by pointing to the likely drop in Gladstone’s share price should Constellation’s bid lapse, and that despite the Gladstone Board stating that it is 'in discussions with interested parties about the possibility of an alternative offer for the Group', no offer has been forthcoming.
But I still feel that the 25p offer remains too low to win sufficient shareholder support for the bid to succeed at the current level. Yes – Constellation will undoubtedly drive the company to deliver better returns over the coming years – but those increased rewards will not be seen by the existing shareholders if their bid succeeds. As I noted previously the bid seems destined to fail at its current level, but I believe that Constellation will up its bid – 30p might succeed, but if they only bid the expected 28p then I suspect it won’t.
Seconds out ... let round 2 begin.....
P.S. I remain a shareholder in Gladstone.
Monday 1 December 2008
OFT refers Capita/IBS merger to the Competition Commission
As I predicted last month (see here) the OFT has referred the completed acquisition of IBS OPENSystems by Capita to the Competition Commission. Quoting from the press release (we’re still awaiting the full text) from the OFT:
The OFT has significant competition concerns in relation to the supply of revenue and benefits software services to UK local authorities. Bidding data, supported by strong customer concerns, indicates that the merger combines two of only three successful competitors supplying such software, and that with the removal of IBS as an important rival, Capita would be likely to find it profitable to offer its own and/or IBS' products and services at less favourable terms in future bidding opportunities.
Although Northgate Information Solutions (Northgate) will remain a substantial rival to Capita, the OFT was not persuaded that two successful bidders competing head to head would give customers the same value for money as three, and new entry to restore local authorities' supply options is unlikely.
Based on the reduction in competition, I can’t see that this decision can be questioned.
However, there is a need to review (and I’m sure that the Competition Commission will look at), the specific nature of the UK Revenues & Benefits market – a relatively small market in national, let alone global, terms and one driven by Government policy – something that can impose severe constraints on suppliers’ abilities to be successful. Indeed, should Central Government decide to abolish Housing Benefits, and/or move to local income tax, then suppliers could see their market disappear overnight – not something that is likely to encourage multiple suppliers to invest their own funds in developing/enhancing their products.
One could argue that, given the size and nature of the R&B market, having two (rather than 3 or more) suppliers makes it easier and, potentially more cost-effective, for Government to make substantial changes to the associated legislation. (One supplier might be even better – but unlikely to happen in the current environment).
I’ll aim to return to this topic later, once the full OFT text has been published.
The OFT has significant competition concerns in relation to the supply of revenue and benefits software services to UK local authorities. Bidding data, supported by strong customer concerns, indicates that the merger combines two of only three successful competitors supplying such software, and that with the removal of IBS as an important rival, Capita would be likely to find it profitable to offer its own and/or IBS' products and services at less favourable terms in future bidding opportunities.
Although Northgate Information Solutions (Northgate) will remain a substantial rival to Capita, the OFT was not persuaded that two successful bidders competing head to head would give customers the same value for money as three, and new entry to restore local authorities' supply options is unlikely.
Based on the reduction in competition, I can’t see that this decision can be questioned.
However, there is a need to review (and I’m sure that the Competition Commission will look at), the specific nature of the UK Revenues & Benefits market – a relatively small market in national, let alone global, terms and one driven by Government policy – something that can impose severe constraints on suppliers’ abilities to be successful. Indeed, should Central Government decide to abolish Housing Benefits, and/or move to local income tax, then suppliers could see their market disappear overnight – not something that is likely to encourage multiple suppliers to invest their own funds in developing/enhancing their products.
One could argue that, given the size and nature of the R&B market, having two (rather than 3 or more) suppliers makes it easier and, potentially more cost-effective, for Government to make substantial changes to the associated legislation. (One supplier might be even better – but unlikely to happen in the current environment).
I’ll aim to return to this topic later, once the full OFT text has been published.
Gladstone puts up spirited defence
In Constellation’s attempt to win Gladstone at a knock-down price (25p), I see that Gladstone has come out with a fairly strong defence, based (on the face of it) on a reasonable set of preliminary results for the year to August 2008. Revenue was up 4% at £9.55M, EBITDA before exceptional items and share based payment charge was up £251k to £1.91 million, and operating activities generated £1.25 million of cash (in my mind, cash generation is always a good indicator of strength for a software applications company).
However, the £1.25M seems disappointingly low to me, and the preliminary results show that cash decreased by £400k to £4.6 million “due to development expenditure, purchase of own shares and investment in education business operations” and, more importantly, £521k of development expenditure was capitalised in the year (up from £100k in the year before).
Previous readers of this blog will know my concerns about the capitalisation of software development costs. Software application companies need to continually develop and enhance their products to stay competitive and there is a considerable debate about which development costs should be capitalised, and which costs should be written off as incurred.
The prudent approach of writing off development costs as they are incurred may not be an option if/when the company is trying to repel an unwanted bid (if the £521k of development expenditure had been written off, Gladstone’s EBITDA for the year would have been some £270k less than the previous year – not something that would help the company’s defence).
If, however, the £521k represents (part of) a planned development programme with a business plan showing realistically the returns to be generated from the development, and the development is going to plan, then capitalisation may be a reasonable step. The problem for Constellation is, I suspect, that it doesn’t have access to such information and it can but guess at the validity of the capitalised expenditure.
With only around 10% of acceptances from Gladstone’s other shareholders, although Constellation has extended its bid to 12 December, the bid seems destined to fail at its current level. As previously predicted, I suspect that Constellation will up its bid – if it were to go to 35p, then I believe it would be accepted – anything less is questionable – 30p might succeed, but if they only bid the expected 28p then I suspect it won’t.
No doubt Constellation is going through the results with a fine toothcomb, also trying to get some information on what business is really like for the Gladstone sales and development teams, and sounding out Gladstone’s major investors to see what has to be done to win them over. I suspect that there will be a higher bid, backed up by further arguments from Constellation – I don’t think Constellation, having gone so far, will give up now.
However, the £1.25M seems disappointingly low to me, and the preliminary results show that cash decreased by £400k to £4.6 million “due to development expenditure, purchase of own shares and investment in education business operations” and, more importantly, £521k of development expenditure was capitalised in the year (up from £100k in the year before).
Previous readers of this blog will know my concerns about the capitalisation of software development costs. Software application companies need to continually develop and enhance their products to stay competitive and there is a considerable debate about which development costs should be capitalised, and which costs should be written off as incurred.
The prudent approach of writing off development costs as they are incurred may not be an option if/when the company is trying to repel an unwanted bid (if the £521k of development expenditure had been written off, Gladstone’s EBITDA for the year would have been some £270k less than the previous year – not something that would help the company’s defence).
If, however, the £521k represents (part of) a planned development programme with a business plan showing realistically the returns to be generated from the development, and the development is going to plan, then capitalisation may be a reasonable step. The problem for Constellation is, I suspect, that it doesn’t have access to such information and it can but guess at the validity of the capitalised expenditure.
With only around 10% of acceptances from Gladstone’s other shareholders, although Constellation has extended its bid to 12 December, the bid seems destined to fail at its current level. As previously predicted, I suspect that Constellation will up its bid – if it were to go to 35p, then I believe it would be accepted – anything less is questionable – 30p might succeed, but if they only bid the expected 28p then I suspect it won’t.
No doubt Constellation is going through the results with a fine toothcomb, also trying to get some information on what business is really like for the Gladstone sales and development teams, and sounding out Gladstone’s major investors to see what has to be done to win them over. I suspect that there will be a higher bid, backed up by further arguments from Constellation – I don’t think Constellation, having gone so far, will give up now.
Wednesday 26 November 2008
Return from Egypt
Many thanks for the e-mails wondering why the blog hasn’t been updated for a couple of weeks – as some of you guessed, I’ve been away – templing and toombing in Egypt.
I’ve come back to the normal pile of e-mail in my inbox, and am working my way through the e-mails as quickly as possible as I’m off up north on a project for the next few days. Somehow I think the weather will be somewhat cooler than the 30C I’ve been used to....
In my absence I note that a number of my predictions have come to fruition – notably the Capita/IBS acquisition being referred to the Competition Commission, and a spirited defence by Gladstone against Constellation’s opportunistic 25p bid. I’ll comment further when I’m back from the frozen north.
I’ve come back to the normal pile of e-mail in my inbox, and am working my way through the e-mails as quickly as possible as I’m off up north on a project for the next few days. Somehow I think the weather will be somewhat cooler than the 30C I’ve been used to....
In my absence I note that a number of my predictions have come to fruition – notably the Capita/IBS acquisition being referred to the Competition Commission, and a spirited defence by Gladstone against Constellation’s opportunistic 25p bid. I’ll comment further when I’m back from the frozen north.
Monday 3 November 2008
OFT vs. Northgate/Anite and Capita/IBS
The OFT has published the full text of its decision not to refer Northgate’s proposed acquisition of Anite’s Public Sector business to the Competition Commission. A summary of the text, and a link to the full text can be found here.
Much as predicted, the focus of their investigation was on the Revenues & Benefits market, the two other areas (of Local Government Social Housing and Criminal Justice) rightfully only requiring minimal investigation to confirm there were no serious competition concerns.
In the R&B market, the OFT seems to have drawn the conclusion that Anite represented no real competition– noting that the “majority of authorities contacted that have recently tendered their R&B business have told the OFT that they do not consider the Pericles product as a viable alternative”. Going on to conclude “bidding data indicate that Anite does not operate as a key competitor in the market. Having assessed the competitive interaction existing between Northgate and Anite, and taking into account Anite's position in the market going forward, the OFT believes that Anite does not place a significant competitive constraint on Northgate and is unlikely to do so in the future. Accordingly, no realistic prospect of substantial lessening of competition arises as a result of unilateral effect concerns in the R&B market.”
Interestingly the full text does refer to the current Capita/IBS investigation. Reading between the lines of the full text (and with knowledge of some of the figures hidden from public view), although the Northgate/Anite OFT text makes it clear that “the OFT does not prejudge the outcome of its investigation in that case”, if it is to follow the same argument that in the end allowed the Northgate/Anite acquisition to proceed, then it seems highly likely that there will be a “substantial lessening of competition” in the R&B market and therefore the Capita/IBS acquisition will be referred.
The Northgate/Anite OFT text noted that “Civica appears not to be interested in bidding for any offer, after having failed to develop a system to meet customer requirements”. So there really are only two suppliers now – Northgate/Anite and Capita/IBS – and on the basis of new business wins over the past few years it seems clear that IBS did indeed place ”significant competitive constraint” on Capita.
It seems likely that the Capita/IBS deal will wind up on the Competition Commission’s desk after all.........
Much as predicted, the focus of their investigation was on the Revenues & Benefits market, the two other areas (of Local Government Social Housing and Criminal Justice) rightfully only requiring minimal investigation to confirm there were no serious competition concerns.
In the R&B market, the OFT seems to have drawn the conclusion that Anite represented no real competition– noting that the “majority of authorities contacted that have recently tendered their R&B business have told the OFT that they do not consider the Pericles product as a viable alternative”. Going on to conclude “bidding data indicate that Anite does not operate as a key competitor in the market. Having assessed the competitive interaction existing between Northgate and Anite, and taking into account Anite's position in the market going forward, the OFT believes that Anite does not place a significant competitive constraint on Northgate and is unlikely to do so in the future. Accordingly, no realistic prospect of substantial lessening of competition arises as a result of unilateral effect concerns in the R&B market.”
Interestingly the full text does refer to the current Capita/IBS investigation. Reading between the lines of the full text (and with knowledge of some of the figures hidden from public view), although the Northgate/Anite OFT text makes it clear that “the OFT does not prejudge the outcome of its investigation in that case”, if it is to follow the same argument that in the end allowed the Northgate/Anite acquisition to proceed, then it seems highly likely that there will be a “substantial lessening of competition” in the R&B market and therefore the Capita/IBS acquisition will be referred.
The Northgate/Anite OFT text noted that “Civica appears not to be interested in bidding for any offer, after having failed to develop a system to meet customer requirements”. So there really are only two suppliers now – Northgate/Anite and Capita/IBS – and on the basis of new business wins over the past few years it seems clear that IBS did indeed place ”significant competitive constraint” on Capita.
It seems likely that the Capita/IBS deal will wind up on the Competition Commission’s desk after all.........
The battle for Gladstone hots up
Canadian firm Constellation has posted its offer document for the 71% of shares that it currently doesn’t own. Not surprisingly, Constellation has heated up the likely war of words over the next few weeks quoting the following benefits of their bid to Gladstone’s shareholders:
· Provides a cash alternative for shareholders compared to an uncertain future under the current Gladstone Board
· Provides the Gladstone business and employees with an attractive future as part of the Constellation group, which is focused on developing vertical market software businesses
· Constellation believes that Gladstone's existing management are not developing the business to its full potential
Leisure systems provider Gladstone has again rejected the unsolicited approach worth £13.54m from Canadian firm Constellation Software (see here for RNS). Stressing that the Board “UNANIMOUSLY rejects the Offer” (their capitals) it states that:
· It believes the Offer undervalues the Company and its future growth potential.
· The timing of the Offer is opportunistic
· The Offer terms fail to take account of Gladstone's robust business structure, market leadership, the quality of its products and investments in a new technology platform which will enable expansion across several new and existing markets and the future prospects in both the Health & Leisure and Education markets.
· Gladstone has a strong balance sheet with significant cash and no borrowings and it is ideally positioned for growth across all its markets and to take advantage of any opportunities that may arise.
In the end I think it will come down to the price that Constellation (or any other potential bidder) would offer for the business.
Either way, shareholders in Gladstone should get more that the 25p currently on the table. As I noted in my last post on this topic, if no one else enters the fray, I suspect that an increased offer of around 30p will see Constellation win (and still get a bargain).
P.S. I am a shareholder in Gladstone - and, as ever, DYOR
Northgate completes Anite PS acquisition
As expected, Northgate completed its acquisition of Anite’s Public Sector division on Friday. I covered this acquisition in last week’s blog (following news that the acquisition was not going to be referred to the Competition Commission), but what now for Anite?
As noted in last week’s blog, 6-8 years ago, Anite had a knack of buying businesses that were just going ex-growth, but at high prices. Now it has two businesses that are in markets that are both declining – a Wireless Testing division and a Travel division. Yes – it can use the £54m from Northgate to clear its debt and possibly buy-back some shares, but longer term it is not out of the wood.
Holways HotViews (sorry – UKHotViews now) has a good article on this – I agree with his expectation of another step before Anite’s transformation is complete – but the Anite Board has struggled to deliver good news over the past few years, and I would not be surprised to see Anite’s share price decline considerably over the coming months as the Anite Board tries to complete that transformation.
As noted in last week’s blog, 6-8 years ago, Anite had a knack of buying businesses that were just going ex-growth, but at high prices. Now it has two businesses that are in markets that are both declining – a Wireless Testing division and a Travel division. Yes – it can use the £54m from Northgate to clear its debt and possibly buy-back some shares, but longer term it is not out of the wood.
Holways HotViews (sorry – UKHotViews now) has a good article on this – I agree with his expectation of another step before Anite’s transformation is complete – but the Anite Board has struggled to deliver good news over the past few years, and I would not be surprised to see Anite’s share price decline considerably over the coming months as the Anite Board tries to complete that transformation.
Thursday 30 October 2008
Gladstone rejects Constellation bid approach
Unsurprisingly, yesterday leisure systems provider Gladstone rejected the unsolicited approach worth £13.54m from Canadian firm Constellation Software (see here for RNS).
At the same time, Gladstone announced that it had changed Gladstone changed its nominated adviser to Grant Thornton and its broker to Fairfax IS. Is this driven by a potential conflict of interest?
I note that up to July 2008 Gladstone’s broker was KBC Peel Hunter, when they swapped to Daniel Stewart – now they’re with Fairfax IS where former KBC Peel Hunt man Adam Hart works. So perhaps not.....
What happens next? As noted previously, one would normally suspect that an MBO or another bidder would enter the running – the main problem being Constellation’s near 29% share holding - but I’m expecting Constellation to open discussions with the major shareholders to see if they can win this bid with a higher offer. Since my last post on this topic, I’m now doubtful that 28p will succeed, but if no-one else enters the battle, I suspect that an increased offer of around 30p will see Constellation win (and still get a bargain).
At the same time, Gladstone announced that it had changed Gladstone changed its nominated adviser to Grant Thornton and its broker to Fairfax IS. Is this driven by a potential conflict of interest?
I note that up to July 2008 Gladstone’s broker was KBC Peel Hunter, when they swapped to Daniel Stewart – now they’re with Fairfax IS where former KBC Peel Hunt man Adam Hart works. So perhaps not.....
What happens next? As noted previously, one would normally suspect that an MBO or another bidder would enter the running – the main problem being Constellation’s near 29% share holding - but I’m expecting Constellation to open discussions with the major shareholders to see if they can win this bid with a higher offer. Since my last post on this topic, I’m now doubtful that 28p will succeed, but if no-one else enters the battle, I suspect that an increased offer of around 30p will see Constellation win (and still get a bargain).
Monday 27 October 2008
Northgate to complete Anite PS take over
Today’s announcement by the Office of Fair Trading that Northgate’s acquisition will not be referred to the Competition Commission (see here for Anite RNS), should mean that Northgate’s take-over of Anite’s Public Sector division will now go through.
Anite’s investment in the Public Sector came in the form of the multiple acquisitions of independent companies (like Sheridan, BCT, Imasys, MPS) and businesses from larger players (like ICL and Bull). Being ungenerous, most had problems at the time they were acquired, and those that didn’t have problems seemed to have reached their peak at the time of acquisition - and Anite paid top prices for businesses that were just going ex-growth.
In the beginning, Anite appeared to have a strategy of bringing the products together with common technical infrastructures and/or appearance, a strategy that it quickly realised would be vastly expensive, and not necessarily of benefit to its sales. I remember a discussion with APS’ senior management back in 2001, when they already doubted the wisdom of bringing the product sets together. But ultimately I believe that the demise of the Public Sector unit was driven by its disastrous State of Victoria project, and multiple problems with the Pericles revenues & benefits product acquired from ICL in 2001.
Anite never really achieved a target of becoming the top supplier in its chosen markets in the Public Sector – Pericles was always number 4 (behind Northgate/ Sx3, Capita and IBS), ITS/Paris was always number 3 (behind Capita/Academy and Civica/Radius), Housing Management was number 5 (behind Northgate/Sx3, Orchard, Capita/IBS and Civica/Comino) – only Sheridan and Imasys seemed to be towards the number one spot in Social Services and Document Management respectively. Anite’s Police and security businesses were well regarded, but if rumours coming out of Anite are to be believed, more problem projects in those areas meant that true profitability was low, and in some cases non-existent.
What will Northgate do with the acquired businesses? I believe that Northgate is an altogether better managed organisation, and on the basis that they have completed a good due diligence phase and understand what they’ve purchased, I would expect to see most of the main units thriving within Northgate. As with all such acquisitions, there is bound to be some fall-out in the early days, but Northgate has considerable experience of such acquisitions and I’m confident will provide some stability to a previously rocky business.
Anite’s investment in the Public Sector came in the form of the multiple acquisitions of independent companies (like Sheridan, BCT, Imasys, MPS) and businesses from larger players (like ICL and Bull). Being ungenerous, most had problems at the time they were acquired, and those that didn’t have problems seemed to have reached their peak at the time of acquisition - and Anite paid top prices for businesses that were just going ex-growth.
In the beginning, Anite appeared to have a strategy of bringing the products together with common technical infrastructures and/or appearance, a strategy that it quickly realised would be vastly expensive, and not necessarily of benefit to its sales. I remember a discussion with APS’ senior management back in 2001, when they already doubted the wisdom of bringing the product sets together. But ultimately I believe that the demise of the Public Sector unit was driven by its disastrous State of Victoria project, and multiple problems with the Pericles revenues & benefits product acquired from ICL in 2001.
Anite never really achieved a target of becoming the top supplier in its chosen markets in the Public Sector – Pericles was always number 4 (behind Northgate/ Sx3, Capita and IBS), ITS/Paris was always number 3 (behind Capita/Academy and Civica/Radius), Housing Management was number 5 (behind Northgate/Sx3, Orchard, Capita/IBS and Civica/Comino) – only Sheridan and Imasys seemed to be towards the number one spot in Social Services and Document Management respectively. Anite’s Police and security businesses were well regarded, but if rumours coming out of Anite are to be believed, more problem projects in those areas meant that true profitability was low, and in some cases non-existent.
What will Northgate do with the acquired businesses? I believe that Northgate is an altogether better managed organisation, and on the basis that they have completed a good due diligence phase and understand what they’ve purchased, I would expect to see most of the main units thriving within Northgate. As with all such acquisitions, there is bound to be some fall-out in the early days, but Northgate has considerable experience of such acquisitions and I’m confident will provide some stability to a previously rocky business.
Bottom fishing
With the FTSE 100 currently below 3,700, some 40% down on its peak earlier this year, is it time for some bottom fishing amongst software and services suppliers to the UK Public Sector?
Looking at the winners and losers to date, the big losers to date have been Logica (currently at 66p, down 60% on its peak earlier this year), Anite (currently at 30p, down 50%) and @UK (currently at 2.75p, down 68%). IDOX (9.25p, down 38%) and Mouchel (293, down 40%) seemed to have followed the market trend; whilst Capita (581p, down 33%) and Gladstone (22p, down only 15% as it is on the receiving end of a bid) seem to have beaten the market downturn.
Of course, some companies may have underlying problems before the potential impact of recession and credit crises (@UK, for instance, is down some 96% from its peak just after launch on AIM, and I believe its share price would have reached the current level without any external credit crunch or potential recession).
Logica appears to have been affected by the recent drops in valuations of off-shore IT companies that I believe are much more dependent on general commercial markets than Logica. But with a market cap of less than £1billion and more than £3billion in annual revenues, even allowing for c £1billion in debt, the share price drop seems overdone, particularly given the August management statement when their CEO, Andy Green said:
"We had a good first half...... Given the market environment, we remain alert to changes in customer sentiment but our first half performance gives us increased confidence that 2008 pro forma revenue growth will be closer to 4%, compared to our previous guidance of around 3%."
Tribal seems to be similarly affected – despite an up-beat half-year report, its market cap is down at £76m for a company turning over (with its new acquisition HELM) c £200m per annum (with net debt reported as only c £7m).
Meanwhile, Capita (long standing winner of Holway’s boring award) continues to receive a high rating (current p/e of c 25) on the back of years of monotonous annual growth in EPS, but has clearly seen its share price marked down in line with the general market.
Is it worth investing now? As ever, readers must do their own research, but my view is not yet. Fortunately I sold my holdings in Logica and Tribal near their peaks earlier this year – I will be looking to buy back in later, but not yet. Capita and Mouchel will continue to follow the market down, and will be possible purchases when the market settles.
But I believe that the downturn has yet to bottom out – my view is that the FTSE will need to hit 3,200 before it stabilises – and until then the very nature of having more sellers than buyers will hit the share prices of all listed companies, without necessarily reflecting their intrinsic value. I remain a holder of IDOX and Gladstone, both are solid, profitable companies that, I believe, will lose their independence via takeover in the next few months.
Looking at the winners and losers to date, the big losers to date have been Logica (currently at 66p, down 60% on its peak earlier this year), Anite (currently at 30p, down 50%) and @UK (currently at 2.75p, down 68%). IDOX (9.25p, down 38%) and Mouchel (293, down 40%) seemed to have followed the market trend; whilst Capita (581p, down 33%) and Gladstone (22p, down only 15% as it is on the receiving end of a bid) seem to have beaten the market downturn.
Of course, some companies may have underlying problems before the potential impact of recession and credit crises (@UK, for instance, is down some 96% from its peak just after launch on AIM, and I believe its share price would have reached the current level without any external credit crunch or potential recession).
Logica appears to have been affected by the recent drops in valuations of off-shore IT companies that I believe are much more dependent on general commercial markets than Logica. But with a market cap of less than £1billion and more than £3billion in annual revenues, even allowing for c £1billion in debt, the share price drop seems overdone, particularly given the August management statement when their CEO, Andy Green said:
"We had a good first half...... Given the market environment, we remain alert to changes in customer sentiment but our first half performance gives us increased confidence that 2008 pro forma revenue growth will be closer to 4%, compared to our previous guidance of around 3%."
Tribal seems to be similarly affected – despite an up-beat half-year report, its market cap is down at £76m for a company turning over (with its new acquisition HELM) c £200m per annum (with net debt reported as only c £7m).
Meanwhile, Capita (long standing winner of Holway’s boring award) continues to receive a high rating (current p/e of c 25) on the back of years of monotonous annual growth in EPS, but has clearly seen its share price marked down in line with the general market.
Is it worth investing now? As ever, readers must do their own research, but my view is not yet. Fortunately I sold my holdings in Logica and Tribal near their peaks earlier this year – I will be looking to buy back in later, but not yet. Capita and Mouchel will continue to follow the market down, and will be possible purchases when the market settles.
But I believe that the downturn has yet to bottom out – my view is that the FTSE will need to hit 3,200 before it stabilises – and until then the very nature of having more sellers than buyers will hit the share prices of all listed companies, without necessarily reflecting their intrinsic value. I remain a holder of IDOX and Gladstone, both are solid, profitable companies that, I believe, will lose their independence via takeover in the next few months.
Wednesday 22 October 2008
Illegal acts of software maintainers...
Oracle and SAP are currently going head-to-head in the US courts over actions taken by TomorrowNow, a SAP subsidiary. It is alleged that TomorrowNow, a third party supporter of Oracle systems – and duly authorised to download material from Oracle on behalf of its customers - used its customers’ usernames and passwords to download more than it should.
I won’t go into this case in detail (Oracle’s full complaint can be found here) – in practice SAP appears to have confirmed that some “extra” downloads were made – and I suspect that the case will focus on trying to assess the level of losses Oracle incurred as a result (somewhere between SAP’s zero figure and Oracle’s $1 billion). But is there potential for the problem to be repeated – possibly with different players – in the UK market?
Clearly yes – and there are some big players that are open to such problems. Most large players’ senior management would not endorse TomorrowNow-type activities, and many make the access limits clear to their staff. In practice however, “Chinese walls” between operating divisions are easily broken by individual staff that “help a mate” or “return a favour”.
In Radius I remember that, when one of our customers out-sourced the running of one of our applications and sought to unilaterally assign all licence rights and obligations to the out-sourcer, Radius would always insist on the original customer retaining a responsibility for TomorrowNow-type breaches (we also built in additional protection for both our original customer and Radius – something that was subsequently proved to be highly beneficial for some of our customers).
We never used those clauses in anger, but their objective was to ensure that the contract between customer and out-sourcer included clauses to try to prevent TomorrowNow-type breaches by the out-sourcer’s staff. The clauses were a bit like a burglar alarm – if the alarm was ever set off by a burglary, the alarm has failed in its main role of deterrence.
The advice for customers using third-party software maintainers and out-sourcers is clear. Ensure that you contracts include not just the legal requirements, but also processes and procedures to be carried out by the third party’s management to educate and monitor their staff to follow the legal guidelines on access to other suppliers’ confidential information.
The advice for third-party software maintainers and out-sourcers is also clear – you must not only ensure that you make the importance of strict confidentiality abundantly clear to staff, but also put in place processes and procedures to monitor staff access to other’s confidential information. Rogue employees have always been, and always will be, one of the biggest problems for established suppliers – procedures to educate and then robustly supervise their actions are the only solution – particularly if those staff are off-shore.
I won’t go into this case in detail (Oracle’s full complaint can be found here) – in practice SAP appears to have confirmed that some “extra” downloads were made – and I suspect that the case will focus on trying to assess the level of losses Oracle incurred as a result (somewhere between SAP’s zero figure and Oracle’s $1 billion). But is there potential for the problem to be repeated – possibly with different players – in the UK market?
Clearly yes – and there are some big players that are open to such problems. Most large players’ senior management would not endorse TomorrowNow-type activities, and many make the access limits clear to their staff. In practice however, “Chinese walls” between operating divisions are easily broken by individual staff that “help a mate” or “return a favour”.
In Radius I remember that, when one of our customers out-sourced the running of one of our applications and sought to unilaterally assign all licence rights and obligations to the out-sourcer, Radius would always insist on the original customer retaining a responsibility for TomorrowNow-type breaches (we also built in additional protection for both our original customer and Radius – something that was subsequently proved to be highly beneficial for some of our customers).
We never used those clauses in anger, but their objective was to ensure that the contract between customer and out-sourcer included clauses to try to prevent TomorrowNow-type breaches by the out-sourcer’s staff. The clauses were a bit like a burglar alarm – if the alarm was ever set off by a burglary, the alarm has failed in its main role of deterrence.
The advice for customers using third-party software maintainers and out-sourcers is clear. Ensure that you contracts include not just the legal requirements, but also processes and procedures to be carried out by the third party’s management to educate and monitor their staff to follow the legal guidelines on access to other suppliers’ confidential information.
The advice for third-party software maintainers and out-sourcers is also clear – you must not only ensure that you make the importance of strict confidentiality abundantly clear to staff, but also put in place processes and procedures to monitor staff access to other’s confidential information. Rogue employees have always been, and always will be, one of the biggest problems for established suppliers – procedures to educate and then robustly supervise their actions are the only solution – particularly if those staff are off-shore.
Monday 20 October 2008
Handbags at dawn.
An ex-colleague phoned me after reading my recent blog Back to Front – how to get efficiency gains, to remind me of our meeting with a number of heads of department of a South Eastern unitary authority, where we had discussed the merging of three separate debtors systems, from three different suppliers, run in three different departments.
The business case was glaringly obvious, but none of the heads of department was prepared to give up their system. In the end the meeting finished for us, but continued for some in the car park with, reputedly, handbags flying between managers. In the end only two of the debtors systems were merged, the third head of department refusing to give up on her system – and the Chief Exec refusing to over-ride her.
This was, and still remains, a major hurdle in breaking down the “silo” nature of local authority departments – primarily in larger authorities – Unitaries, London Boroughs and Mets. Strong heads of department – and typically a Chief Exec who doesn’t want to get involved or make tough decisions over his Officers.
Many of the transformational gains that are available to local authorities involve cross-departmental or even cross-authority (e.g. shared service delivery) working. In many authorities this can only be achieved if the process is both initiated and seen through to completion by the Chief Exec.
Unfortunately, some Chief Execs do not see this as part of their or their department’s role. Some delegate responsibility to individual Officers, but give them neither the authority nor their support to drive strong heads of department down the agreed transformation route. These Chief Execs need to change their views – before someone changes the Chief Exec......
The business case was glaringly obvious, but none of the heads of department was prepared to give up their system. In the end the meeting finished for us, but continued for some in the car park with, reputedly, handbags flying between managers. In the end only two of the debtors systems were merged, the third head of department refusing to give up on her system – and the Chief Exec refusing to over-ride her.
This was, and still remains, a major hurdle in breaking down the “silo” nature of local authority departments – primarily in larger authorities – Unitaries, London Boroughs and Mets. Strong heads of department – and typically a Chief Exec who doesn’t want to get involved or make tough decisions over his Officers.
Many of the transformational gains that are available to local authorities involve cross-departmental or even cross-authority (e.g. shared service delivery) working. In many authorities this can only be achieved if the process is both initiated and seen through to completion by the Chief Exec.
Unfortunately, some Chief Execs do not see this as part of their or their department’s role. Some delegate responsibility to individual Officers, but give them neither the authority nor their support to drive strong heads of department down the agreed transformation route. These Chief Execs need to change their views – before someone changes the Chief Exec......
Thursday 16 October 2008
ID Data to bring in administrators
ID Data Group plc (AIM: IDD), the smart card and card solutions group, has today announced that its core business unit ID Data Limited has filed at the High Court of Justice notification of its intention to appoint an administrator to protect itself from its creditors. See here for full statement.
Many people in the Local Authority market will not recognise ID Data, but they had just started getting their innovative smartcard technology into use by councils – and had recently delivered a multi-application smartcard RFID solution to allow citizens to use a single card as their library card, leisure centre card and bus pass. However, this was a very small part of their business, and it was a lack of funds in the current credit crunch that seems to have caused problems for this company.
I would hope and expect that ID Data will find a buyer – in particular for its CardBASE Technologies subsidiary (which, interestingly, is not mentioned in the statement), which has developed some highly innovative software for multiple application smart cards.
Many people in the Local Authority market will not recognise ID Data, but they had just started getting their innovative smartcard technology into use by councils – and had recently delivered a multi-application smartcard RFID solution to allow citizens to use a single card as their library card, leisure centre card and bus pass. However, this was a very small part of their business, and it was a lack of funds in the current credit crunch that seems to have caused problems for this company.
I would hope and expect that ID Data will find a buyer – in particular for its CardBASE Technologies subsidiary (which, interestingly, is not mentioned in the statement), which has developed some highly innovative software for multiple application smart cards.
Wednesday 15 October 2008
Gladstone mulls over response to Constellation’s bid
Gladstone (GLD) – suppliers of leisure centre systems to both local authorities and commercial operators – and its shareholders are mulling over their response to the cheeky 25p bid from its majority shareholder, Constellation.
Companies that might be considering rival bids appear to be concerned about the potential block of the near 29% current shareholding of Constellation (and there are rumours that Constellation has been upping its stake by buying in the market since announcing its offer yesterday). Current shareholders hopes for a rival bid may, therefore, be dashed.
But major institutional shareholders and several private investors believe that the current offer price lets Constellation buy Gladstone on the cheap. Taking into account the cash in the balance sheet, and the 4.5 million shares held in the treasury, it’s estimated that Constellation will only have to stump up an estimated a net £3-4 million in cash to complete the acquisition. In addition Constellation would get Gladstone's c £2M of freehold property.
And that’s without factoring in the great strides Gladstone has made in launching its new product suite Orbit ( .... the same name as we used for our e-procurement product in Radius .... ), on the back of their acquisition of a company in Denmark with potentially the best leisure product on the market – Orbit looked great at the recent Leisure Industry show in Birmingham. I believe that their main competitors’ products appear weak at the moment compared to Orbit – and although gym membership will undoubtedly reduce in the upcoming recession, I believe that the prospects for Orbit are great – let alone the likely return from Gladstone’s investments in the education sector.
Therefore, I expect that the Board will reject the current offer as undervaluing the company – but would not be surprised if they open negotiations with Constellation about upping the offer. As noted in my earlier blog, I believe that an offer of c30p is likely to be sufficient to easily win the support of shareholders (unless a counter bid appears – in which case I expect the final price to be c35p).
Having said that, a lot will be down to the Board, their personal plans and Constellation’s likely plans for them. Normally I would have considered an MBO as likely, but the current credit crunch, and Constellation’s near 30% holding makes that difficult.
My guess is that Constellation will up their bid to 28p and, unless someone else enters the fray, or the Board puts up a spirited defence – that will be it.
P.S. I am a shareholder in Gladstone myself. This blog is not intended as investment advice – please DYOR (do your own research) if you intend to invest in any of the companies mentioned anywhere in this blog.
Companies that might be considering rival bids appear to be concerned about the potential block of the near 29% current shareholding of Constellation (and there are rumours that Constellation has been upping its stake by buying in the market since announcing its offer yesterday). Current shareholders hopes for a rival bid may, therefore, be dashed.
But major institutional shareholders and several private investors believe that the current offer price lets Constellation buy Gladstone on the cheap. Taking into account the cash in the balance sheet, and the 4.5 million shares held in the treasury, it’s estimated that Constellation will only have to stump up an estimated a net £3-4 million in cash to complete the acquisition. In addition Constellation would get Gladstone's c £2M of freehold property.
And that’s without factoring in the great strides Gladstone has made in launching its new product suite Orbit ( .... the same name as we used for our e-procurement product in Radius .... ), on the back of their acquisition of a company in Denmark with potentially the best leisure product on the market – Orbit looked great at the recent Leisure Industry show in Birmingham. I believe that their main competitors’ products appear weak at the moment compared to Orbit – and although gym membership will undoubtedly reduce in the upcoming recession, I believe that the prospects for Orbit are great – let alone the likely return from Gladstone’s investments in the education sector.
Therefore, I expect that the Board will reject the current offer as undervaluing the company – but would not be surprised if they open negotiations with Constellation about upping the offer. As noted in my earlier blog, I believe that an offer of c30p is likely to be sufficient to easily win the support of shareholders (unless a counter bid appears – in which case I expect the final price to be c35p).
Having said that, a lot will be down to the Board, their personal plans and Constellation’s likely plans for them. Normally I would have considered an MBO as likely, but the current credit crunch, and Constellation’s near 30% holding makes that difficult.
My guess is that Constellation will up their bid to 28p and, unless someone else enters the fray, or the Board puts up a spirited defence – that will be it.
P.S. I am a shareholder in Gladstone myself. This blog is not intended as investment advice – please DYOR (do your own research) if you intend to invest in any of the companies mentioned anywhere in this blog.
Monday 13 October 2008
Constellation makes cheeky bid for Gladstone
Gladstone (GLD) – suppliers of leisure centre systems to both local authorities and commercial operators – is today on the receiving end of a cheeky 25p bid from its majority shareholder, Constellation Software (a Canadian company listed on the Toronto Stock Exchange).
Constellation Software Inc. said it will make a 25 pence per share cash offer for the shares of Gladstone Plc. it does not already own, valuing the company at about £13.54 million. Constellation says that the offer for the approx 71% of shares it doesn’t already own represents a premium of about 33.3 percent to the closing price of 18.75 pence per Gladstone share on Oct. 10.
This should come as no real surprise for regular readers as my blog item After Anite and IBS – where’s the next big acquisition last month flagged Gladstone as one of the candidates for acquisition. I guess we’re all surprised at the timing with the current financial crises, but full marks to Constellation on timing their move when the market is well down (GLD were trading around 22p only a few days ago). I also understand that Gladstone’s CEO, Dr Said Ziai is currently in Australia.
Will it succeed? In my opinion, the offer doesn’t over-value the company which in its last reported financial year had a turnover of £9.2 million and net assets of £12.8 million (and an operating profit of £1.66 million). In addition, I’m guessing that GLD has around 12p of net cash (there was £4M in cash on the balance sheet at 29 Feb 2008), and around 8% of its own shares in treasury.
Unless there is a counter-bid, In the current financial environment I think that the bid could succeed – yes – I think there could be a counter-bid (I can think of at least two prospective bidders that could be running their slide-rules over GLD right now) – but have they got easy access to the cash? If so, then my guess is that 30p might win, but that 35p will be the take-out bid – but then Constellation do have c29% of the shares already.......
P.S. I am a shareholder in Gladstone myself.
Constellation Software Inc. said it will make a 25 pence per share cash offer for the shares of Gladstone Plc. it does not already own, valuing the company at about £13.54 million. Constellation says that the offer for the approx 71% of shares it doesn’t already own represents a premium of about 33.3 percent to the closing price of 18.75 pence per Gladstone share on Oct. 10.
This should come as no real surprise for regular readers as my blog item After Anite and IBS – where’s the next big acquisition last month flagged Gladstone as one of the candidates for acquisition. I guess we’re all surprised at the timing with the current financial crises, but full marks to Constellation on timing their move when the market is well down (GLD were trading around 22p only a few days ago). I also understand that Gladstone’s CEO, Dr Said Ziai is currently in Australia.
Will it succeed? In my opinion, the offer doesn’t over-value the company which in its last reported financial year had a turnover of £9.2 million and net assets of £12.8 million (and an operating profit of £1.66 million). In addition, I’m guessing that GLD has around 12p of net cash (there was £4M in cash on the balance sheet at 29 Feb 2008), and around 8% of its own shares in treasury.
Unless there is a counter-bid, In the current financial environment I think that the bid could succeed – yes – I think there could be a counter-bid (I can think of at least two prospective bidders that could be running their slide-rules over GLD right now) – but have they got easy access to the cash? If so, then my guess is that 30p might win, but that 35p will be the take-out bid – but then Constellation do have c29% of the shares already.......
P.S. I am a shareholder in Gladstone myself.
Back to Front – how to get efficiency gains
The Audit Commission’s report “Back to Front” (download here) reviews how councils have made back office efficiency gains and identifies lessons for the future. The report is released with a covering press release that emphasises the need for English councils to increase the £1.2bn in efficiency gains between 2005 and 2008 through savings on back office work. But how?
I won’t repeat the report’s suggestions here, but I will highlight one of its conclusions - a transformational approach is often required for the greatest benefits.
My own experiences have been that, in many cases, departments have made existing processes and procedures more efficient (e.g. through the use of more and better IT systems), without addressing and changing the core ways it undertakes business. As we always used to say, if you have a poor process, and you automate it, it just goes wrong that much more quickly and noticeably.
Also, some, through the purchase of the wrong type of IT system, have undergone lengthy business process re-engineering projects that have primarily been focussed on getting the departments processes to match the way the software works, rather than transforming the processes to provide the most efficient methods for the authority.
Most local authorities now have the e-government building blocks that enable innovative approaches to the delivery of services both internally and externally. Many modern systems are fully inter-operable, and applications like e-payments, e-procurement, workflow and call handling systems, combined with a transactional web-site and other interoperable back office systems, allow innovative processes to be introduced.
As a small example, many authorities are faced with the high costs of raising invoices for ad-hoc services, chasing payment, and then writing off un-recoverable invoices. Some authorities approached this by making the production of invoices easier/cheaper, and introducing automated debt recovery workflows (but still having to write off un-recoverable invoices). Others used their call centre and related systems to transform the process, insisting on payments in advance for many services, with no need to chase payments for invoices (and no need to write off unpaid invoices). These latter authorities have gained more through their transformation than those authorities that sought just to make their existing processes more efficient.
This is a small example of what is possible once you have the interoperable components of e-government in place. Far better, and more far-reaching transformations are now possible – all that’s needed are good ideas, and the willingness of Officers, managers and staff to implement them.
I won’t repeat the report’s suggestions here, but I will highlight one of its conclusions - a transformational approach is often required for the greatest benefits.
My own experiences have been that, in many cases, departments have made existing processes and procedures more efficient (e.g. through the use of more and better IT systems), without addressing and changing the core ways it undertakes business. As we always used to say, if you have a poor process, and you automate it, it just goes wrong that much more quickly and noticeably.
Also, some, through the purchase of the wrong type of IT system, have undergone lengthy business process re-engineering projects that have primarily been focussed on getting the departments processes to match the way the software works, rather than transforming the processes to provide the most efficient methods for the authority.
Most local authorities now have the e-government building blocks that enable innovative approaches to the delivery of services both internally and externally. Many modern systems are fully inter-operable, and applications like e-payments, e-procurement, workflow and call handling systems, combined with a transactional web-site and other interoperable back office systems, allow innovative processes to be introduced.
As a small example, many authorities are faced with the high costs of raising invoices for ad-hoc services, chasing payment, and then writing off un-recoverable invoices. Some authorities approached this by making the production of invoices easier/cheaper, and introducing automated debt recovery workflows (but still having to write off un-recoverable invoices). Others used their call centre and related systems to transform the process, insisting on payments in advance for many services, with no need to chase payments for invoices (and no need to write off unpaid invoices). These latter authorities have gained more through their transformation than those authorities that sought just to make their existing processes more efficient.
This is a small example of what is possible once you have the interoperable components of e-government in place. Far better, and more far-reaching transformations are now possible – all that’s needed are good ideas, and the willingness of Officers, managers and staff to implement them.
Friday 10 October 2008
Icelandic terror attack to net over £1billion?
The early comments on my early-morning blog yesterday (predicting that local authority losses with Icelandic banks would exceed £0.5billion) thought that I had over-stated the likely losses (and were generally amazed that the SI was under the anti-terrorism laws, something that most of the press picked up on later in the day). Now it appears that I understated the figure - and it's nearer £1billion.
The BBC has compiled a full list of the authorities affected - see here - with the big potential losers being:
Kent County Council - £50 million
Nottingham City Council - £42 million
Norfolk County Council - £32.5 million
Dorset County Council - £28.1 million
Hertfordshire - £28 million
Barnet Council- £27 million
Somerset County Council - £25 million
Northumberland County Council - £23 million
Surrey County Council - £20 million
Hillingdon Council - £20 million
Neath Port Talbot Council - £20 million
Westminster Council - £17 million
Brent - £15 million
Caerphilly County Council - £15 million.
North Ayrshire - £15 million
The BBC has compiled a full list of the authorities affected - see here - with the big potential losers being:
Kent County Council - £50 million
Nottingham City Council - £42 million
Norfolk County Council - £32.5 million
Dorset County Council - £28.1 million
Hertfordshire - £28 million
Barnet Council- £27 million
Somerset County Council - £25 million
Northumberland County Council - £23 million
Surrey County Council - £20 million
Hillingdon Council - £20 million
Neath Port Talbot Council - £20 million
Westminster Council - £17 million
Brent - £15 million
Caerphilly County Council - £15 million.
North Ayrshire - £15 million
IE8 – initial opinion...
My general advice to all my customers is never to use the first major release of new software from Microsoft – let someone else debug it for you – and then take it after the first Service Pack or minor release. However, those of you that have known me over the past few years will know that I’m a technical geek at heart, have always be interested in the latest technology as soon as it is available, and so you’ll not be surprised that I’ve moved my browsing across to Internet Explorer Beta 2.
My early impressions are very good – the only minor problems I’ve found have been solved by turning on the compatibility viewer for some sites that don’t display properly under IE8. There has been a massive improvement in usability and stability, with noticeable improvements in performance over IE7.
The biggest benefit has been the use of accelerators – primarily for use with searches and maps. I use the Internet a lot for research, and the ability to highlight a word or phrase and then search on it without having to cut-and-paste it into the search box is very useful. However, as a committed user of Internet mapping (before putting the address into my SatNav), the ability to highlight a postcode (of a prospect’s office or a hotel location) to then get a map in a new tab, is really useful. I can see this functionality being embraced by a variety of other web-sites above and beyond the subset included in the beta programme.
I also work with a lot of tabs open in my browser. Although only a minor improvement, IE8’s grouping of the tabs is very helpful, and does help one’s focus on a particular route of investigation, without being drawn off at a tangent by tabs opened for other reasons.
Whilst the Web Slices functionality looks potentially of use, the slices available with the beta are few and far between. I thought the eBay slice looked of interest, but I’ve yet to work out how to load it into my browser area – and even when I use it off the eBay web-site, it only searches the US site – not the UK eBay site – so not much use yet. But this sort of functionality might be embraced by Councils who want to offer a local information service to their citizens?
I haven’t had the courage to turn on the suggested sites functionality yet (I have too many pages to view already, without any automated suggestions). Also, I’ve not used the InPrivate Browsing (more popularly known as “porn mode”) that allows you to open a new browsing session where no record is kept of your travels.
Controversially, IE8 (like Google’s Chrome browser) allows users to effectively block third party cookies and pixels, blocking any kind of outside advertising based on tracking and analytics services – great – let’s have as much of this as is possible and legal!
IE8’s phishing filter SmartScreen appears to be much better than IE7, and a full-window warning pops up when you stumble upon a suspected phishing site. However, SmartScreen relies largely on a database of known phishing sites, so a new, unknown phishing site may be able to slip through the cracks. IE8 also displays sites' domains in a darker text colour, so you can more easily see whether you're actually visiting a Barclays.com page, say, or in reality a page on some site you've never heard of.
Have I noticed the supposed improvement in performance of IE8? Yes – it seems to be noticeably faster on many websites – with an even better improvement on my complex sites (like portfolio/stock pages) which use JavaScript.
Is it more stable? Yes – stable as a rock – despite a week of heavy usage IE8 has yet to crash. Yet my usage of IE7 (particularly with a lot of open tabs) would regularly see a crash or two a day. The stability has been so good that I’ve not had the opportunity to test its improved crash recovery and the ability to recover the last browsing session in case the browser does crash, or even if you just accidentally close it yourself.
If you want to try IE8 (most probably at home – as I’m sure your IT department at work won’t allow it yet) click here for more information and a download site (but if you do download, make sure you disable any add-on toolbars before you run it or it can, reputedly, crash).
My early impressions are very good – the only minor problems I’ve found have been solved by turning on the compatibility viewer for some sites that don’t display properly under IE8. There has been a massive improvement in usability and stability, with noticeable improvements in performance over IE7.
The biggest benefit has been the use of accelerators – primarily for use with searches and maps. I use the Internet a lot for research, and the ability to highlight a word or phrase and then search on it without having to cut-and-paste it into the search box is very useful. However, as a committed user of Internet mapping (before putting the address into my SatNav), the ability to highlight a postcode (of a prospect’s office or a hotel location) to then get a map in a new tab, is really useful. I can see this functionality being embraced by a variety of other web-sites above and beyond the subset included in the beta programme.
I also work with a lot of tabs open in my browser. Although only a minor improvement, IE8’s grouping of the tabs is very helpful, and does help one’s focus on a particular route of investigation, without being drawn off at a tangent by tabs opened for other reasons.
Whilst the Web Slices functionality looks potentially of use, the slices available with the beta are few and far between. I thought the eBay slice looked of interest, but I’ve yet to work out how to load it into my browser area – and even when I use it off the eBay web-site, it only searches the US site – not the UK eBay site – so not much use yet. But this sort of functionality might be embraced by Councils who want to offer a local information service to their citizens?
I haven’t had the courage to turn on the suggested sites functionality yet (I have too many pages to view already, without any automated suggestions). Also, I’ve not used the InPrivate Browsing (more popularly known as “porn mode”) that allows you to open a new browsing session where no record is kept of your travels.
Controversially, IE8 (like Google’s Chrome browser) allows users to effectively block third party cookies and pixels, blocking any kind of outside advertising based on tracking and analytics services – great – let’s have as much of this as is possible and legal!
IE8’s phishing filter SmartScreen appears to be much better than IE7, and a full-window warning pops up when you stumble upon a suspected phishing site. However, SmartScreen relies largely on a database of known phishing sites, so a new, unknown phishing site may be able to slip through the cracks. IE8 also displays sites' domains in a darker text colour, so you can more easily see whether you're actually visiting a Barclays.com page, say, or in reality a page on some site you've never heard of.
Have I noticed the supposed improvement in performance of IE8? Yes – it seems to be noticeably faster on many websites – with an even better improvement on my complex sites (like portfolio/stock pages) which use JavaScript.
Is it more stable? Yes – stable as a rock – despite a week of heavy usage IE8 has yet to crash. Yet my usage of IE7 (particularly with a lot of open tabs) would regularly see a crash or two a day. The stability has been so good that I’ve not had the opportunity to test its improved crash recovery and the ability to recover the last browsing session in case the browser does crash, or even if you just accidentally close it yourself.
If you want to try IE8 (most probably at home – as I’m sure your IT department at work won’t allow it yet) click here for more information and a download site (but if you do download, make sure you disable any add-on toolbars before you run it or it can, reputedly, crash).
Thursday 9 October 2008
Councils lose £0.5billion in Iceland terror attack?
How much has been lost by UK local authorities who invested their cash in Icelandic banks? And where do the Anti Terror laws come in?
The Conservatives say their own research has identified at least one London council that had banked £40m, one in the South East which had a £30m deposit and others with £20m or £25m.
Meanwhile, London public authorities are thought to face a total exposure of around £200m, according the umbrella organisation London Councils – with Brent (£27M), Westminster (£17M) and Havering (£12.5M) leading the queue of Icelandic creditors in the capital (along with TfL - £40M and the Met Police - £30M).
Meanwhile, county councils like Kent (£50M) and Herts (£17M) have also lost significant sums. There is a deafening silence from most Mets, Unitaries and Districts. Whilst district councils have lost less, there are a lot more of them, and their potential losses are estimated at around £150M, with Mets and Unitaries also losing c £150M.
Like bankers, many authorities have been reluctant to reveal the size of their problems publicly (congratulations to those that have been totally open), but extrapolating from the information available at the moment, it seems highly likely that the total losses will exceed £500M.
Incidentally, it’s surprising to me that the Government has used the Anti terror laws to deal with the Landsbanki Bank problem. The wording of the new Statutory Instrument (2008 No. 2668), laid before parliament at 8th October 08, called the The Landsbanki Freezing Order 2008, starts with:
The Treasury believe that action to the detriment of the United Kingdom’s economy (or part of it) has been or is likely to be taken by certain persons who are the government of or resident of a country or territory outside the United Kingdom.
The Treasury, in exercise of the powers conferred by sections 4 and 14 of and Schedule 3 to the Anti-terrorism, Crime and Security Act 2001(a), make the following Order:
The Conservatives say their own research has identified at least one London council that had banked £40m, one in the South East which had a £30m deposit and others with £20m or £25m.
Meanwhile, London public authorities are thought to face a total exposure of around £200m, according the umbrella organisation London Councils – with Brent (£27M), Westminster (£17M) and Havering (£12.5M) leading the queue of Icelandic creditors in the capital (along with TfL - £40M and the Met Police - £30M).
Meanwhile, county councils like Kent (£50M) and Herts (£17M) have also lost significant sums. There is a deafening silence from most Mets, Unitaries and Districts. Whilst district councils have lost less, there are a lot more of them, and their potential losses are estimated at around £150M, with Mets and Unitaries also losing c £150M.
Like bankers, many authorities have been reluctant to reveal the size of their problems publicly (congratulations to those that have been totally open), but extrapolating from the information available at the moment, it seems highly likely that the total losses will exceed £500M.
Incidentally, it’s surprising to me that the Government has used the Anti terror laws to deal with the Landsbanki Bank problem. The wording of the new Statutory Instrument (2008 No. 2668), laid before parliament at 8th October 08, called the The Landsbanki Freezing Order 2008, starts with:
The Treasury believe that action to the detriment of the United Kingdom’s economy (or part of it) has been or is likely to be taken by certain persons who are the government of or resident of a country or territory outside the United Kingdom.
The Treasury, in exercise of the powers conferred by sections 4 and 14 of and Schedule 3 to the Anti-terrorism, Crime and Security Act 2001(a), make the following Order:
EDS confirms loss of UK posts
Regular readers of this blog will not be surprised by this week’s announcement that the HP job cuts announced last month will fall on 3,378 posts in the UK arm of EDS (see last month’s post EDS/HP to shed 8% of staff – going off-shore?.
Understandably, the Public and Commercial Services Union has condemned this - see here – (even though they represent less than 10% of all EDS staff).
However, my understanding is that the job cuts will happen over the next two years, and that many are expected to come from its current voluntary redundancy exercise, which was already in place prior to the announcement. Also, not all the 3,378 posts are currently filled, and I’m told the cut in posts reflects some of EDS’s pessimism on growth over the next two years, rather than a dramatic reduction in business.
Either way, as I noted last month, this move also represents a gradual and continual move of EDS workload to off-shore operations. It will be interesting to see if this move affects its business with UK Public Sector customers, who seem to like the cost benefits, but suffer from negative staff and citizen comments whenever such moves take place.
Understandably, the Public and Commercial Services Union has condemned this - see here – (even though they represent less than 10% of all EDS staff).
However, my understanding is that the job cuts will happen over the next two years, and that many are expected to come from its current voluntary redundancy exercise, which was already in place prior to the announcement. Also, not all the 3,378 posts are currently filled, and I’m told the cut in posts reflects some of EDS’s pessimism on growth over the next two years, rather than a dramatic reduction in business.
Either way, as I noted last month, this move also represents a gradual and continual move of EDS workload to off-shore operations. It will be interesting to see if this move affects its business with UK Public Sector customers, who seem to like the cost benefits, but suffer from negative staff and citizen comments whenever such moves take place.
Tuesday 7 October 2008
New minister – new policy on HIPs?
Margaret Beckett has been appointed in Communities and Local Government as Minister of State for Housing, replacing Caroline Flint.
Ms Flint was firm with her support for HIPs in public – but perhaps less so in private. In common with many LA Land Charges staff, she and her department seemed to have a strong dislike of Personal Search Companies – but even so she did not signal the end of the Home Information Pack.
Margaret Beckett meanwhile is reputedly in favour of getting rid of HIPs. As noted last month in my HIPS will go – but when article, it’s only a matter of time before HIPS go – it just looks a bit sooner now....
Ms Flint was firm with her support for HIPs in public – but perhaps less so in private. In common with many LA Land Charges staff, she and her department seemed to have a strong dislike of Personal Search Companies – but even so she did not signal the end of the Home Information Pack.
Margaret Beckett meanwhile is reputedly in favour of getting rid of HIPs. As noted last month in my HIPS will go – but when article, it’s only a matter of time before HIPS go – it just looks a bit sooner now....
What’s a Petabyte?
I was intrigued by an article about building and managing a 150 Petabyte database, only to wonder what is the definition of a petabyte – a thousand or a million terabytes?
Quick research showed that a petabyte (derived from the SI prefix peta- ) is a unit of information or computer storage equal to one quadrillion bytes, or 1000 terabytes. It is commonly abbreviated PB. When used with byte multiples, the prefix may indicate a power of either 1000 or 1024, so the exact number may be either:
1,000,000,000,000,000 bytes — 1000 to the power 5, or 10 to the power 15, or
1,125,899,906,842,624 bytes — 1024 to the power 5, or 2 to the power 50.
I know that many local authorities hold terabytes of data, but has anyone out there moved into petabytes?
Quick research showed that a petabyte (derived from the SI prefix peta- ) is a unit of information or computer storage equal to one quadrillion bytes, or 1000 terabytes. It is commonly abbreviated PB. When used with byte multiples, the prefix may indicate a power of either 1000 or 1024, so the exact number may be either:
1,000,000,000,000,000 bytes — 1000 to the power 5, or 10 to the power 15, or
1,125,899,906,842,624 bytes — 1024 to the power 5, or 2 to the power 50.
I know that many local authorities hold terabytes of data, but has anyone out there moved into petabytes?
Monday 6 October 2008
Problems of going off-shore - more.....
The Register has followed up on their interesting poll on the “off-shoring backlash” that I referred to in my earlier blog item last week, with an article of the challenges of distributed software development. You can read their full article here.
The problem areas and their impact on the different models for distributed software development will come as no surprise to anyone involved in such projects, with communication being the top problem area, followed by “software quality issues due to the variable level of skills between locations” and “political issues with the way the organisation is structured”. The Register concludes that the main message of their survey seems to be that if you distribute development, quality will suffer.
Given that this second survey includes a lot of organisations which do not off-shore some/all work, but distribute the work between different locations within their own organisations, in my mind, the survey confirms that the off-shore model – when used properly – can work as well as any equivalent model based on staff working locally. The key is to get the right model, and to ensure that the organisational roles and procedures for software development are strongly stated and adhered to.
What I find most interesting is the correlation of the perceived success against the reasons for distributed development. In this area, 65% of respondents who believed their distributed development approach was primarily motivated by cost savings reported that their development was out of control. Those focussing on resource optimisation and/or management strategy responded best, with only 12% out of control and around 50% good or great.
In my previous blog item I noted that:
Another type of poor customer is one who has had a poor methodology in his IT operations to date (poor/non-existent documentation, poor statements of requirements, non-existent specifications, etc ...), and expects to continue in the same way when working off-shore – a 5,000 mile gap between customer and supplier will only accentuate the problems of this approach.
The Register’s article supports this – it highlights that organisations that take an ad-hoc or mixed approach to distributed development have the highest dissatisfaction with their level of control – whilst those having formalised hub-and-spoke or peer-to-peer approaches have better control.
I can but repeat that this is no doubt that off-shoring can and does work - but only if it is done properly – with the right management expectations, relevant splits of roles and responsibilities, firm methodologies and strong communication.
The problem areas and their impact on the different models for distributed software development will come as no surprise to anyone involved in such projects, with communication being the top problem area, followed by “software quality issues due to the variable level of skills between locations” and “political issues with the way the organisation is structured”. The Register concludes that the main message of their survey seems to be that if you distribute development, quality will suffer.
Given that this second survey includes a lot of organisations which do not off-shore some/all work, but distribute the work between different locations within their own organisations, in my mind, the survey confirms that the off-shore model – when used properly – can work as well as any equivalent model based on staff working locally. The key is to get the right model, and to ensure that the organisational roles and procedures for software development are strongly stated and adhered to.
What I find most interesting is the correlation of the perceived success against the reasons for distributed development. In this area, 65% of respondents who believed their distributed development approach was primarily motivated by cost savings reported that their development was out of control. Those focussing on resource optimisation and/or management strategy responded best, with only 12% out of control and around 50% good or great.
In my previous blog item I noted that:
Another type of poor customer is one who has had a poor methodology in his IT operations to date (poor/non-existent documentation, poor statements of requirements, non-existent specifications, etc ...), and expects to continue in the same way when working off-shore – a 5,000 mile gap between customer and supplier will only accentuate the problems of this approach.
The Register’s article supports this – it highlights that organisations that take an ad-hoc or mixed approach to distributed development have the highest dissatisfaction with their level of control – whilst those having formalised hub-and-spoke or peer-to-peer approaches have better control.
I can but repeat that this is no doubt that off-shoring can and does work - but only if it is done properly – with the right management expectations, relevant splits of roles and responsibilities, firm methodologies and strong communication.
Thursday 2 October 2008
The problems of going off-shore
The Register has an interesting poll on the “off-shoring backlash”. With my own experience of off-shoring, initially poorly due to our naivety/inexperience, then very successfully once we understood how to work offshore effectively, I can sympathise with most of the comments, such as:
“2 years of excuses, laziness, constant turnover (complete waste of training time when the guy/girl buggers off and leaves you with a new muppet).”
“This informal communication is completely lost when parts of a project are outsourced. Sending the same spec to another country to be evaluated by a developer who has never met the author and who must route all queries through an account manager just does not work”
This is no doubt that off-shoring can and does work, but only if it is done properly. Like any market, there are good off-shore suppliers, and bad off-shore suppliers – and both small and large off-shore suppliers can fit into each category. Staff turnover is a major problem for many off-shoring suppliers – in a good company, this should not be a major issue. The biggest issue is the management of risk – all too frequently, the off-shore supplier seeks to move to a “body shopping” contract where the deliverable is a number of “warm bodies” with minimal risk on the supplier, and most of the risk remaining with, or returning to the customer.
Not surprisingly there are also good and bad customers for off-shoring. First-time off-shorers can be the worst – their expectations seem to be sky high, soon to be brought down to earth by reputable suppliers – but then they are tempted by better financial offers from other suppliers who perhaps do not supply such good services – leading to a poor project, and the customer gets a bad experience of off-shoring. Another type of poor customer is one who has had a poor methodology in his IT operations to date (poor/non-existent documentation, poor statements of requirements, non-existent specifications, etc ...), and expects to continue in the same way when working off-shore – a 5,000 mile gap between customer and supplier will only accentuate the problems of this approach.
The Register’s articles, and most other commentators on off-shoring, agree that communication is the key to good off-shore projects. I absolutely agree with this – and it doesn’t necessarily have to be by putting staff face-to-face in each other’s countries (although this is one solution) – modern communications, and the use of relevant software development methodologies, together with splitting responsibilities properly between the on-shore and off-shore teams are also key.
However, it is also necessary for both customer and supplier to recognise that different types of projects need to be contracted and managed in different ways, and differently for different customers.
“2 years of excuses, laziness, constant turnover (complete waste of training time when the guy/girl buggers off and leaves you with a new muppet).”
“This informal communication is completely lost when parts of a project are outsourced. Sending the same spec to another country to be evaluated by a developer who has never met the author and who must route all queries through an account manager just does not work”
This is no doubt that off-shoring can and does work, but only if it is done properly. Like any market, there are good off-shore suppliers, and bad off-shore suppliers – and both small and large off-shore suppliers can fit into each category. Staff turnover is a major problem for many off-shoring suppliers – in a good company, this should not be a major issue. The biggest issue is the management of risk – all too frequently, the off-shore supplier seeks to move to a “body shopping” contract where the deliverable is a number of “warm bodies” with minimal risk on the supplier, and most of the risk remaining with, or returning to the customer.
Not surprisingly there are also good and bad customers for off-shoring. First-time off-shorers can be the worst – their expectations seem to be sky high, soon to be brought down to earth by reputable suppliers – but then they are tempted by better financial offers from other suppliers who perhaps do not supply such good services – leading to a poor project, and the customer gets a bad experience of off-shoring. Another type of poor customer is one who has had a poor methodology in his IT operations to date (poor/non-existent documentation, poor statements of requirements, non-existent specifications, etc ...), and expects to continue in the same way when working off-shore – a 5,000 mile gap between customer and supplier will only accentuate the problems of this approach.
The Register’s articles, and most other commentators on off-shoring, agree that communication is the key to good off-shore projects. I absolutely agree with this – and it doesn’t necessarily have to be by putting staff face-to-face in each other’s countries (although this is one solution) – modern communications, and the use of relevant software development methodologies, together with splitting responsibilities properly between the on-shore and off-shore teams are also key.
However, it is also necessary for both customer and supplier to recognise that different types of projects need to be contracted and managed in different ways, and differently for different customers.
Wednesday 1 October 2008
A Match.com for PCTs and providers
From today, all NHS commissioners will be required to post information about tendering opportunities and contract awards on a new site, making it easier for suppliers to track down single opportunities and understand exactly what PCTs want. For commissioners, Supply2Health will help meet their legal requirements to advertise and potentially increase the number of suppliers responding to their adverts by reaching a wider audience.
When he launched the service last week, Health Minister Ben Bradshaw said:
"We are committed to make it easier to do business with the NHS. And in complex healthcare market we realise it's not easy to find the perfect match.”
"Talking to providers of all types, what was keeping people awake at night was the thought they may have missed an opportunity. That there was a PCT out there in need of exactly what they had to offer, but they simply didn’t know about each other.”
“If you want to be technical, it is an online procurement portal. But I like to think of it more as a sort of online dating agency. A Match.com for PCTs and providers.”
“Supply2Health is a place where PCTs looking for love and clinical services can place their ad, tell the world about who they are and what they want, and then wait for eligible suitors to come and sweep them off their feet.”
Is it likely to help IT suppliers be swept off their feet into wedded bliss? No - despite the positive launch last week, be aware that it does not cover all types of procurement, only “Part B Clinical Services” – something not mentioned in Ben Bradshaw’s speech.....
It looks as if smaller IT suppliers will have to continue to rely on either their rich grandmother’s contacts, or visiting the local pub, to find true romance.
Visit www.supply2health.nhs.uk – however, there don’t appear to be any/many opportunities on there yet – other than ones from a PCT called Testshire, mentioning Jill, Jan, Jack and John Test - Ooops.....
When he launched the service last week, Health Minister Ben Bradshaw said:
"We are committed to make it easier to do business with the NHS. And in complex healthcare market we realise it's not easy to find the perfect match.”
"Talking to providers of all types, what was keeping people awake at night was the thought they may have missed an opportunity. That there was a PCT out there in need of exactly what they had to offer, but they simply didn’t know about each other.”
“If you want to be technical, it is an online procurement portal. But I like to think of it more as a sort of online dating agency. A Match.com for PCTs and providers.”
“Supply2Health is a place where PCTs looking for love and clinical services can place their ad, tell the world about who they are and what they want, and then wait for eligible suitors to come and sweep them off their feet.”
Is it likely to help IT suppliers be swept off their feet into wedded bliss? No - despite the positive launch last week, be aware that it does not cover all types of procurement, only “Part B Clinical Services” – something not mentioned in Ben Bradshaw’s speech.....
It looks as if smaller IT suppliers will have to continue to rely on either their rich grandmother’s contacts, or visiting the local pub, to find true romance.
Visit www.supply2health.nhs.uk – however, there don’t appear to be any/many opportunities on there yet – other than ones from a PCT called Testshire, mentioning Jill, Jan, Jack and John Test - Ooops.....
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