pssst..... Public Sector Software, Services and Technology

Fraud–if only Government knew what Government knows….

2010-08-11T09:51:00.002Z

The Government has announced yet another attack aimed at getting fraud out of the benefit system. But like all such pledges made over the past 15 or so years, will it succeed?

The use of external credit checking organisation is a worthwhile step forward – these organisations have the sorts of sophisticated databases and search engines that, despite continual recommendations by the IT industry, Government has consistently failed to put in place over the past two decades. (Within Radius we submitted numerous proposals to central government, and yet not one was picked up – the common reason being given that “there’s no money for fraud detection”).

At the time our strap-line was:

“If only local authorities knew what local authorities know”

It’s still the same today – within local authorities (and some Government departments), data is held in individual departmental silos – inaccessible to their own internal fraud teams, yet alone front-line staff dealing with benefit claims. Then each local authority is an island of information separated from its neighbouring (and all other) authorities – how many housing benefit claimants claim benefit in one local authority area whilst having a taxi driver licence in another (or even working for another authority?).

Meanwhile, central government has numerous lists of relevant names (e.g. the names of tens of thousands of immigration/asylum offenders and absconders who have exhausted the appeals process, and are not entitled to public funds), that, even if they were made available to local authorities and other departments, could not be used because of the lack of investment in counter-fraud computer systems.

The National Fraud Initiative (NFI) operates a data matching service for participating organisations, using data matching across a large number of databases to identify potentially fraudulent activity. In its last report, the NFI claims to have found £215M p.a. of fraud, perhaps a reasonable result in absolute terms, but a very small percentage of the National Fraud Authority’s figure of £7 billion p.a. of public sector fraud estimated to be in the system. The biggest gap in this initiative is that only one government agency took part – not a single central government department participated.

The next gap is within local authorities and other organisations using NFI – in 2008/09 only 269 prosecutions resulted from the NFI – and although 16,535 blue badges and 21,534 concessionary travel passes were cancelled, this is hardly tackling serious benefit fraud. NFI sends authorities lists of ‘potentially fraudulent activity’ – many (most?) authorities lack the funds/staff/time to investigate the people identified by NFI. As one councillor told me “there’s no money in fraud detection” whilst another told me “I don’t want to catch housing benefit fraudsters amongst my electorate – they clearly need the money to live, and if government is prepared to pay them, why should the council seek to stop them?”.

Also, as most Officers will say, it is a lot easier to detect fraud at the point it tries to enter the system, rather than after it is in the system. Carrying out an annual data matching exercise is too little too late – such data checking should be available at the time a claim is submitted – not up to 12 months later. Also, where authorities’ fraud teams are investigating individuals, or have a known fraudster, there are very few ways that the information on that individual can be shared with other authorities or organisations (worthwhile regional initiatives such as LTAF – London Team Against Fraud – have been starved of cash and doomed from the time of their birth).

So how to move forward?

The best way may be to have a unified benefits system under the control of a single body. If this were assisted by each claimant having a unique ‘entitlement’ number or card then so much the better (NINO’s would have helped, had there not been, reputedly, over half a million extra NINOs in existence). This may be the new government's aspiration, but I doubt that it will happen quickly, so in the meantime key initiatives should include:

local authorities must be encouraged (via much more generous financial subsidies/payments) to find and stop fraud both entering the system, and once it is in the system
the NFI must be expanded to include all government departments, and
the NFI’s systems should be re-engineered to allow for much more frequent data checks (to help stop fraud entering the system)
a secure, centralised database/network must be created to allow the fraud departments with local authorities and other public sector (and perhaps private sector) organisations to share information on confirmed and suspected fraudsters.

P.S. Many Councillors and Officers try to hide their lack of support for counter-fraud data matching behind the Data Protection and other Acts. I won’t try to examine the detail of the complex legal framework, nor add the caveats about informing citizens, but suffice it to say that data matching exercises are OK provided they are solely ‘for the purpose of assisting in the prevention and detection of fraud’.

Wave goodbye to Google Wave

2010-08-05T09:14:00.002Z

Only just over a year after its launch, Google has announced the end of its Google Wave initiative as a stand alone product.

As I noted in my Google Waves hello to Microsoft post last year, the initiative introduced an integrated set of tools around email and instant messaging that would make it a whole lot easier to manage internal collaboration that other tools then on the market. It has driven some changes in other suppliers’ offerings, with Microsoft’s Outlook 2010 introducing a small part of the same functionality (and I think more will come over the coming years).

However, Google apparently never overcame the security implications of Google Wave – one of the factors that has contributed to a very poor take up of the technology by corporate customers. To quote from the Google announcement:

“ …. Wave has not seen the user adoption we would have liked. We don’t plan to continue developing Wave as a standalone product, but we will maintain the site at least through the end of the year and extend the technology for use in other Google projects.”

So perhaps some of the technology will find its way into other Google products….

SaaS is the answer – not G-Cloud

2010-08-02T10:43:00.002Z

Over the past couple of weeks, I’ve posed an interesting conundrum to a number of decision makers involved in purchasing software applications for local authorities. All discussions started off on the premise that ‘cloud’ computing is the way forward, and the question was:

If you were looking for a new back office application, assuming the 5-year cost of ownership is the same, which of the following would have the greatest impact on your decision:

the application runs in G-Cloud?
the application runs in a supplier-managed cloud?
the application runs on the LA-managed cloud/data centre?
the licence agreement is on a SaaS basis?

In all but one case, the answer was a pricing based on SaaS, where the LA pays based on usage – there was little concern about where the application was run, the focus was on price and matching that price to usage.

To me this was a surprise, firstly, because LA’s have historically disliked the ‘blank cheque’ approach of true SaaS agreements, where if usage increases so does the cost – they have typically liked to budget for a cost and know that that budgeted cost will not be increased, come what may. In discussions, most did not expect transaction volumes to increase, and wanted the flexibility of SaaS agreements to allow them to manage and move their transaction volumes as the years progressed.

This led to discussions on the types of SaaS agreements being offered. Most said that they did not regard SaaS agreements that stipulated a minimum level of commitment as true SaaS contracts. They regarded volume pricing as acceptable under SaaS (i.e. if volumes decline below certain levels, then per unit pricing increases), but only if they were not punitive. (However, perversely, one person believed that suppliers should have a maximum cap on total annual cost - whilst not having a minimum level of commitment on the LA).

I was also surprised by the lack of emphasis on, or questioning about security levels. Either the messages about overcoming the security hurdles are getting through, or there is a growing cynicism about IT departments over-stating the potential problems to support their own preferred solution. Not surprisingly, the one dissenting voice came from Social Services who put security top of his list, and would insist on the applications only running under the management of the LA.

Although my survey size was not large enough to draw firm conclusions, it would appear that suppliers will need to look harder at their own commercial terms, rather than just the technical hosting solution, if they are to win over new customers in the future.

G-Cloud – data centre or true cloud?

2010-07-15T14:49:00.002Z

My latest project has given me considerable exposure to the design and development of new applications to be hosted in the ‘cloud’ - albeit for a commercial company rather than a public sector customer. However, it has led to a number of contacts asking for my opinion on the Government’s G-Cloud initiative.

On paper, G-Cloud is potentially a money-saving initiative even if, as I suspect, it is more a shared data centre than a true cloud computing initiative. The question is whether the project can be made attractive to the many, largely autonomous, organisations that form the UK Public Sector. Whilst Central Government departments can perhaps be expected to sign up to this initiative (although I doubt that there will be universal acceptance without the use of a stick or a very large carrot), past experience has shown that other organisations like local authorities, police and others will be far more reluctant.

As I’ve discovered in my cloud projects, once the security issue has been overcome, the next most important factor is cost and the ease with which additional computing power can be bought on stream to deal with peaks in demand. Can G-Cloud match commercial cloud providers such as Microsoft, Amazon or others?

My view is that it is unlikely to. Running a cloud purely for the UK Public Sector means that it will have to be sized to cope with the peak demands of its customers – peaks that will in many cases all occur at the same time. If a flexible pricing policy is adopted, then I suspect that it cannot be competitive with commercial cloud suppliers who manage a wide variety of peak demands, and can therefore spread their costs better. And what comes first? – the computing power or the demand? – in a public sector heavily constrained by budget restrictions can the computing power be put in place before the demand is contracted?

No – I suspect that G-Cloud will be more a shared data centre, with organisations committing to take up a dedicated level of computing power, with the level of pay-for-what-you-use computing limited by relatively high on-demand pricing (but still likely to be cheaper than running in-house options).

Also, it will be interesting to see if the concept of the Government App Store succeeds or not. In theory it should, but in practice I fear it will be limited by the current architecture of many of the existing applications used within the UK Public Sector. In the short-term, what I expect instead is a few suppliers cleverly offering a SaaS pricing approach on existing ‘legacy’ applications without embracing a true on-demand use of hardware – most probably against a ‘minimum commitment’ that will limit the cost savings for users.

But given a software generation or two, I believe new applications will be developed that have been designed to make optimum use of true on-demand, cloud computing systems. Only then will the real cost benefits of cloud computing possibly be realised by the UK Public Sector.

No surprises with cancellation of BSF

2010-07-12T13:49:00.002Z

I guess that the largest announcement whilst I was in N America was the cancellation of the Building Schools for the Future (BSF) programme.

The cancellation should not come as a surprise to suppliers – the Conservatives’ opposition to such programmes was very clear, and even Alastair Darling’s announcements on capital spending (in the 2009 Budget Report he signalled a halving of the government’s capital programme from £44 billion to £22 billion per annum) meant that were Labour re-elected, the BSF programme was unlikely to continue. Over the past 18 months I’ve worked on a number of business plans in the Education sector, and each one identified the potential cancellation of BSF as a major external risk factor.

Leaving aside the political arguments, working in the software supplier space, personally I’m pleased to see the back of BSF. The programme was vastly complicated, bid processes involved crowds of unnecessary people, far too many tiers of contractors and sub-contractors were involved, and the resulting main contracts seemed over-priced and poor value to the customer.

The impact on the ICT main contractors will be immense. They have incurred massive bid costs on the basis of gaining volume and recouping their costs from rolling out solutions to multiple schools across the regions – roll-outs that are now unlikely to happen. However, I believe that the canny suppliers will keep in there – the BSF programme may be dead, but the need for new build and modernisation of secondary schools remains – the building programme will be cut back, but the need for ICT will remain – and if the procurement is devolved more, then perhaps that ICT procurement will become less complex, it may again be possible to deal with the customer staff that matter, and perhaps, just perhaps, customers will focus more on the real educational computing needs, rather than the suits’ view of life…..

However, in the post-BSF (and post-BECTA) era, if we are to have devolved procurement of new ICT for schools, I believe it will be essential for central government to retain a central advisory and supervision role to help the agreement and implementation of open standards across all areas of software in use at schools. Allowing an unmanaged explosion of small-system developments/implementations could result in a bigger long-term waste of taxpayers’ money than the planned ICT expenditure in the expensive BSF programme.

Seeing off the grizzly in my OWL…

2010-07-12T11:31:00.002Z

I was fortunate to spend the last week of my time in North America in Yellowstone, where I was able to knock off another item on my OWL (Outrageous Wish List) when I met up (at a safe distance) with a grizzly bear (and its 3 cubs).

In talking to my hosts about my OWL, I was, once again, made aware of the American focus almost exclusively on work, and their general lack of planning of their own personal lives. At this stage I can plug the services of Richard Maybury who, in addition to helping me manage my work activities better, taught me the need to use the same techniques in managing my personal life – one of the ideas being to build an OWL of 10-20 things that you want to do in your life – and plan to knock 1-2 items off the list each year.

OK – so I’ve only managed to knock 4 items off my OWL in the past 5 years (getting to Yellowstone and meeting a bear was one) – but having the OWL (as well as using several of other time-management techniques in my personal, as well as my work, life) has made a big difference in my life.

In the USA they talk of bucket lists instead of OWLs, but surprisingly none of the people I met out there have one – do you?

Is the FiReControl project at risk?

2010-05-20T13:41:00.002Z

In today’s document outlining the new coalition government’s programme for government there is a short comment about the fire services, namely that the government will “stop plans to force regionalisation of the fire service.”

Whether this refers to the FiReControl project or Prescott’s wishes for a merging of the existing 46 English fire services into 9 regions is unclear. Personally I hope that this does not spell the end of FiReControl.

As I’ve said before, the case for FiReControl is very strong – as a nation we would have far a better response to major emergencies were an effective FiReControl system implemented. As ever, the problem is that the procurement of the technology for this project was fatally flawed from day 1 (see FiReControl – a catalogue of poor judgement and mismanagement ).

Whilst the incoming government will inevitably focus on the costs of the project, and the potential savings from cancelling the project, I hope that it doesn’t throw the baby out with the bath water. The current project may be flawed, but the underlying ideas and vision aren’t. If the current project is to be cancelled, let’s hope that the vision remains, and that it is taken forward more effectively and efficiently in a well-specified project with strong user engagement.

HIPs to go – at last….

2010-05-20T11:11:00.002Z

OK – I predicted the demise of HIPS prematurely (see HIPS will go - but when... ) – but the new coalition government has today suspended the use of Home Information Packs (HIPs) by home sellers.

Introduced in 2007, the aim was to speed up the house selling process by obliging sellers to provide much of the required conveyancing information when properties are first put up for sale.

The packs were paid for by sellers and contained property information, title deeds, and local searches. But in practice many prospective purchasers ignored the HIP whilst making their decision, and actual purchasers resorted to getting their own local authority searches.

"Today the new government is ensuring that home information packs are history," said Housing Minister Grant Shapps.

"By suspending home information packs today, it means that home sellers will be able to get on with marketing their home without having to shell out hundreds of pounds upfront. We are committed to greener housing so from now on all that will be required will be a simple energy performance certificate" he added.

FiReControl – a catalogue of poor judgement and mismanagement

2010-04-01T09:32:00.003Z

No – that title isn’t mine – it’s from Communities and Local Government (CLG) Committee Chair Dr Phyllis Starkey when launching the report of an enquiry into the FiReControl project (a programme to replace 46 local fire and rescue service control rooms with nine purpose-built regional control centres).

This will come as no surprise to regular readers who may remember my December 2008 post on this project:

“the project itself smacks of Government’s usual inability to follow best practices when procuring new IT systems….….. 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.”

Yet again Central Government is giving us a lesson on how not to procure and implement new IT projects. Quotes from the evidence presented to the committee include:

“The problem stems again from a lack of user engagement at the early stages of the project.”

“the rush to procurement meant the level of detail in the specification did not reflect what the professional people were saying. That has plagued the project ever since, both in terms of delays and being over-optimistic about how quickly it could
be delivered, how much it was going to cost, and why certain things that were absolutely necessary were never specified and other things were put in that were not needed.”

As I have posted so many times, this is yet another project that has gone wrong before the initial contract was signed. The matter appear to have been compounded by (yet again one of my pet topics) the “adversarial relationship between the customer and contractor”. Central Government must get out of the current ways of procurement of these innovative systems:

Government under-defines requirement
Suppliers bid knowing that the requirements will change
Government awards contract on the basis of price rather than value
Government then involves end users who identify substantial changes to requirements
(in many cases like this, initial software solution is found not to meet the new requirements)
Suppliers use change control procedures to delay the schedule and increase the price of the contract to reflect the additional work required to meet the changes
Contractor and Supplier fall out – to the overall detriment of the project

I have great sympathy with both the supplier’s and the CLG’s management staff on this project. They appear to have done the best they can given the framework under which Government procures these types of projects. Although I do wonder what the unsuccessful bidders for the original project said in their proposals – did they point out the likely problems, allow for them in their bids (and get ruled out because of the resulting higher price and/or delayed schedule?).

As I noted in my 2008 posts, we need this project to work – once implemented it should give us one of the best operational systems in the world. The good news is that main contractor EADS has entered into a new subcontract with Intergraph for its well-respected I/CAD product. Intergraph already appears to have stamped its authority and experience on this project and, whilst the lack of fully defined requirements so late in the project gives cause for concern, I have more confidence that they will be able to deliver a working central system than before their appointment.

P.S. You may be interested in some of my other posts on these topics:

Microsoft Mix 10 – designing Modern Web Apps

2010-03-18T14:21:00.002-01:00

My current project is based around an interactive application delivered over the Internet to both full screen browsers and mobile devices with small form factors. Of key importance to the business plan is that the application be easy to use, and be capable of use by citizens who are not necessarily computer literate. (It’s also going to be delivered via Microsoft’s Azure cloud computing platform – but that’s another story).

As the product is being built with Microsoft tools, I’ve been up early this week watching the videos from the sessions given at Microsoft’s Mix 10 event in Las Vegas (you need to have downloaded or streamed the videos before the east coast of the US wakes up – from about midday onwards the response is very, very slow).

There is a lot about technologies not strictly relevant to my current project, but out of the Azure and Web Apps presentations I’ve seen to date, the best has been from Luke Wroblewski (not an MS employee) on the topic of Modern Web Form Design. In summary, Luke describes how to use modern web technologies/tools to deliver better end user experiences, and illustrates his talk with results from research into the end user acceptance, and use of, tools/techniques such as in-line validation, AJAX accordions and other such tools aimed at providing a better end user experience.

If, like me, you have an interest in this area (and would like to learn more about the methods to adopt in building web apps for small form factor mobile devices), then I thoroughly recommend the video (although be advised that it is over an hour long, just).

P.S. For those who want to know more about the Azure cloud computing platform at a fairly high level, then I recommend a Lap around the Windows Azure platform (although, yet again, this is about an hour long). This demonstrates the ease with which apps can be deployed to the cloud – although I can’t believe it’s as easy as the demo……

How to split large Government IT projects

2010-03-15T08:56:00.002-01:00

I’ve been intrigued by the debate on large Government projects and the use of the larger service suppliers that has been prompted by the Conservative Technology manifesto. Some rush to the defence of the larger suppliers, whilst others, typically coming from the SME sector like me, point to the way the current procurement process fails to include SME’s adequately.

My experience of working as potential subcontractors to the big service suppliers is that even though you may have a market-leading software solution, they will try to find a way to prove that the end customer will be better off with a customised solution built, typically from scratch, with lots of chargeable days from the main contractor, rather than making use of an SME solution. And how many software package selections do main contractors make on the basis of the amount of services required from the main contractor to implement the solution (rather than possibly a better/cheaper solution that doesn’t involve oodles of services from the main contractor)?

These large services companies are in these large projects to generate services revenue for themselves, maximise their margins, and to make money for themselves - not their subcontractors – who they will use only when they really need to – and typically then only with loads of chargeable time from the main contractor to oversee the subcontract procurement and subsequent management of the implementation project.

But why would we expect otherwise – it costs a great deal to bid for Government work, and once it’s won, who would expect the supplier to do anything else. No – the problem lies in the way Government structures, procures and manages these projects, not the way the big services companies work.

Even with the Conservatives’ proposed limit of £100M on IT projects, the projects are likely to fall outside the types of project that SMEs can bid for directly. Central government needs to change the way that it structures larger deals, and uses the larger services suppliers to oversee them. Yes, use a main contractor in a management role or responsible for integration, but making it clear how far that role goes, and in particular that whoever manages the procurement and oversees the project cannot fulfil any of the other roles. Why not set a minimum percentage of the project value that must be spent with SME subcontractors?

More importantly, split the application software development out into separate projects from the implementation and roll out (and have separate infrastructure supply and support projects). For major new developments, fund two or three SMEs to develop software in competition, keeping the best solution but being prepared to throw away one or more developed solutions before the cost of implementation and roll out – even though the developments have been paid for. Get experienced software developers involved sooner, and in touch with the end users to develop software that really meets their needs.

Let’s get a contractual framework where the main contractors are focused less on where their own services revenue will come from, and more on how to provide the best solution for the customer.

P.S. The Conservative plan for a small in-house ‘skunkworks’ team, to develop low cost applications and advise on the procurement of larger projects seems like step in the right direction. But will Government be able to recruit the appropriate resources – with all due respect to the IT civil servants I’ve met, in most cases, they are not the types of staff that will be the best for this new role. As noted above, why not make use of those staff in SMEs, calling on a much wider pool of experience, and in many cases with experience relevant to the specific project in mind…..

Fraudulent misrepresentation – what now?

2010-02-04T11:15:00.002-01:00

There has been a lot of press comment over the past week about the recent Court ruling that HP/EDS must pay damages (“in excess of £200M”) to BSkyB for a failed CRM system. Surprisingly, much of this comment seems to suggest that this case will result in significant changes to the ways that IT suppliers will sell and contract in the future.

Yet the basis of the Court decision is that HP/EDS was guilty of fraudulent misrepresentation, and that HP/EDS could not rely on its ‘limit of liability’ clause to limit he amount of damages it had to pay to BSkyB. But this is neither a change to contract law – nor a new interpretation – under the Unfair Contract Terms Act 1977 (UCTA) suppliers have always been unable to exclude fraudulent misrepresentation, and under UCTA they cannot limit liability for such fraud.

What are surprises are the size of the likely damages (several times the value of the original contract), the apparently blatant misrepresentation carried out, and that the case ever came to court (it most similar cases there is an out of court settlement – note that in this case HP/EDS is rumoured to have spent over £40M in legal fees to date – suggesting that, yet again, the real winners in such cases are the legal eagles).

Hopefully, this case will serve as a wake-up call to Directors and senior managers to revisit their own internal procedures, training and guidance to all their customer-facing staff – and not just their sales staff (although they are the main concern), as it is just as likely that pre-sales staff, consultants and/or other staff could misrepresent the capabilities of a system being proposed to a prospect.

Most importantly, in addition to the proposal/tender vetting process, the contractual negotiation phase must be used by a supplier to fully vet its own proposal, collecting together any documentation and/or ‘side letters’, to try to avoid any prospect from relying on any statements that could be false. When I used to negotiate larger contracts I always openly asked the customer if there were any statements, email or documents that he was relying upon – and if so I insisted that they were referenced or included in the contract.

As I have said many times before, from my own experience gained in trying to turn around problem projects – as clearly happened in this BSkyB project - most failed projects have gone wrong before the contract is signed….

iPad – not yet for me

2010-01-28T10:36:00.004-01:00

After all the hype the iPad is released – and it looks as if it’s just a larger version of an iPhone or iPod touch. Yes, it looks great with its sharp colour display, oleophobic screen and touch interface, but will it perform? (Many thanks to gizmodo for the picture – they also have a good overview of the iPad).

If one steps back from the hype (Steve - great launch by the way), and compares this to, say, a tablet PC running Windows 7, then the iPad comes up as lacking many key features that existing laptop, PC and Mac users would require.

The biggest failing I’ve seen is the iPad’s lack of any multi-tasking (already a major failing on the iPhone) – except, of course, for Apple’s own applications. So forget writing an e-mail whilst writing a document or having a Twitter.

Then of course there is Apple’s continuing refusal to support Flash – apparently to be continued with the iPad – this rules out many of the best web sites – which will appear on the iPad with large blank holes.

Will the iPad run any applications? – almost certainly not – Apple will retain its control over the apps it allows – all of which can only come through the Apple applications store – allowing Apple to control the types of application one can access, effectively censoring the apps that individual users have access to. Want to run Google Voice or a Browser other than Safari? – not allowed.

Cameras? – not yet – so no video conferencing.

So my view is that the iPad will be solely a consumer device – and one bought primarily by individuals who don’t make heavy use of computers at the moment – functionally, it really is like an iPhone with a larger screen.

What is more interesting is what the impact on the market will be. Microsoft, HP and others have pushed tablet PCs in the past without much success, and the touch-screen user interface of Windows 7 has not had much success to date. Will the launch of the iPad revitalise these initiatives and see the rise in keyboard-less, touch screen netbooks and tablets? – I certainly think so. Like many initiatives started by Apple, in the longer term, I think the iPad will result in significant changes to the way we view and interact with mobile computers and PCs.

2010: Another year of “if it ain’t broken….

2009-12-16T12:51:00.002-01:00

…. don’t fix it”.

I’ve had the opportunity to talk to a number of software and service suppliers to the UK local authority market over the past few weeks, and with the exceptions of out-sourcers and suppliers into the social services, education and housing sectors, they are broadly pessimistic about the opportunities for new business in 2010.

As I predicted early this year, 2009 has not been too bad a year, with the April re-organisation throwing up some good new contracts and opportunities, whilst some existing customers have had the budget to buy additional functionality and services from existing suppliers. But now supplier orderbooks seem to be depleted, and without significant new business in the offing, many suppliers continue to review their costs and staffing structures to batten down the hatches for a tough 2010.

As 2010 is an election year (both general and local), it will spread uncertainty in many purchasing areas and exacerbate the opportunities for indecision. In normal times suppliers would have expected a poor year, but in today’s troubled financial times, it promises to be even worse.

Not surprisingly, several companies are looking at acquisitions as a way of growing their customer base, and with poor sales forecasts for many smaller suppliers potentially driving down their valuations, I think 2009 will see further consolidation in the application software market. Indeed, a few suppliers are not expecting their competitors to survive the the next couple of years, and I would agree that there are a number of smaller suppliers that will not survive what I believe will be an orders drought through to at least 2012.

As I've said before, existing suppliers will try to maximise revenue from existing customers, both through increased services offerings and new modules & functionality for existing systems. Larger suppliers will attempt to cross-sell between departments within existing customer sites (I think, in 2010, with limited success, although customers may be tempted by the lower cost of procurement).

However, the corollary to all this, particularly for the smaller or bolt-on applications, is that we may see the arrival of new, smaller players with new offerings that are significantly cheaper and potentially technically superior to existing suppliers who have not invested enough in their products.

So 2010 – an even tougher year for the software suppliers.

Agile vs waterfall – the debate continues

2009-12-15T13:01:00.002-01:00

It’s been good to see the number of new readers that have found this blog by searching for this topic – and I welcome the many comments that I’ve received on my previous posts.

Over the past year I’ve met with a number of advocates of agile methods, and had the opportunity to review a number of new software products being developed using agile methods. Whilst my view remains that it’s “horses for courses” when deciding on agile vs. waterfall methods for development (see my original post - Agile vs. waterfall methods), I’ve yet to find anyone that is using agile development methods for new application package products effectively.

Yes – I’ve seen some very successful agile developments of bespoke systems for single customers, but agile methods seem unable to cope with the development of package products that need to be designed to meet multiple and differing customer needs. The key appears to be the need to understand the many different customer requirements in advance, so as to be able to decide upfront on the core parameters for the product.

As noted in my post Agile methods for package enhancements?, when there is an existing product, where the majority of core parameters have been defined already, agile methods can be used effectively to develop new modules – always providing that you have the right types of team members and a true agile methodology (rather than a “let’s give the techies control of this development” approach).

However, do any of my readers know of new application software products that have been built successfully using agile methods? If so, please let me know.....

OT - America’s Cup 2010

2009-12-15T12:54:00.003-01:00

For those of you that don’t keep up-to-date on sailing, the next meeting of the giants of match-race sailing, the America’s Cup, has been totally changed by the courts following legal battles between Larry Ellison (CEO of Oracle) and the Swiss challengers, Alinghi. Rather than a competition open to all entrants to fight to challenge the holders, next year’s competition will be solely between the holders, Alinghi and BMW Oracle Racing – racing in mighty multi-hulls rather than the normal 12 metre yachts.

We may not yet know for sure where the February competition will be held (my betting is on Valencia), but next year’s America’s Cup racing looks as if it will be more a technology rather than a tactical race. Just look at the competitors....

Visit the BMW Oracle Racing and Alinghi web sites for more information, photos and videos.

I can’t wait to see who wins this competition next year – I just hope that the two boats are relatively evenly matched, otherwise the competition could be as boring as some Formula 1 GPs, where one car can be so dominant as to result in predictable, processional races. I don’t see multi-hulls as the ideal vehicles for close match racing, however, if we get some good breezes, just watching these monsters at speed could prove exciting on its own....

I hope that we will see a return to common sense rather the courts after 2010, with the competition returning to open races in boats built to an agreed specification (ideally 12 metres, but if not, let’s have a tight standard that puts the emphasis back onto the skills of the teams).

After the downturn

2009-12-11T10:02:00.002-01:00

Let me draw your attention to a joint paper by CIPFA and SOLACE on the Pre Budget Report – a paper that tries to start the discussion on how Local Authorities will have to start planning for public spending cuts. A bit like the PBR, it neither identifies specific areas for change, nor the levels of cuts, but discusses the strategies that LA’s will have to adopt over the coming years.

The paper focuses on two scenarios, one envisaging a 7.5% cut in real terms over 2011-14, the other 15%. Whilst the 7.5% cut is possible, I believe that the 15% cut scenario is much more likely, and I believe it may even be more than 15% – particularly as I believe the ability for LA’s to increase Council Tax will be substantially reduced over the same period.

I won’t repeat the contents of the paper here, other than to say that I strongly agree with the need to re-think the delivery of services, and the paper’s three options of:

redefining the relationship between the state and the individual
a significant de-layering of the public sector
a major initiative to maximise economies by much more effective collaboration between public bodies

After the ‘ring fencing’ of some key services, I believe that many LA’s will have no choice but to terminate or almost remove some other services (e.g. the library service is one area that could be under threat in some areas). However, de-layering of the public sector, combined with more effective collaboration between public bodies, in my mind, potentially gives the greatest potential for savings.

Perhaps severe cutbacks in funding will force organisations into sharing services, and the government into more ‘vertical integration’ of services (e.g. between national, regional and local bodies). This will inevitably lead to more out-sourcing, but if the public sector was to think more in an out-of-the-box way, perhaps we will see the more innovative use of out-sourcing to commercial operations where true synergy is possible – e.g. local supermarket chains, or even banks (or can some of them be already regarded as part of the public sector?).

Congratulations to CIPFA and Solace on their paper. Hopefully it will encourage the public sector to discuss the major shifts in service delivery that the current crisis in public sector finance demands.

Tories to reduce Government’s commitment to large IT vendors?

2009-11-03T08:44:00.002-01:00

The Tory Shadow Minister for Science and Innovation, Adam Afriyie gave a very interesting speech last Thursday, in which he outlined some of the Tories plans for major IT projects if/when they get into power.

Regular readers will know of my confirmed belief in the vital importance of true inter-operability, and it was a pleasure to hear Adam’s views on this....

"By using standard data formats, like XML, government can open up the procurement process to the widest possible base of suppliers. With inter-operability, large projects can be split into manageable, modular chunks. The outcome is a more flexible procurement process where it is easier to change suppliers and resolve problems as they emerge."

Then, as if he had been reading my post on How NHS NPfIT should have been procured, he announced that...

"One option we are considering is the use of multiple proof-of-concept pilot projects. If several suppliers are asked to come up with working solutions, they can then be piloted, and the most successful can be scaled up and rolled out nationally. The use of multiple early-stage pilot projects could reduce reliance on a handful of big vendors and increase the proportion of IT budgets spent with innovative young companies."

I only hope that the Civil Service allows this to happen – I remember that one of the objectives of the LA Pathfinder projects in 2001-02 was to involve smaller companies who were more innovative and faster to react than larger IT companies – unfortunately 24 of the 25 Pathfinder projects went to the major service suppliers – some of whom had no track record of LA application software development at all.

But perhaps, given the spate of government IT disasters over the past few years, these sorts of initiatives will have a chance over the next couple of years.

Adam also gave what was, in my view, a very good summary of the current government’s e-initiatives:

".... some worthy objectives, such as joined-up government and personalised public services. But their approach has been deeply flawed. While the pace of technological change was breath-taking, the response from government was not.
Internet access empowers people. It improves productivity and opens the door to self-improvement. But while the internet was empowering individuals to take control over their lives Labour was attempting to maintain the old bureaucratic machinery.

Ministers were mesmerised by the transformative potential of technology but failed to integrate it seamlessly into everyday use

Perhaps the next few years will see significant changes in the way government procures and develops new IT systems – let’s hope so.....

Capita divests IBS R&B unit to Civica

2009-11-03T08:17:00.005-01:00

Over the summer, Civica acquired IBS's revenues & benefits unit from Capita - following the Competition Commission's decision to force Capita through a divestment – see Capita to divest IBS Revenues & Benefits unit.

I was quite surprised that Capita divested the unit to Civica as, with Civica's existing base of R&B back office and Comino workflow/DIP customers, it makes a serious competitor to Capita's own R&B business. But as I understand it, Civica were the only credible bidder with the cash to complete the deal.

In practice, I believe that Civica has done well and bought the unit at an apparently bargain price. I'm sure that the indecision brought about by the CC investigation has harmed both the IBS business and staff, but now Civica has a complete, competitive R&B offering – and a good upgrade offering to its existing R&B back office customers running Civica's very old, Pick-based, back office software.

However, I still believe that Civica will have an uphill struggle to sell its now Progress-based solution to new customers – particularly the larger users such as the new unitaries. But perhaps they will win a sympathy vote from those customers unhappy with Northgate's decision to switch off support for the old Anite Pericles product (and unwilling to move into Capita's extensive grasp).

Over the past year I've spent some time with external companies looking at the UK local authority market and considering trying to enter the R&B market by developing new back office products from scratch, but all seem put off not just by the development cost, but also by LA prospects' desire to see three live reference sites, the resulting lengthy time to market, and the possibilities of future central government changes in the way revenues are collected and benefits handed out.

Seeing no potential new entrants, we now must live with the three R&B suppliers, each of them with competent solutions, but neither of them with clearly the best solution, and each of them with at least one major drawback.......

Back to blogging

2009-11-01T15:36:00.000-01:00

As regular readers will have recognised, I’ve not been posting to this blog during the summer, primarily due to pressure of work. But after a very busy summer, including a stint as interim Operations Director of an AIM-listed software company, work has reduced a bit, so I’ll be getting back to posting a few items each week.

Government IT projects – time for change

2009-06-08T11:43:00.002Z

The debacle of the C-Nomis project (see Tony Collins blog for the background) highlights the need for fundamental changes in the way that government (primarily Central Government – local government seems to be far better) procures new IT systems.

As I have previously posted, I recommend breaking large projects down into smaller, more manageable chunks. But, perhaps more importantly, ensuring that the requirements for the project have been accurately and completely defined – prior to a specification stage that includes detailed walk-throughs with real-life end users. This is the most important phase of an IT project – yet is typically rushed or overlooked, and frequently completed without adequate reference to the managers and end-users that will be using the system.

I’m a great believer in “phased fixed price” contracts for dealing with large projects that require the development of customised software – splitting out each phase into separate contracts where the current phase is on a fairly firm basis (ideally fixed price against an agreed definition), with budgeted prices for the next phases (typically based on some broad brush assumptions of what will come out of the each phase). Such an approach allows for the requirements collection phase to be contracted separately and carried out by potential eventual developer (if you want to know how to do this in a way that allows for subsequent changes in contractor, please contact me).

All too often, major government IT contracts are awarded to big service suppliers rather than splitting off the development stages (that frequently generate lower revenues than the roll-out and related infrastructure stages) to specialist software developers, and leaving the other stages to the service suppliers. The culture of specialist software development businesses is different to that of the major service suppliers, a culture which is more likely to deliver a better software solution (whilst service suppliers would be better at the other stages of a large new IT project).

As the C-Nomis project proved, a lack of focus on the core requirements, system design and expected benefits, has resulted in a system that met neither the business objectives, nor the project budget and timescale. I suspect that it’s been a great business success for the service supplier who has benefited from the budget increase from £234M to £513M – no doubt far outweighing any bad PR from this obvious failure.

How many more project failures will there have to be before we see Government recognising the need for splitting up large projects into smaller, more manageable chunks, ideally allocated to different specialists for the different types of contract?

Capita to divest IBS Revenues & Benefits unit

2009-06-04T08:54:00.002Z

The Competition Commission has published its final report on Capita’s acquisition of IBS and, unsurprisingly, it has announced that it is requiring Capita to divest the IBS Revenues & Benefits unit.

The report points to the several problems with the partial divestment of the R&B unit (Capita would be allowed to keep the Social Housing unit if it can achieve the partial divestment of the R&B unit), but has apparently obtained assurances from Capita that it will pick up any additional customer costs such as additional licensing costs and/or separation of an integrated IBS database into separate R&B and SH databases.

I would imagine that existing joint R&B/SH customers of IBS will not be too pleased about losing their single contractor, single point of contact and integrated database, but if Capita had been allowed to keep the IBS R&B unit, in the long run, perhaps Capita would have moved the customers off the IBS R&B product any rate, so the customers would have lost many of these benefits without the forced partial divestment.

There seems little doubt that the value of the R&B unit to purchasers will be reduced by the partial divestment, rather than a full divestment of the whole IBS business including the SH unit, but I suspect that Capita will much prefer such a partial divestment. Although the value realised will be less, and the partial divestment will be more time consuming and messy, given the likely smaller price tag, there are likely to be more potential purchasers – and, given the unknowns, I suspect that it will be some time before the divested unit becomes a forceful competitor again in the R&B market.

There is the risk that if a partial divestment is not achieved, the CC will require Capita to go down the full divestment route – a route that I’m sure Capita will wish to avoid at all reasonable costs. Although Capita has announced that it is “in early discussions with interested parties”, no doubt the due diligence and purchasing process will take several months, but it will be very interesting to see who the succesful purchaser of the IBS unit turns out to be .....

FOI to apply to suppliers?

2009-06-03T08:32:00.001Z

UKauthorityITy.com has pointed out that there is an impending extension of Freedom of Information powers to cover suppliers (see here for the article).

However, I believe that software and associated service suppliers will not be affected – any extension is likely to be limited to BPO contractors – and not software suppliers operating on either a conventional licensing or SaaS approach.

It will be interesting to see where any extension stops as far as IT services and managed services are concerned. Where a managed service is limited to supplying a working computer system for use by public sector employees and/or their contractors, then I believe that any FOI extension will not affect this sort of service any more than current contracts/legislation require.

Where a service supplier provides a fully-outsourced IT service, any extension is likely to be less well defined. My personal view is that FOI should not apply to such contracts, but from the comments flying around at the moment, I believe that there is pressure to bring these types of contracts into the FOI arena. This will no doubt provide lots of work for the legal profession over the coming months/years....

Google Waves hello to Microsoft

2009-06-01T08:36:00.002Z

Possibly to try to counter Microsoft’s launch of its new search engine Bing, Google last week pre-announced its new Google Wave product - a “new-age communication and collaboration tool” that seems to combine e-mail, instant messaging, and bulletin board functionality, with strong support for multi-media, into a single product.

I’ve only seen the developer preview at last week’s Google I/O 2009 conference (see here for the 80-minute video of the presentation), and whilst it was clearly still buggy in its development form, and will not be on general release before the end of this year, it seems to be a serious future competitor to the Microsoft tools that currently dominate corporate communications.

Particularly impressive to me were the collaboration aspects of Google Wave – potentially very effective for project teams to communicate ideas and make decisions – together with the ability to replay the messages/discussions in order to see how the discussion went from initiation through to current time. Given the potential benefits for improved collaboration, I can see that small technology operations (like software houses) – particularly those using a high level of remote working, be they home-working or distributed offices – will be the early adopters; the question is, will the major corporates follow?

However, whilst such tools would be great for in-house use, I struggle to see how one might manage the security implications of opening up such ‘waves’ to users external to one’s own organisation – or even across departments in large corporates or organisations.

I also wonder about the level of server computing power (and network capacity) necessary to support just internal heavy usage – let alone the power/bandwidth necessary for public utilisation.

Google is planning for Google Wave to be open source, and through its pre-launch in San Francisco last week, is trying to encourage the developer community to embrace the product, and use the API’s to produce bolt-ons (‘gadgets’ and ‘robots’). The plan appears to promote open networks, with anyone being able to become a Wave operator, with ‘Wave’ running on a distributed network model operating on a peer-to-peer basis.

Whilst I suspect that Google Wave will need to change before its open launch - to address both potential security and performance issues - its innovative functionality will undoubtedly drive significant changes in the way we all use e-mail and instant messaging in the future. I’m intrigued to see how Microsoft will respond....

Bing launches this week

2009-06-01T08:33:00.000Z

Wednesday 3 June sees Microsoft launch Bing, its new search engine– although Microsoft describes Bing more as a “decision engine”.

If you want to know more then there are a number of write-ups around, or try looking at Microsoft’s press kits or view a short (less than 3 Minutes) video.

However, the initial launch will focus on the American market, with only a Beta version available in the UK – where we’ll have to wait around another 6 months before we see a version of Bing optimised for UK searches.

I had the opportunity to have a demo of Bing when it was known as Kumo, and I was impressed by the potential of Kumo to make better sense of the search results. But the demo had a very strong American bias, and worked best to the demo script – adhoc departures from that script showing up the early stages of the development.

Only in practice will we be able to see if Microsoft has come up with a Google-beater. It will be interesting to try out Bing in anger – even if the results will be focussed towards users on the other side of the Atlantic....

Oracle’s acquisition of SUN – what about the software?

2009-05-19T09:42:00.002Z

Surprisingly, it was discussion about Oracle/SUN and my postscript about Business Objects that raised most comments in my post Microsoft to acquire SAP? – in particular, what will happen to the many software products that Oracle acquires with SUN?

Top of the list of products at risk must be the MySQL database. Personally I can’t see Oracle putting much investment in here – however, fortunately, there is a complete community of developers out there that will, I suspect, ensure that the product is not killed off entirely.

Top of the list of products to survive must be Java – Oracle remains a big supporter of Java and I believe we will see continued development and support and, despite rumours to the contrary, I believe that Oracle will continue to keep Java entirely free.

What about SUN’s operating system Solaris? – Oracle has always run best on Solaris, but with Linux seeming to have greater volume and presence in the market, I can see that Oracle will find a way to retire Solaris as the year’s pass by....

Then there’s OpenOffice.org - Larry has always been anti-Microsoft and looking for a product to attack the mighty MS – so perhaps this is a weapon in the great Oracle-vs-Microsoft war. But does OpenOffice really fit into Oracle’s toolbox? – particularly for the types of corporate customers Oracle aims at? I think OpenOffice could be at risk but – like MySQL – I believe that its long term future will be secured by the existing user community, and that it’s not in Oracle’s interest to kill off the products, but to limit its exposure to ongoing costs. No, I don’t see Star Office re-appearing as an Oracle product....

P.S. Every comment I received agreed that Microsoft would aim to take over SAP, although several felt that the timing would not be until next year....

Microsoft to acquire SAP?

2009-05-12T09:21:00.003Z

Rumours have abounded for the past few years about Microsoft bidding to acquire SAP, and now Microsoft has raised $3.75bn in the first bond issue in its financial history, refuelling those rumours. (Microsoft already has a formidable cash mountain of around $25bn, even after last year’s special dividend of $32bn).

Would SAP make a good acquisition for Microsoft?

In the past, Microsoft has focussed on selling volume products to smaller customers; in the business area, typically focussing on the SME market for ERP-type applications. Through several acquisitions it has built a Dynamics business around primarily its Great Plains, Navision and Axapta product lines. I believe that the AX ERP product is extremely strong in the mid-market for businesses, but Microsoft has continued to suffer from its “small company” image, and had found it difficult to make significant inroads into larger companies.

Microsoft has also suffered from the same problems with its database, SQL Server, easily the best technical product in the marketplace and, in my mind, far superior to Oracle. Although SQL Server is at long last making some inroads into larger organisations, it has been a long and steep slope that has taken many years more than such a good product deserves.

So one can see why Microsoft is considering SAP. Its acquisition would immediately put Microsoft onto the same level as Oracle in the battle for ERP market share, and open up the top end of the market - although one has to wonder what Microsoft will offer to SME’s – Dynamics or SAP Business One? I believe that the Dynamics AX product set is the superior offering in the middle market, although SAP may have more market share. In the short-term I would expect Microsoft to support all products, although it must aim to converge towards one or possible two products in the long term.

With Oracle continuing down its acquisition route, with SUN Microsystems its last major buy, and Microsoft failing in its bid to acquire Yahoo, Microsoft needs a big acquisition to move forward, and SAP seems perfect.

However, I can see problems ahead if the acquisition is made - my experience of cultures of the two companies is that they are significantly different. In addition, despite its protestations to the contrary, Microsoft remains a technology company, and has never fully understood the business applications software market – if Microsoft tries to impose its own culture and processes onto SAP, then I hate to think what the result may be. But perhaps SAP will be allowed the upper hand in the business applications area, and Microsoft will benefit from their different approach....

P.S. What about Business Objects, SAP’s last large acquisition? Although it comes with Crystal Reports, the reporting engine of choice for many Visual Studio programmers, the Business Intelligence (BI) software would compete directly with Microsoft’s own BI tools. Again, I see the two BI products co-existing in the short-term, but, I suspect that Microsoft would aim to see convergence towards a single BI product set – in this case I’d put my money on the Microsoft tools winning in the long run....

What about IRACIS?

2009-05-11T08:56:00.001Z

Following on from my post on bringing back Systems Analysts, and continuing a theme related to grandmothers and eggs, I received a comment about development teams not understanding the true objectives of a new system – a comment I agree with - indeed, in my experience, there are situations where many directors/managers cannot explain nor quantify why a development is taking place (although I’ve found that this latter symptom is much more prevalent in the public sector than the private sector).

Back in my analyst days (admittedly a long time ago) we had the acronym IRACIS drummed into us to define the benefits of new systems –
Improve Revenue,
Avoid Cost,
Improve Service

Personally, as well as bringing back Systems Analyst roles, I believe it’s time to re-emphasise the importance of IRACIS to ensure that the benefits of new systems are better defined and understood across the whole organisation – from sponsoring Director, through managers and down to the most junior of the development team.

(Fortunately, many developments do have the expected benefits defined well, but it’s amazing how many don’t - and also how many projects that have their expected benefits defined don’t try to quantify those expected benefits, nor measure them post implementation, to see if the benefits have been realised).

Time to bring back Systems Analysts?

2009-05-08T08:28:00.001Z

I’ve had a number of discussions with directors and project managers since my posts on Agile vs. Waterfall methods of development (see Agile vs. waterfall methods and Agile methods for package enhancements?) and there has been two common themes of those discussions – the capture of requirements and production of an overall design.

For developments using Agile methods, it would appear that where these go wrong is, typically, in the collection of an overall set (not necessarily 100% complete) of requirements. Where development teams include senior end users (full- or nearly full- time) who understand the overall requirements fully, the risk of problems diminishes (but definitely doesn’t disappear) – but when the end user involvement is limited (either in time or level of seniority/experience), the risk of problems increases greatly.

Meanwhile, in waterfall developments, whilst the capture of an overall set (again, not necessarily 100% complete) of requirements usually seems fairly good, it is the next design stage that seems to be skimped on, and in some cases even not carried out. (If necessary, see my post Requirements vs. specifications for an explanation of the difference).

Several of my contacts have rued the passing of the old “Systems Analyst” role, pointing to the current rise in the use of Business Analysts who focus more on requirements rather than system design, and “Analyst/programmer” roles who really focus on the programming and technical aspects, rather than overall system design – leaving a systems design gap between requirements and coding stages.

Perhaps it’s time to re-emphasis the systems analysis and systems design role, and bring back good old fashioned Systems Analysts......

NPfIT moving in the right direction?

2009-05-06T09:05:00.001Z

Last week, the Department of Health announced an initiative that seems to be moving the NPfIT forwards in the right direction.

DoH has announced the development of a new toolkit which will “allow new products to be developed locally, accredited centrally and linked to existing deployments of information systems such as Cerner and Lorenzo.” However, it is envisaged that work on this toolkit – “a pioneering initiative to take advantage of the latest technological developments” - will not be available until March 2010.

The Department of Health's Director General for Informatics, Christine Connelly said:

"We now want to open up the healthcare IT market to new suppliers and new technological developments, to inject more pace into this programme. Working together we can help Trusts configure systems to best meet their local needs as well as take advantage of market developments to make more use of the information held in the core systems.”

I just hope that this initiative is used to truly open up the market for new and existing software developers, and not used to restrict access and constrain developments to protect incumbent system suppliers. Early indications seem to be positive – I just hope that this initiative is not stifled by a bout of protectionism similar to that encountered by several of the Government’s e-government interoperability initiatives of the past few years.

Capita IBS decision delayed

2009-05-05T08:22:00.001Z

Decision day for Capita was due to be no later than 5 May, but the Competition Commission “now considers that the completion of its investigation, including the remedies process, and the publication of its final report, will not be possible within the original reference period and has concluded that an extension is necessary because of delays in the provision of information necessary to carry out the inquiry and the need to consider the effectiveness of both a full and a partial divestiture of the IBS business.”

Accordingly, the CC has announced that the “reference period” has been extended by 8 weeks, and now the CC report is expected by 30 June 2009.

Unfortunately, due to reasons of confidentiality, I can currently only comment on information in the public domain, but I would not advise anyone to hold their breath whist awaiting a final decision on the remedies – this could be a long drawn out process.....

For my previous comments see:
Capita/IBS – Competition Commission progress (February)
Capita/IBS – Northgate notes published (March)
Capita's acquisition of IBS is ruled anti-competitive... (April)

Inefficiency in Local Authorities

2009-04-27T11:12:00.001Z

Tony Travers’ presentation at Socitm09 set the likely financial scene for local authorities over the future years:

* Increased demand for services due to the recession
* the need for increased support for NGOs
* the need to assist more in economic development
* at best, 0% grant increases for all councils
* a tighter cap on Council Tax

Speaking to several attendees from the supplier community at the conference, there was widespread belief that – perhaps – this much increased pressure on LA’s will at long last force many laggard councils into the significant changes in processes that can not only reduce costs significantly but also, potentially, provide a better service to citizens.

Anecdotal evidence from several suppliers who supply self-service solutions, supported the view that currently several authorities are unprepared to adopt self-service and/or abandon traditional high cost channels of service delivery, as they cannot stomach the implied loss of staff. Procurement decisions are, in many cases, still being left to the departments and staff likely to be affected by the adoption of self-service, i.e. “Turkeys voting for Xmas” – unsurprisingly resulting in no, or slow, adoption of such cost-saving initiatives.

It’s disappointing to note that these laggard authorities give local government a bad name in the efficiency stakes, even though the top quartile of LA’s have already moved to high levels of self-service, taking the pain of staff cuts in their drive to reduce costs. I just hope that this top quartile will not be penalised in the future as it becomes easier for laggard authorities (who currently have plenty of slack) to reduce costs, whilst top quartile authorities who have already reduced costs significantly find it more difficult to reduce costs even further.

Looking forward, for suppliers, it’s clear that my forecast for 2010 onwards remains valid – indeed, I now definitely believe that, for public sector software suppliers, poor revenues will undoubtedly continue into 2012 and possibly beyond....

Operational in-Efficiency Report

2009-04-27T09:03:00.002Z

Snuck out on the morning of last Wednesday’s budget statement was the 92-page final report on the Treasury’s Operational Efficiency Programme. In theory the 20-odd pages on Back Office Operations and IT should have made for interesting reading as it seemingly identified some £7.2b of savings.

However, those readers that take the time to view the document soon realise that the document merely supports the setting of targets for saving of some £4b on back office operations and £3.2b on IT, with no detail or outline plans for how those savings will be made.

Even worse, the paper identifies that Central Government doesn’t know how much it spends on back office operations and IT, let alone how such expenditure compares with the private sector. Indeed, the findings summary states that “examination of back office operations and IT has focused on the need to improve the collection and integration of management information into departmental processes, and to introduce benchmarking and performance reviews. [The] work on IT has aimed particularly at better governance of IT-enabled projects, and greater standardisation and simplification of IT across the public sector.”

Estimates of expenditure on IT across the wider public sector vary from £12.5b to £18.5b – let’s say it’s £16b – against which we must be able to make some savings – let’s say 25% - giving savings of £3.2b – that’s sounds OK - let’s go with that. (I believe that the authors could have been far more scientific, but in practice they must have been stymied by the lack of any meaningful financial information on the real costs being incurred).

The report hints at the types of savings that can be made by the use of shared services and outsourcing, but makes no commitments to the introduction in any named areas. As ever, decision seem likely to be left with the departments and organisations themselves, with no clear plans other than to start measuring how much it really costs now.....

Although the OEP report indicated that it had found it difficult to get information on costs within Local Government (“it is hard to conduct a detailed analysis of this expenditure as it lies in a very devolved landscape”), I believe that local authorities have a much better handle on their costs that central government bodies. Last Thursday at Socitm09, Tony Travers suggested that the OEP report effectively increases the 3% Gershon target for savings to 4% for Local Government. Hardly challenging in the current environment, and I would not be surprised to see this raised further by a new government.

Gladstone produces sound interim results

2009-04-24T08:46:00.000Z

Gladstone, the supplier of software solutions and services to the leisure and education markets has announced a sound set of interim results today. Despite the current economic and financial environment, turnover has not reduced, and underlying operating profit was up 6% to £698k.

However, on the negative side, as predicted in my last post, Gladstone has incurred exceptional costs of £690,000 - primarily as a result of the costs associated with defending Constellation's hostile bid – and continued with capitalising the costs of development of its new product, £352k in the 6 months.

I was fortunate to have a meeting with Gladstone’s Chairman and Chief exec, Dr Said Ziai, last month and was impressed with his confidence in the business. As well as the significant exceptional costs incurred in fighting off Constellation, the fight and EGM undoubtedly deflected management time away from driving the core business forward, but Said was confident that the business would be successful as the Constellation issues reduced and the new developments came on stream.

I regard Gladstone as one of the “old style” of software houses – cash in the bank (available for funding development in a recession and/or acquiring distressed competitors) – clear market leader - and yet having realistic plans for growth over the coming years, recognising the current financial situation and not looking for excessive growth.

A prudent company that will, in my estimation, survive the recession and, once we see the green shoots of recovery, will power ahead.

Socitm – a conference of two halves....

2009-04-23T18:07:00.001Z

I’ve just got back from today’s socitm09 National Conference at Stoneleigh, and whilst most of the content was informative, it was also quite depressing....

The morning sessions focussed on the future – Tony Travers giving a broad brush view of the impact of the Credit Crunch on future funding (more about that in a later blog post), Richard Allen a refreshing presentation on unlocking the power of local information, and Rose Crozier on how socitm is at long last listening to, and focussing more on the needs of, its members. Although the messages were in some cases setting strong challenges for the future, there is clearly an uphill struggle for Local Authority IT departments and their staff over the coming years.

The afternoon session, however, was spent looking backwards and did nothing more than to emphasise how the majority of local authorities have not embraced the Internet and the use of electronic self-service sufficiently to reduce costs significantly. Martin Greenwood seems to have drawn the short straw to encourage LA’s to “use the concept of ‘avoidable contact’ to reinvigorate transformation”, and Dhanushka Madawala gave examples of the work Hillingdon had undertaken to reduce avoidable contact – all very basic stuff, but apparently necessary for many authorities....

(I will own up to having skipped the last session on “Digital Inclusion, LA’s and the third sector” in favour of attending IBM’s presentation on Business Process Optimisation).

Yet the exhibitors gave a far more encouraging message on what (presumably the upper-quartile of) Local Authorities are doing. Far from re-enforcing basic messages on Internet usage, suppliers were extolling their LA customers’ use of Web 2.0, blogs, Twitter and the like to try to really communicate with their citizens. Very encouraging.

Can so many other LA’s really be burying their heads in the ground and failing to embrace modern technology and, amongst other uses, adopt self-service to reduce their own costs?

Ordnance Survey’s new strategy....

2009-04-23T18:05:00.001Z

Richard Allan’s socitm09 presentation (he’s the Chairman of the Power of Information Task Force) again brought up the serious data licensing problems that have been introduced by Ordnance Survey.

It would appear that their highly restrictive licensing of data is providing a major obstacle for the public sector to use graphical presentations of data – something that is absolutely key to good public access. I’ve encountered these sorts of problems with trying to negotiate access to NLPG, and it relates not to licensing but to payment – i.e. the licences are being used as an attempt to extract further funds from the OS customers - sometimes very significant sums.

This has surely been disjointed government at its best – one agency, OS, trying to cross-charge other government organisations (e.g. LA’s) – charges that the other organisations can’t afford, so the data doesn’t get displayed, and the citizen loses out. No wonder Google and Microsoft Maps are growing in use for displaying geographic data...

However, and perhaps in response to the criticism and competition, I note that the OS has today announced a New Business Strategy, which promises to focus on five key areas:

Promoting innovation – with an enhanced free OS OpenSpace service to allow experimentation with digital information and a clear path from this service to greater commercialisation;

Reforming Ordnance Survey’s licensing framework – so that it is much simpler to use Ordnance Survey data and services in other applications;

Reducing costs over time – to ensure that Ordnance Survey continues to offer value-for-money;

Supporting the sharing of information across the public sector – to enable better public policy and services;

Creating an innovative trading entity – to explore commercial opportunities around providing a better platform for consumers to access Ordnance Survey products.

I hope that this will result in a complete about-turn by OS on the fees for use of its data – personally I’m pessimistic – my experience is that strategies in the public sector can take years to implement (and sometimes implementations never see the light of day). The strategy is currently light on detail, but results are promised in the next year – we’ll have to wait to see what transpires over the coming months.....

Contracting for developments using Agile methods

2009-04-22T09:23:00.003Z

One of the questions I had following my article on Agile vs. waterfall methods, was how could customers contract with suppliers for developments using Agile methods?

As I’ve stated in previous posts on contractual matters, the key to success is to ‘define the deliverable’.

One approach is to go for a heavily documented Statement of Requirements and/or Specification (i.e. have a fairly well defined software deliverable), then look for a fixed price development. But this negates much of the benefit of the use of agile methods, and in my mind, the level of risk for the supplier could be too great (although new entrants to a market, who see the developed software as having some extra value – always assuming they retain the IPR – may see this as an investment to get into a new market). Beware that if a fixed price approach allows for multiple/costed changes for all changes to requirements (inevitable if true agile methods are adopted), then the original fixed price will be purely illusory.

On the basis that a complete SOR doesn’t exist, the development team will involve both customer staff (helping to define/refine requirements) and supplier staff, and will have no clear definition of the deliverable (although I regard an outline scoping document as the minimum for starting any such agile development). In such an environment, the easiest form of contract is a straight Time & Materials contract where the deliverable from the contractor is a number of “warm” bodies (although, hopefully, will particular application and/or technical skills and/or experience).

But such a T&M approach puts virtually all the risk back with the customer, and less-trustworthy suppliers may use the agile methods to encourage requirements creep and rework to ensure that their staff’s time on the contract is extended beyond original expectations.....

My discussions on these types of projects have shown the need to develop a trust relationship between customer and supplier – if a watertight contract is proposed so that companies who mistrust each other can work together, it will almost always fail.

As I noted in my earlier post, agile projects are much easier to run with in-house teams where the staff skills and experience are known (hopefully), and the team know that their performance will be measured by their success in getting a quality solution developed to schedule and on budget. If an external supplier is to be brought in, and management of the agile development retained by the customer, then the best contractual approach is one of a T&M form.

If the development project is to be managed externally by the supplier, then clearly during the procurement cycle, the customer needs to satisfy himself of the track record of the supplier in similar developments, prior to contract award. No one-size-fits-all solution exists for the form of contract – they all depend on too many variables ranging from the scope of the project to team size to outline budgets and schedules – but some of the recommendations I make include:

* ensure there is a broad goal for the project
* outline constraints such as budget and timetables upfront so the whole team is aware of them
* define standards for the project up front (UI, coding, data, documentation, testing, etc ...)
* as the development progresses, set detail goals every few weeks
* define in advance the level of customer involvement in the project (and ensure it is met)
* agree the priorities in order – budget vs. dates vs. functionality
* consider splitting the contract into multiple smaller contracts – some fixed price and some T&M – possibly using the “phased fixed price” approach I’ve discussed before
* consider a performance bonus for meeting defined targets (I know that the current trend is for negative penalties for not achieving targets – but I prefer the much more positive approach of bonuses – they’re much more motivational and, in my experience, deliver more successfully than the threat of penalties).

As noted at the beginning of this post, the key is to be clear on what the deliverables are, and then agreeing a pricing formula based on the level of risk to be accepted by each party.

P.S. As well as providing a “fire fighting” service for problem projects, I also provide consultancy to help new or existing projects proceed successfully and avoid becoming problem projects. If you would like to discuss ways of avoiding problem projects in the future, please contact me at Phil@systemsolveconsultancy.co.uk

Disney systems

2009-04-21T08:31:00.001Z

Today’s advertisement for a Tender for a new Command and Control system for Lothian and Borders Police reminds me of a visit I made many years ago to a Scottish police force to view one of its brand new computer systems.

In discussion with one of the end users, in a broad Scottish accent, he described the system as a “Disney” system. Confused, we visitors from south of the border had to ask what was a “Disney” system?

Very simple said the officer – this function disney work, and that function disney work......

Agile methods for package enhancements?

2009-04-20T07:57:00.000Z

Firstly, it’s worth welcoming back a number of my readers after what I hope was a good Easter week off. The number of readers and page hits was down around a third during last week – but despite that I received a good number of comments on my article Agile vs. waterfall methods.

Not surprisingly to me, the majority of them were from readers who had previously believed that the “waterfall” methods were the only way that a software house could undertake developments safely, and their comments reflected some strong cynicism about the motives of developers and development teams who proposed “Agile” methods.

Further discussions with a couple of those commenting on the post introduced an interesting problem – if a software product has been developed using traditional (waterfall) methods, is it possible to introduce Agile methods for new upgrades?

Unfortunately, as in my original article, I had to revert to using the phrase “horses for courses” in my discussions, as again there is no simple answer – it really depends on what you want to develop, who’s developing it, and the expectations of the management team sponsoring the development.

Surprisingly enough, a brand new module may be just the right project to trial agile methods on – standards for the product will already have been established and documented, and typically the functionality will be relatively small compared to the existing product. Agile methods should allow the product to be seen quickly, and possibly even installed and reviewed early at “warm” customer sites.

However, as in last week’s article, the key to the decision must be the composition and skills of the development team. Not only must they have the necessary technical skills and experience, the team must include someone who understands the requirements in depth – without this latter person, the risk for such an agile development increases dramatically.

It is easy for an agile development to be never ending, with more functionality being identified and added as the weeks progress. Once the original objectives have been met, it is essential to decide on a first deliverable, stop development, and get the new module out to customers.

Once the new module is completed, as with waterfall development, it is also essential to ensure that it is adequately tested by staff external to the development, and supported by comprehensive documentation to allow for easy maintenance by separate support personnel.

However, as noted last week, perhaps the biggest problem is with senior management – are they prepared to take the risk of an agile development?

Amongst my contacts, it is almost invariably the smaller companies that have adopted the agile methods – I know of very few larger application software package developers that have done so successfully. But perhaps that reflects my horses for courses view – perhaps smaller organisations have a level of specific staff experience and knowledge that is possibly missing in larger organisations, their projects tend to be smaller, and their management closer to the development teams. However, as the song goes, I detect that times they are a-changing......

Agile vs. waterfall methods

2009-04-15T17:58:00.002Z

I’m regularly asked by my customers to advise on the benefits of agile vs. waterfall methods of software development, and which method they should adopt (or continue to use). In my response I regularly use the phrase “horses for courses” in my discussions, as there is no simple answer – it really depends on what you want to develop, who’s developing it and the expectations of (or contractual relationship with) the person/organisation funding the development.

From a technician’s point of view, the agile approach lets him get down to the bits and bytes quickly, using the technology to help him work with end users to collect requirements and build solutions to satisfy those requirements. If you have skilled technicians, either with a high level of understanding of the requirements (unlikely) or with a very good working relationship with end users who not only know the requirements, but also have the ability to spend significant time with the developers, then you may have a project for the agile approach. If those end users are also the project sponsors and are funding the development, then the case for agile development gets stronger.

If, however, the development is to be built in a client-contractor environment, normally against a fixed price or firmly set estimates and timetables, then the level of risk in using agile methods increases. Add in larger contract size, leading to larger teams, and more remote communication with end users, then going down a waterfall approach can quickly become the preferred route.

For application package developers the problems become even greater – they have no one customer, but look for a solution that can handle multiple sets of requirements. Then they have to not only maintain, but also enhance the package over many future years, in many cases without the designers and technicians who wrote the package initially. Also, and perhaps most importantly, senior management are unlikely to sign blank cheques for the development of new packages without some degree of certainty that the developed product will meet their target customers’ requirements, be marketable and delivered within an agreed budget against a realistic time schedule.

From my own experience, I’ve always believed that the coding stage is, surprisingly enough, one of the least important stages – as with any stage, if you get it wrong the project will suffer, but it will suffer less than if you get the requirements collection wrong, or adopt the wrong design. Coding is used to implement a design – no matter how good a coding team is, if it has a poor or incomplete design, it is highly likely to produce a poor system.

Ever since my early days of developing software the 50-30-20 split of work (50% of the effort spent on requirements collection and system design, 30% coding and unit testing, and 20% system/acceptance testing) has remained curiously static for new software developments over the years. (Before I get a lot of comments - I note that the development of new versions of, or replacements for, existing products means that a large proportion of the requirements capture has been completed already – however, the success of any new development is still dependent on the overall design being absolutely right).

Evangelists of agile methods will point to large projects developed using waterfall methods, where the requirements collection and analysis phase goes on forever in an attempt to capture every last requirement before the development starts. Then any new project spends so long in development, that by the time it is complete, the requirements have changed and the solution no longer meets the users’ needs.

Exponents of waterfall methods will point to agile developments where the level of rework to build in missed functionality has been many times the effort that would have been required if the requirement had been identified before coding started, to projects where the quality assurance team weren’t able to start to generate their test plans until just before the development was complete, or systems where the user and technical interfaces were inconsistent across the code built by separate individuals.

The advice I give my customers is based on the size of the project, the size and skills of the team, the expectations of the funding organisation/person, and, most importantly, the criteria for success. If I advise a waterfall approach, I encourage the use of modern software development tools to produce (normally disposable) prototypes during the analysis and design stages (one of the – waterfall - projects that I reviewed was using Microsoft Expression Blend for prototyping – it just blew my mind, and the prototypes could be used in the later stages of development). I also encourage the use of high levels of automation for documentation and testing processes.

If I advise an agile approach, I stress the importance of an overall scoping document, with clear standards for look-and-feel, navigation and interactions between modules. I also look for strong management and ownership, not only of the project but also of all common aspects of the development, be it the database or common classes. Also, no matter how good the developers and the methods adopted, I still recommend a separate testing team.

In all cases I emphasise the involvement of the main project sponsor to decide on scope, give clear direction to the team, and help to avoid requirements creep. All too often, early expectations are set far too high, and once reality sets in, when forecasts seem unattainable and budgets insufficient, there needs to be open communication between the team and the sponsor to arrive at an acceptable solution.

All too often problems get hidden – “we’re behind but we’ll recover” - and it is only later in the project that confidence crumbles and reality sets in. Unfortunately with agile developments it is difficult to regain management confidence in revised project plans due to a lack of measurable performance to date that can be extrapolated towards a final completion date for each phase. It is at this time that a good and involved project sponsor can be the saviour of a project – all too often I see sponsors returning to a ‘hands off’ position and failing to get involved – making a problem project into an even bigger problem......

P.S. As well as providing a “fire fighting” service for problem projects, I also provide consultancy to help new or existing projects proceed successfully and avoid becoming problem projects. If you would like to discuss ways of avoiding problem projects in the future, please contact me at Phil@systemsolveconsultancy.co.uk

Proactis back into profit

2009-04-07T08:36:00.002Z

The spend control software house Proactis has today announced its interim results for the first half-year after its restructure last year.

The company appears to have brought its cost base back into line with its revenue, reducing costs by 24%, and as a result has returned in a half-year profit of £362k (vs. a loss of £438k for the same 6 months last year), on revenue up 6.7% year-on-year. Reassuringly, the business has returned to being cash generative, despite capitalisation of £207k of R&D expenditure in the period.

As I’ve noted previously, whilst Proactis does sell directly (e.g. to the UK Public Sector), they have wisely focussed on building their network of accredited resellers, and have diversified their offerings away from just pure e-procurement and spend control. It would appear that Proactis has strengthened its relationship with Agresso, where I suspect Agresso will use the better functionality of the Proactis products to help it compete against the likes of Civica and others who have stronger offerings than Agresso's in the procurement area.

As I noted last year, with its move into other markets, and international coverage, Proactis will, I believe, survive and, once we move into a more positive financial environment, should thrive as companies look to replace outdated back office systems. However, I believe that there is a strong chance that Proactis will be acquired by a bigger player (see my post from last year for the names of some potential candidates).

Proactis’ share price is up 2p at 19.5p this morning, giving a market cap of £6M – in my view, in the current financial environment, a fair valuation for a company turning over c £7M per annum and with a half-year EPS of 1.3p.

Don’t forget the 2012 Olympics

2009-04-06T08:30:00.001Z

Based on the comments I've received, it would appear that most of you agree with my prediction that 2009-10 will be a tough, but manageable year for those public sector software suppliers who have order books and good recurring revenues to live off, whilst 2010-11 looks like it could be one of the worst years for public sector software suppliers.

However, my prediction of a recovery in 2012 has not received such a high level of agreement – particularly for suppliers to UK Police Forces.

Here, suppliers are concerned about the impact of the 2012 Olympics on Police Forces’ normal procurements – yes, there will inevitably be some addition expenditure on software and services specific to the Olympics themselves, but it would appear that the expectation is that Forces will put off the procurement of other systems and service until after 2012, both to conserve funds for the inevitable extra workload and costs of the Olympics (not just confined to the Met) and to wait to see what impact the Olympics will have on security issues going beyond 2012.

I raised this with a supplier of software and services to larger local authorities, to see if he felt the Olympics could also affect procurements amongst London Boroughs and those authorities outside London that are hosting Olympic events. He felt not – and agreed with my prediction of a recovery in 2012 – but added the caveat that in the current environment, there could be no certainty on any date for a recovery, and that 2012 could be yet another reason for government generally to delay procurement decisions....

e-mail distribution

2009-04-06T08:29:00.001Z

If you’re one of my many subscribers who receive my posts by e-mail, please accept my apologies for the late delivery of your posts. This seems to be a problem related to the change to BST – I’ve tweaked the time settings and hopefully you will now receive your e-mail updates on the same day new posts are made.....

IT Forecasts – Holway’s Rant

2009-04-02T09:24:00.003Z

If you are a Software or IT Services supplier, I strongly recommend that you read Richard Holway’s article today, where (unlike many other optimistic forecasters) he forecasts negative growth for the UK SITS sector in 2009 with no return to positive growth until 2010.

From the conversations that I’ve had with a number of software suppliers, I have to agree with his views for the general software and IT services (SITS) market, although I sense that the downwards curve for SITS companies working in the Public Sector market will be some 12-18 months behind the decline being suffered by suppliers to the private sector.

As I see it, many public sector software suppliers are currently living off orders won over previous years, with new business being hard to find. They are managing their cost bases to reflect their declining order backlog and, in many cases, do not appear to be unduly worried about the future – with the new financial year about to start, they believe that 2009-10 will produce as much business as 2008-09.

As I’ve said before, this may be true in some specific areas (e.g. in Social Services, Housing and, probably, Education), but in other areas my discussions with potential customers have shown an increase in the “if it ain’t broken, don’t fix it” attitude. Also, with increased requirements for information and transactions to be made available electronically, I detect a much stronger move to bringing such services work back in-house, rather than contracting it out.

What could be worse for public sector software suppliers is that 2010 will (almost certainly) be a General Election year, with June 2010 being pencilled in for the actual election. Historically, this has meant that procurement processes and their decisions, typically kicked off early in the new financial year, will now be delayed until at least summer 2010 and, I believe in many cases, potentially through to the following 2011-12 financial year – with organisations waiting to see what financial constraints the new government will be imposing.

So - 2009-10 will be a tough, but manageable year for those suppliers who have order books and good recurring revenues to live off, whilst 2010-11 looks like it could be one of the worst years for public sector software suppliers, with any recovery delayed until 2012 at the earliest......

P.S. For me, the companies I’ve been associated with have always suffered from a recession in a year ending in one – starting with 1971 which saw me made redundant (by Fraser Williams) before I even started with them. We survived 1981 in IAL Gemini on the back of our niche applications, and fortunately Systemsolve was acquired by Radius just before the 1991 recession hit. 2001 was our last bad year, and it looks as if 2011 could continue the trend .....

Capita's acquisition of IBS is ruled anti-competitive...

2009-04-01T11:46:00.001Z

The Competition Commission (CC) has provisionally concluded that the completed acquisition by Capita of IBS could damage competition in the market for the supply of revenues and benefits (R&B) software to local authorities in the UK. This will have come as no surprise to regular readers of this blog, nor will the CC’s decision that there are no similar concerns in the Social Housing software market.

Christopher Clarke, Inquiry Group Chairman, commented:

“This merger combines two closely competing suppliers of revenues and benefits software to local authorities, leaving only one other supplier actively competing for business. In a stable market with little prospect of entry by new suppliers, our provisional conclusion is that the enlarged Capita revenue and benefits business will be able to take advantage of the lack of competition, for example by increasing prices or reducing levels of service to its customers.

We consider it likely that the adverse effects of the merger will have an impact on all customers, whether they are in the process of tendering for new revenues and benefits software or already have a contract for such software in place.”

Given the remit of the CC, this decision was expected, but I still regard it as disappointing, given the nature of the small and declining market for R&B systems. By not giving the CC a wider remit, Government has, I believe, missed a great opportunity to put in place protection for the interests of existing & future IBS users, and possibly even some safeguards for other Capita R&B customers.

But now the decision is made, and the discussion of remedies commences. It would appear that the CC is unlikely to agree to “behavioural remedies” such as price controls or Capita’s maintenance and ongoing development of two R&B systems in parallel. Rather it is looking at the feasibility of splitting off just IBS’s R&B business (from the social housing part) and its viability as a stand-alone business unit, or whether a divestment of the full IBS business is required.

The CC is also looking for the views of potential purchasers of the IBS business (full or R&B only) and constructive suggestions for other remedies, behavioural or structural – although I doubt that there will be any serious suggestions in this latter area.

All parties have been requested to provide any views in writing, including any practical alternative remedies they wish the CC to consider, by 20 April 2009. The CC states that its findings may alter in response to comments it receives on its provisional findings, in which case the CC may consider other possible remedies, if appropriate. – but I’ll be surprised if they stop short of divestment.

Given the current position, it seems as if divestment is the preferred route, but of what, to whom, and for how much?

As I understand it, the CC will have considerable control over any divestiture, deciding on the form of the business to be divested, setting a timetable (typically 6 months), vetting/approving potential purchasers, and generally overseeing the divestment through to completion. I can think of at least two potential, serious bidders who will no doubt be knocking on CC doors over the next few weeks......

NHS to award new NPfIT contract to HHI

2009-04-01T07:26:00.002Z

One of my moles told me yesterday that the NHS will announce on Wednesday that it has decided to recommend that HHI be appointed as an alternative software supplier to iSoft and Cerner for NPfIT projects.

This is a tribute to the Rapid Application Development (RAD) technology used by HHI, a small UK software company employing only 8 staff, who have been able to complete their development of a full care records system using Microsoft Visual Studio tools in just 6 months, and have been able to get the system live at the pilot site at Midshire PCT in only 8 weeks.

Andrew Gile, HHI’s Managing Director, praised his three technicians who, prior to the start of the development, had little or no experience of health applications. He explained that the team had been able to work with doctors and nurses from Midshire PCT to understand their requirements and build them into working prototypes, that had then been used to explain to NHS managers what the system was supposed to be used for.

Ursula Sit, HHI’s Implementation Manager, believes that the short 8-week implementation time was due to the end user interface being modelled on Facebook. She noted that “most end users were already heavy users of Facebook outside (and some inside) work, and were fully aware of the rich functionality available. The intuitive interface meant that the majority of end users required only a two hour introduction to the system functionality before they felt happy enough to use the system in practice”.

The selection of HHI should be confirmed at a meeting to be held on Wednesday morning with a formal announcement due around midday. Andrew notes that he hopes the announcement will stop the circulation of a great deal of the hot air that has been around the NPfIT project since its inception, and will allow his company, Hoof Hearted Inc, to get on with the planned 3-month roll out of the HHI system to the remaining 2,000 Trusts awaiting a new system......

I should have the confirmation of the selection of HHI around lunchtime on Wednesday – check back in the afternoon for confirmation.

Midday, Wednesday 1 April update: Yes, you guessed it, this was an April Fool post. But what about "agile" development processes - are they better than "waterfall" processes? Revisit this blog over the coming days for my views.....

The importance of touch....

2009-03-30T09:06:00.001Z

Just by coincidence, one of the companies I met last week was fired up by the use of touch screens using an “iPhone”-like user interface, and over the next week I hope to be looking at a product developed using such technology alongside very large screens in some highly innovative application areas. Then, at a dinner, I raised the topic of such a “Touch” PC being installed in kitchens, primarily for use with cooking and recipes – and was surprised by the remarkable interest it received from the cooks around the table.

Windows Touch will be included in the next version of Microsoft Windows 7, and includes a very usable touch interface (see this BBC article for a short demonstration). This touch interface is very similar to the user interface built into the iPhone and is apparently being incorporated into Apple Snow Leopard OS Update. (Indeed Windows 7 has been described as slick to the (Apple?) core.......)

Microsoft had a false start with this technology a couple of years ago with its Microsoft Surface (TM) technology, based on tabletop computing. This technology was superb to use on a high-resolution, large screen laid flat as a tabletop – but for some reason the product doesn’t appear to have caught on and seems to be limited to the giving of very exciting demos. However, Microsoft Surface has now been rolled out to countries outside the USA, and appears to have gained some take-up in non-hostile user environments – although I’ve yet to see the technology in live operation myself, although perhaps it’s still early days in the UK (as its official launch in the UK was only last week).

Personally, I believe that on the back of Windows 7, touch technology will really start to take off. No, it’s unlikely to be adopted for “power” or professional” users who use a PC for hours on end each day – but for the adhoc user (e.g. the “kitchen” PC) it could become the ‘norm’ for good user interface experiences. If you are not yet looking at such an interface, then I would encourage all product managers to investigate and start planning now for the use of the touch facilities of Windows 7.

Maxima and Touchstone

2009-03-25T09:05:00.003-01:00

Following on from yesterday’s post on listed software company valuations and private equity interest, I now turn to two more software houses that have grown rapidly through acquisition, but, following recent setbacks, have seen their share prices plummet (to a level where they have become acquisition targets themselves). Neither is heavily involved in the supply of software and services to the UK public sector, although both have completed projects for Government organisations.

Through my involvement with Microsoft, I have been a close follower of both Maxima and Touchstone who have sought to grow by acquisition of many smaller software companies over the past few years, primarily focussed on the supply of software and services from Microsoft’s Dynamics range, although both supply software and services based on other supplier’s accounting systems and infrastructure products.

Both companies have issued profit warnings this month – Touchstone’s was expected, as its share price was already down 90% since its peak in 2007, and only moved down a bit – whilst Maxima’s was a bit of a surprise which saw its share price plunge to under 60p (down from a peak of 330p in 2007).

There is obvious concern about both companies’ performances deteriorating further, but looking at the revised expectations for the two companies:

Touchstone Maxima
Revenue c. £30M £50-56M
Forecast profit £0.3M £5M
Net debt None/minimal c. £15M?
Forecast eps 1.9p 19.1p
Current share price 18p 57p
Market Cap £2.3M £14M
(apologies for the poor formatting - I've yet to find out how to publish tables in Blogger format)

Looking at these revised estimates, Maxima seems to managing the downturn better than Touchstone – perhaps due to over 50% of its revenue being recurring, and therefore giving the company some time to cope with any contract terminations – whilst Touchstone seems more dependent on new sales, and these seem to have been much more difficult to make in the current financial environment.

The concern must be that Maxima’s downturn, partially protected by its contracted recurring revenue, might be just as great as Touchstone’s but the downwards curve is perhaps 6-12 months behind Touchstone’s. However, if their share price continues its downward movement in expectation of this, perhaps Maxima will decide on a “kitchen sink job” for reporting in the year to 31 May 2009, so as to make the future prospects more palatable.

As with all shares, the key is to call the bottom – I think (hope?) Touchstone’s was the 15p it touched last week – meanwhile I fear that Maxima’s lowest price is a few months away. However, both are acquisition targets as soon as the worst news is out of the way - and then I wouldn’t be surprised to see them both bought by their existing management once the credit markets have recovered.

Of course, a merger of the two would build a very strong player in the Microsoft Dynamics market, a market that I believe will grow very rapidly once the financial climate changes for the better......

P.S. I have been a short-term holder of Maxima shares twice over the past 2 years, both times exiting at the right time – which is good as I’ve been a long-term holder of Touchstone, with my profits on Maxima only just off-setting my losses on Touchstone. I still hold a small number of Touchstone shares.

Private equity starts to target software companies again?

2009-03-24T09:55:00.003-01:00

With many listed software companies shares prices hammered over the past months, there is no surprise that private equity has started to target these companies. In the Public Sector market, these depressed share prices and company valuations are likely to lead to more consolidation of suppliers (e.g. by the likes of 3i behind Civica, or KKR behind Northgate).

I’ll cover other companies in later posts, but looking at today’s news....

The Innovation Group receives bid

Ok – TIG is not really into the supply of public sector software, but it is a well known, listed software supplier with a chequered history, that has had some very well known names on its board (the most recent being Geoff Squire who resigned as Chairman recently).

Its share price had dropped from 55p in 2005 to 20p last year on the back of reduced profits, only to be hammered down to just over 4p recently following December’s announcement that it was being sued by one of its Canadian customers for £42M.

Now it is on the receiving end of a potential offer of 15p from the private equity group Carlyle, valuing the company at c £100M – offering to complete due diligence in the next two weeks, but placing a pre-condition that the legal case be defeated by TIG....

The interesting hook is the timing of any court cases ... “Carlyle said that it could complete the first round of due diligence in two weeks and that its cash offer was subject to Innovation defeating a C$75 million (£42 million) lawsuit from Allstate, of Canada.” Clearly, if this case is to go to court (and possibly appeal) it will take years to get a court decision. So what are the options?

Firstly, I guess that the purchase price is discounted by all or part of the potential £42M claimed – leading to a bid price of around 8p (perhaps explaining why the current share price is only around the 7.5p mark).

Next, the Board is encouraged to agree a quick settlement with the customer out of court – say agreeing to pay £10-20M – personally I think this is unlikely – having been in such a situation before, senior management will be firmly entrenched in a “we will win at all costs” mode rather than a pragmatic “let’s get out of this as quickly and as cheaply as possible” mode.

The most probable scenario is that the case remains open, and the £100M offer is discounted by, say, 20% to cover a potential settlement (which the new owners are more likely to look for, to enable them to clean up their acquisition). So the current 15p offer drops to, say, 12p. (Or there is the risk that Carlyle do not bid at all).

The other option is that another bidder appears who is prepared to make an offer without any conditions on the legal action (except that his price will reflect whatever discount the current bidders have applied against their 15p bid). Then a bidding war might break out, without any pre-conditions.

If you are a shareholder like me, then I think it’s time to sit tight and see what happens – the bidding war would result in the best price, but without it, I’d bet on at least 12p from the current bidder.

apologies for the typo

2009-03-23T11:11:00.001-01:00

Please accept my apologies for the typo in my previous blog - I've corrected the post, but for thos of you that received the post by e-mail or RSS feed, the sentence in question should read:

(However, projects like NPfIT where the contracts appear to have limited this ability for suppliers to exploit changes to fund overruns, have shown that in such confrontational approaches no-one ‘wins’, both client and contractor lose – and the end user gets an IT system that does not meet his needs).

Civil Servants to lose their large pensions?

2009-03-22T10:32:00.004-01:00

The IT disaster known as C-Nomis - an initiative, begun in 2004, by the National Offender Management Service to build a single offender management IT system for the prison and probation services – has been well documented over the past week following a National Audit Office investigation that found that the project had been hampered by poor management leading to a three-year delay, a doubling in project costs and reductions in both scope and benefits.

Computer Weekly used the project to illustrate one of its top tips for project managers, in its editorial:

“Number one in the list of Computer Weekly's top tips for project managers is advice that's supposed to be humorous, even slightly cynical. It says that projects with realistic budgets and timetables don't get approved.

But reality trumps our satire: big projects keep being approved on the basis of unrealistic estimates of their cost and time to completion.

One government project executive has told Computer Weekly that budgeting in government is a game: if the Treasury and the department in question want the scheme approved, they turn a blind eye to irrationally low initial estimates of the cost and the timescales.”

C-Nomis joins many Central Government projects that have been unmitigated financial disasters – costing taxpayers over half a billion pounds – but small in comparison with other failed or failing projects like NPfIT that have cost taxpayers billions of pounds.

In any commercial environment, there would have been an internal search for the guilty, inevitable unemployment, and (if the taxpayer had to bail out the company) potentially loss of agreed pension rights. It has been suggested that the same fate should befall civil servants who bear responsibility for these IT disasters – not only unemployment, but also loss of their valuable, taxpayer funded pensions. Will it happen?

No chance.....

Firstly, we’ll never find out who was truly guilty – as I noted in my post NHS NPfIT – a successful Government project? the definition of a successful Central Government project is one that lasts more than two years. As civil servants typically only stay in their positions for around two years, this ensures that the person that started the project doesn’t finish it, and the person that finishes it doesn’t start it. If the project is a success, both can claim the credit; whilst if it fails, both can blame each other.

Next, it will always be the fault of the supplier – “underestimated the project”, “Government had no choice but to fund the overrun”, .... etc .... To a certain extent, and in some cases, I might agree, but in most cases the supplier has no choice but to work on the incomplete brief given for the project, bidding low to win the business, on the basis that the gaps in the requirements can be exploited to increase the contract value greatly. (However, projects like NPfIT where the contracts appear to have limited this ability for suppliers to exploit changes to fund overruns, have shown that in such confrontational approaches no-one ‘wins’, both client and contractor lose – and the end user gets an IT system that does not meet his needs).

Finally, and I would agree with this, through no fault of any one individual, the current method of Central Government procurement of major IT projects remains seriously flawed – contracts are insufficiently scoped, requirements incomplete, end-users inadequately consulted – and contracts let prematurely, before either client or contractor know what is really required. (e.g. see my post How NHS NPfIT should have been procured)

We must move back to a procurement process that allows for major projects to be properly analysed and designed before final contracts are let – ideally in a phased approach that, whilst giving us less certainty on final costs, is more likely to wind up with a properly designed system to meet real end user requirements, for less cost and shorter timescales than the current processes......

Where now for Gladstone?

2009-03-17T09:12:00.002-01:00

Unsurprisingly, but in a very close vote at yesterday’s EGM, Gladstone shareholders have rejected spurned bidder, Constellation’s request for a place on the Gladstone Board. As noted in the announcement:

“The Board of Gladstone hopes that the unsolicited approaches and initiatives by Constellation Software Inc. will now cease. Shareholders have twice voiced their rejection of Constellation's moves and their support of the current Board. The Board expects Constellation to respect this statement by its fellow shareholders and work constructively with the Company as a major shareholder. The Board of Gladstone looks forward to delivering the growth plans and shareholder value they believe is inherent in the business.”

So where now?

Firstly, the recent failed bid and EGM vote will undoubtedly have cost Gladstone a six-figure sum in fees and expenses, let alone a significant amount of management time. The diversion of time from the management of the company will inevitably have impacted the business, so even though the external costs will no doubt be shown as exceptional costs, the business will have suffered – let’s hope not too much.

Now the Board must try to concentrate on “delivering its growth plans”, something that will be difficult enough in the current financial environment without Constellation’s diversions. Gladstone is financially strong, a clear market leader, and should be able to succeed in growing both its revenue and profit – left alone, I’m sure that it will prosper.

But will third parties leave Gladstone alone?

Hopefully yes, but most probably no. I suspect that Constellation will keep its 29% stake, wait until the end of the year and then, when Stock Exchange rules allow it, will bid again for Gladstone. Had they bid 28p rather than the 25p they bid last year, I suspect they would have won control (30p would almost certainly have won). The risk is that, with Gladstone management time diverted into defence against last year’s bid and the recent EGM, Gladstone’s growth plans will suffer, and Constellation will again try a low-ball bid of 25p (or less).

Alternatively, will there be a white knight or third bidder? My view is that this would only happen if Constellation decided to give up and sell on its stake. I’m sure there are many potential bidders out there that are put off bidding by Constellation’s 29% stake, but I’ll bet that there will be a few people sounding out Constellation’s intentions and required price for purchase of their 29% stake.

Personally, unless they get a really good price offered, I think Constellation will hang in there and play a waiting game to see how Gladstone performs this year.

Tribal moving up

2009-03-17T09:11:00.001-01:00

Tribal Group has today, as expected, announced an excellent set of results for the year to 31 December 2008, with revenue up 12% to £234M and adjusted profit up 21% to £18.6M. More importantly, net debt is just under £20M, and EPS up 20% at 14.7p. The current share price is 109p (up 5% today).

Looking forward, Tribal notes that “general economic conditions remain very challenging and the Group anticipates further tightening in overall public sector spending in the UK, particularly following the next general election. However, key areas such as education and health will remain priorities for government and we believe that we are well-positioned to support reform and changes in the implementation and delivery of public policy.”

But, as I noted a few weeks ago, I would fully expect Tribal to use its “resilient” business model to help it avoid cost wherever possible and achieve some profit growth in 2009. Tribal has made great steps forward since the disposal of it Mercury Health venture, and I remain a strong supporter of its abilities in the UK Public Sector.

iPhone rumours

2009-03-16T08:38:00.002-01:00

Regular readers will know that, despite being very much a “Microsoft person” in the past, I was totally sold on the Apple iPhone’s user interface, and moved across to a 2G iPhone last year. With our contracts up for renewal soon, it’s interesting to note the rumours relating to Apple’s mobile phones.

Firstly, with thanks to The Register for bringing all rumours together, it would appear that the next version of the iPhone software (version 3) will at long last provide support for cut-and-paste, a major omission from the iPhone to date, and a facility that I could make great use of (when it is made available .... and always provided it works).

MMS is also rumoured to be on its way (Multimedia Messaging Service – the ability to send and receive pictures and/or video) – another embarrassing omission from the current iPhone software portfolio - although I am unlikely to be a regular user of this, as the iPhone camera itself remains weak, with poor resolution.

Other enhancements mooted include tethering (the ability to use the iPhone to connect a PC to the Internet), background running for applications, and the ability to run multiple applications concurrently (although I suspect that the iPhone hardware will limit any support for the latter).

We should all know more this week as Apple announces the new software version 3.0 tomorrow, Tuesday.

However, rumours also abound about a new iPhone being launched around June/July – at around 18 months after the launch of the first iPhone, and 12 months after the 3G version, this would be around the expected time for a new product (indeed – possibly a bit later than normal). Although the rumour of a “Nano-type” iPhone, smaller with reduced functionality, seems to be debunked by a number of sources.

Perhaps the biggest indicator to support this new product is reported in Mobile Today, who expect that O2 will make the existing 3G iPhone available free of up-front charge on monthly contracts - trying to clear its stock of iPhones in time for the new product?

Hmmmm – I think I’ll wait until the middle of the year to see what the new product is or isn’t......

Dead cat bounce?

2009-03-12T09:13:00.002-01:00

There have been some comments about my prediction that the FTSE100 will drop to 3,200 – most probably around April – followed by a dead cat bounce. Firstly, what did I mean by a dead cat bounce?

In short, and at the risk of again teaching grandmothers to suck eggs, a dead cat bounce is small and temporary recovery in a financial market following a large fall.

Typically, when a financial market suffers a consistent fall traders attempt to detect when prices are at their lowest and then buy stocks hoping for a bargain. If they buy too soon prices may rise temporarily but then decline again. This is called the dead cat bounce. The idea being that even a dead cat will bounce if you drop it from a great height.

Did Tuesday’s big rise (4.8%) in the FTSE100 represent a dead cat bounce?

Given the falls over the past 6 months, I suspect not – it might be classified as a small bounce – but personally I still expect the FTSE100 to fall further, say to 3,200 - before a real dead cat bounce back to, say, 3,800 – followed by a return towards the original low.

However, please remember that, whilst a dead cat will bounce if you drop it from a high building, it doesn't mean it's alive. I still think there is more bad news to come out of the financial sector (Barclays in particular), the extra costs of pension funds, further declines in property values and continued de-stocking.....

A new player in LA Financial Management

2009-03-11T07:29:00.001-01:00

I note with interest that TechnologyOne, the Australian software house, has won its first local authority customer in the UK (it is already one of the largest suppliers to local government in Australia and New Zealand).

In a testament to persistence (I think they bid their first UK LA tender some 5 years ago), TechnologyOne has won Scarborough BC, supplying its financial management and works/assets solutions in a contract worth £218k. This must be a double reward for Joe Slattery, TechnologyOne’s Regional Director as it not only potentially opens up the UK LA market at last, but also gives TechnologyOne a win over the Civica (one of their main competitors down under), the incumbent FMIS supplier at Scarborough.

However, the UK local authority FMIS market is littered with the grave stones of failed attempts of new suppliers to become significant suppliers of their FMIS solutions to UK local authorities (with suppliers like Coda, Ross, Northgate, CyberScience, Foundation, Flex and JD Edwards all winning their first sites, but then failing to get more than a handful of other LA customers - in many cases, only one or two – before deciding that it’s not a market for them and their product). It can be a tough market, with users demanding more from their FMIS than some suppliers expect (or their products can supply).

But, having researched TechnologyOne during my time in Radius and Civica, I believe that their product, whilst lacking some key functionality for the UK LA market, can be enhanced relatively easily to fill any gaps. With their track record down under, a range of excellent bolt-on modules, and a friendly user interface, I suspect that TechnologyOne will succeed – albeit they will have to go through a pain barrier to achieve live operation by the target October of this year.

Will TechnologyOne be successful in the UK LA market?

My view is yes - most probably – but it will take a long time. I’d rank their core functionality, width of product offering, and technology above many incumbent suppliers like Civica, iBS, COA and Consilium – all of whom appear to be looking to preserve their existing customer base, rather than win lots of new UK LA business. TechnologyOne is in many more sectors than just local government, and will also be able to rely on revenue from those sectors to fund its overall investment in attacking the UK market.

I think that, long term, TechnologyOne can compete with the likes of Agresso, and possibly even SAP and Oracle – but it will take many, many years – I just hope that they are prepared for a very long battle to gain a significant foothold in the UK LA market.

Problems with e-mail distribution

2009-03-11T07:25:00.003-01:00

For those of you that subscribe to pssst.... by e-mail, it would appear that the Feedburner distribution system didn't issue e-mail updates yesterday, Tuesday.

As I didn't receive e-mail updates to a number of other blogs to which I subscribe, I think the fault is with Feedburner, rather than this blog. Hopefully e-mail distribution will restart today....

Blog post 100

2009-03-10T08:27:00.003-01:00

Since transferring my blog to this open pssst... blog last September, Google informs me that this is my 100th post, so now is the time for a quick review......

According to the statistics that I have, the most popular posts relate to my comments on the NHS NPfIT projects (greatly helped by a Computer Weekly article and a number of other blogs that linked to one of my posts), with Capita’s acquisition of IBS coming a close second, and the Constellation/Gladstone battle an easy third.

The most controversial posts have related to the use of Open Source, where this blog has followed and commented on both the Tories' and then the Government's attempts to adopt Open Source - Conservative’s move to Open Source – a major mistake? and Open Source – who poached whose policy? It would appear that several of my readers fervently support Open Source (whilst some others, just as fervently, oppose it).

The blog has received many hits from search engines based on “FTSE predictions”, where in an Off-Topic post I’ve predicted that the FTSE100 will drop to 3,200 – most probably around April – followed by a dead cat bounce, and then a return to around 3,300 by the middle of the year, with a recovery starting in September leading to the FTSE100 rising to around 4,200 by December. The FTSE100 seems to be on the way to 3,200, but now I’m beginning to doubt my optimistic prediction of a return to 4,200 by the end of the year.....

I’ll also point out that, as long ago as last September, I predicted that many bank shares would be all but worthless, and that nationalisation was on the cards. In practice I’ve been proven right – bank shares have plunged by 90% since then (Barclays 85%) and both RBS and Lloyds/HBOS are nationalised in all but name – whilst I still suspect that Barclays will follow them in the fullness of time.....

On other predictions, this blog:

Successfully predicted a bid for Gladstone - After Anite and IBS – where’s the next big acquisition? . And successfully predicted the failure of that bid - Decision time for Gladstone shareholders.

Followed the Northgate/Anite and Capita/IBS acquisitions and correctly predicted that the Northgate/Anite acquisition would not be referred to the Competition Commission, but that the Capita/IBS acquisition would be referred - Capita's acquistion of IBS is referred

Was one of the first to predict huge losses for Local Authorities in Iceland, and to identify the use of Anti terror legislation by the UK Government - Councils lose £0.5billion in Iceland terror attack?

However, I will own up to have predicted the demise of HIPs by this March (HIPS will go - but when...) – this is now unlikely; although I still believe HIPs will go, I think this will now not happen until there is a change of Government. Also, although I still think that the PIGS will fly the EU this year, I wonder if the I is now for Ireland rather than Italy (P being Portugal, G Greece and S Spain).

I will aim to continue giving predictions where possible, mostly aimed at the market for, and companies in, the supply of software/services to the UK Public Sector; but as I have noted before, please remember that this blog does not aim to offer investment advice and you are advised to DYOR (do your own research) before you make any investments yourself.

In response to requests from readers, I will aim to continue comments on project management issues – typically general advice initiated by a significant project which is in the public domain (e.g. NPfIT or FiReControl), or prompted by similarities with other areas, e.g. When Project Managers and Directors disagree......

Finally, I’d like to thank those readers who have sent me, some anonymously, items of interest, areas for investigation and, in some cases, good gossip (some of which I just can’t pass on......). I always welcome any suggestions and/or ideas for topics to cover in the next 100 posts – and all your comments. I maintain strict confidentiality on all such suggestions/comments and will not attribute them to the author without prior approval. Please e-mail me at phil@systemsolveconsultancy.co.uk.

Capita/IBS – Northgate notes published

2009-03-09T09:31:00.002-01:00

In my last post on the Competition Commission’s progress on investigation of Capita’s acquisition of IBS, I noted that the CC had yet to publish the summary of its hearings with Northgate. It would appear that the parties have agreed the editing of the summary notes of those hearings, and the hearing summary is now available for download from the CC web site.

The summary mentions the Social Housing (SH) market, but tends to focus on the Revenues & Benefits (R&B) market where the reduction in the number of suppliers brought about by the acquisition is significant.

I believe that the significant comment in the summary is that “Northgate did not consider that a merged Capita/IBS could dominate the R&B or SH markets, although it would be a very competent competitor to Northgate”. This, combined with comments about the threat of LA’s outsourcing IT procurement and management in their entirety not being seen as a major threat, suggests that Northgate has not strenuously objected to the acquisition (perhaps because Northgate may also benefit from the removal of IBS as a competitor?).

The one area where Northgate appears to have expressed concern is in the creation of shared service operations where Northgate “would be at a disadvantage bidding for shared services arrangements where it was not the incumbent supplier for at least one of the partners” - Capita’s acquisition of the IBS customer base clearly increasing the chances of this happening in the future.

According to Northgate, “the R&B market could sustain three competitors although it could decline to a point where it could only sustain two players” – but (unless their comments have been edited out) don’t appear to be saying whether that point has been reached yet or not (I would argue that it has – particularly when Northgate predicts that “there would be about six tender opportunities a year for R&B software”).

Confirming recent comments on Civica’s involvement in the R&B market, Northgate appears to have said “that Civica was no longer a serious contender in the R&B market, and that Civica had not been actively bidding.” And that “although 3i’s investment made it possible that Civica might re-emerge as a stronger competitor in R&B, the recent economic downturn made this less likely.”

Looking at the chances of a new entrant into the R&B market, Northgate notes that "significant technological or legislative changes requiring large-scale re-writes of R&B software would create opportunities for new suppliers to enter the market". However, later highlights that “the level of upfront investment needed to enter the market, and the time required, as further barriers to entry” (however, Northgate’s apparent estimates of cost and time for development have been edited out). Let me repeat that I believe the likely cost of development and testing of a new suite of back office R&B applications from scratch to be near £10M and take over two years to first delivery (and significantly longer to get to a stage of having three live reference sites).

In summary, therefore, unless some significant comments have been edited out, it would appear that Northgate comments have confirmed many of the points already raised in other hearings and documents. I’m sure that the hearings with Northgate have enabled the CC members to get a much better view of the overall R&B market, but I suspect they’ve not helped the CC to any decision other than the acquisition has reduced competition.

My own opinion remains that Central Government could act in a more joined-up way, with the DWP coming up with a clear strategy (and funding?) for R&B software suppliers to enable increased investment (by both existing suppliers and new entrants) – although I fear this is unlikely, and most probably impossible. Unfortunately, the DWP’s funding of LA’s to purchase R&B systems over the past few years has not resulted in what the DWP would have wished for. Going forward, if it wants more than two real competitors, there must be more money put on the table – but hopefully in a way that delivers what Central Government wants.

Without it, even if the CC forces Capita to divest IBS, I suspect that there is a strong chance that there will still only be two main suppliers – Northgate and Capita – with a strong possibility that existing IBS customers will not have the security, nor negotiating power, that they would have had with IBS as part of Capita.

If the Competition Commission were to let Capita continue to own IBS, it has a great opportunity to put in place protection for the interests of existing & future IBS users, and possibly even some safeguards for other Capita R&B customers. Unfortunately, Central Government is not joined up, and I fear that the CC will have no choice but to act against its own restricted remit, and will be unable to provide the initiatives that this market really requires.

Gladstone/Constellation update

2009-03-05T09:14:00.001-01:00

I know that this blog has a lot of readers interested in the ongoing battle between Gladstone and its spurned bidder, Constellation Inc. There has been a new letter to shareholders from Gladstone, urging shareholders to reject Constellation’s request for a place on the Board.

In the letter, the Gladstone Board is complaining about Constellation’s actions at last week’s AGM, removing the Finance Director and constraining Gladstone’s ability to either buy more shares in the market, or sell existing shares held in treasury. Something that I fear the Board may have to get used to if it cannot resolve its current dispute with Constellation.

Gladstone has also taken the unusual step of obtaining the names and addresses of shareholders who hold their shares through nominee accounts, and using Grant Thornton to write to them with a voting form for the EGM vote, urging them to vote against the resolution. This, combined with Constellation’s success at the AGM, suggests that the EGM vote on 16 March could be close....

Unfortunately, this disagreement does little to help the Gladstone business – it is incurring extra costs to fight off Constellation, and the fight is undoubtedly taking up significant amounts of management time – time that should be used to manage and drive the business forward.

I remember that when Radius was listed we had a dissident major shareholder who, similar to Constellation, was a constant thorn in the side of the Board, requesting EGMs and involving senior management in vast amounts of unnecessary work. No-one won out of the disputes, and the company suffered through the diversion of senior management time – and I suspect that may well be the outcome of this protracted battle between Gladstone and Constellation.

In practice, Constellation owns just under 30% of Gladstone, and one could argue that they should be allowed a seat on the Gladstone Board on that basis alone. One thing I learnt from the Radius experience was the need to have your major shareholders on your side – if they’re not, the company will be unable to function properly until either they are, or they are no longer shareholders.

But I suspect that Constellation is not about to give up its shareholding – even if they fail to get a Board position (unless there is a new bidder offering a significant premium to the 25p Constellation paid for its shares). Whilst if they get a Board position, I’m sure they would shake up the existing management – yes, they might use their position to try to acquire the company on the cheap – but without Constellation on the Board, I fear that the current Board may not deliver on their promise to grow the business over the next year any rate, and if so, Constellation may still get Gladstone “on the cheap” early next year.

No doubt Constellation will respond to Gladstone’s latest letter – it will be interesting to see what new attacks they make on the existing Gladstone Board.......

Definition of a pessimist

2009-03-04T08:24:00.001-01:00

Following yesterday’s blog on Project Management truisms, one of my ex-managers reminded of one of my discussions with colleagues - several years ago - following my review of forecasts for projects and sales within a new division for which I had acquired responsibility. I was quickly branded a pessimist, and asked if I could produce reports which were more optimistic. My (standard) response was to refer to the definition of a pessimist:

A pessimist is an optimist with experience.

Although I left the organisation shortly after the above discussions, i was reminded that in practice and the fullness of time, it turned out that even my pessimistic forecasts were proven to be mildly optimistic.....

Project management truisms

2009-03-03T09:46:00.002-01:00

It seems as if the on-line community has decided to publish collections of statement, sayings and jokes about project management over the past week. Many of you will have read my collection of rules of project management, but Tony Collins of Computer Weekly has published a list (which you can read in full here) – several of which I absolutely concur with:

Projects with realistic budgets and timetables don't get approved – and the best example here has to be NPfIT, although I’m sure every organisation has a number of projects that fall into this category.

The more desperate the situation the more optimistic the progress report – and in my own experience “the heavier the progress reports get”

A freeze on change melts whenever heat is applied – which is where the hairy-arsed project manager, who enforces his moratorium on change forcefully, comes into his own (but typically also alienates himself from senior management and future work with the same organisation)

If at first you don't succeed, rename the project – I always admired a competing company to Radius, whose director insisted that project names included the scheduled completion date (e.g. NPfIT December 2008) – although I still didn’t see their projects being delivered on time

Everyone wants a strong project manager - until they get him – again an absolute truism – my best project manager was PeterB – someone who spoke his mind and was difficult to keep under control – but his projects were (nearly) always successful and on schedule - his customers knew their responsibilities and he managed them as forcefully as our own staff, to achieve successful outcomes.

Projects don't fail in the end; they fail at conception – as regular readers of this blog and web-site will know, in my consultancy work to turn around problem projects, almost everyone has gone wrong before the original contract was signed – NpfIT being one of the most notable examples.

Finally, if you want some of these truisms illustrated in cartoons, click here.

IDOX & Gladstone – a tale of two AGMs...

2009-03-02T09:24:00.003-01:00

In last week’s post before their AGM’s, I pointed out the need for both IDOX and Gladstone to produce positive, informative announcements at their AGMs to address the drift in their share prices. What we got were two totally different approaches – and two totally different results....

IDOX produced a one paragraph statement along the lines of “steady on the tiller”, that was short on any detailed information. However, the AGM appears to have gone well, with some discussions about “large pipelines”, “bid activity ahead of last year” and “robust demand”. But there appears to have been some frustration expressed by Directors at the lack of recognition by the market of IDOX’s value (a view that I would share). All AGM resolutions were passed, and the share price rose marginally.

Gladstone meanwhile, in the face of an attack from spurned bidder and 29% shareholder Constellation, produced a really positive, long AGM announcement and combined trading statement. Although short on quantified values, the announcement named customers, including some significant new customer wins, and detailed numbers of sites and facilities to be supplied. All-in-all, a very positive view......

Yet at the AGM (see here for the AGM results announcement), the majority of resolutions were voted down, the Finance Director not re-elected, and the auditors not re-appointed. In addition, the company’s ability to use its cash pile to buy shares in the market was curtailed (as was its ability to sell any of the 4.5M shares currently held in treasury). Whilst I have little doubt that this happened because Constellation wished to show its strength (and the constraints on the company buying/selling shares will assist them in their ongoing battle with the Board), questions have been raised about “dark forces” being at work, and perhaps there is another agenda in place – that does not include Constellation......

As a result, the share price has also increased marginally, and from a recent low of under 19p has today returned to be above 20p, but still some way away from Constellation’s 2008 bid of 25p.

What next ? – the EGM on 16 March 2009, to vote on Constellation’s request for a position on Gladstone’s Board. I think this whole saga could run on and on – unless another bidder appears – something that I feel is unlikely at the moment unless Constellation wishes to dispose of its shareholding – and I don’t think they want to do that just yet......

Update: the Gladstone situation made it into the FT today. The FT article quoted Constellation as saying it was committed to Gladstone’s future success but had voted down several resolutions because of concerns about corporate governance, director conflicts, compensation and other financial matters. “We believe that the removal of Mr Montgomery from the board was a necessary step towards addressing these concerns.”

Name searches

2009-02-26T09:52:00.000-01:00

If you are like me and need to search the Internet for information on a person (perhaps a prospect, or someone you’re about to meet for the first time), you may have found the problems of using Google – too many incorrect entries and/or insufficient views of blogs and social networking sites.

You may wish to try a couple of new sites that have been recommended to me (thanks to Dan for forwarding on the links):

Try typing your own name into www.pipl.com and not only does it search for textual entries, it can also come up with photos extracted from web sites and social networking sites (for me it comes up with not only my own photo from this blog, but also a number of photos of other unfortunates with the same name....). Now try other contacts and/or prospects – sometimes the search provides nothing, but in many cases I find that some of the entries are for valid items not found by a conventional Google-type search.

Then try typing your own name, a company name, brand name or topic into www.addictomatic.com and it performs a search of the web for the latest news, blog posts, videos and images. I’ve been impressed with the up-to-date output from this search engine – yes, it comes up with a number of irrelevant hits, but frequently finds some relevant hits that are not found easily in a Google-type search.

Open Source – who poached whose policy?

2009-02-25T09:34:00.004-01:00

Only a couple of weeks after the Tories announced a policy to support Open Source, yesterday the Government published a new policy on Open Source software “that will ensure maximum value for money for taxpayers”.

Unlike the Tories though, the Government has put some meat on the bones of its press release and published 10 actions that “will actively help make sure the best possible, best value for money software solutions are put forward for tenders, be they Open Source or propriety products”. However, as with the Tory announcement, I believe the Government policy is fatally flawed.

Fortunately, those 10 policies/actions recognise the need to make procurement decisions “on the basis on the best value for money solution to the business requirement, taking account of total lifetime cost of ownership of the solution”. However, the policies/actions propose to help tip the balance towards Open Source through the introduction of two proposed safeguards that are, in my mind, unworkable in practice:

Firstly, where Government becomes locked into proprietary software it will, where possible “take exit, rebid and rebuild costs into account in procurement decisions and will require those proposing proprietary software to specify how exit would be achieved”. Whilst proprietary software suppliers can no doubt describe the exit route, it is impractical for either the supplier or the purchaser to try to estimate rebid and rebuild costs with any degree of accuracy– and who would be responsible for such costs if they were subsequently (say, 5 years down the line) proven to be wrong?

However, and rather worryingly, it does introduce the opportunity for customers who have already decided on their preferred solution to justify its purchase over, say a solution with a lower overall cost of ownership, by coming up with an over-stated exit, rebid and rebuild cost.

Secondly, “the Government will look to secure full rights to bespoke software code or customisations of commercial off the shelf products it procures, so as to enable straightforward re-use elsewhere in the public sector.” This is fine for bespoke software that can work in isolation, but is virtually unworkable for bespoke code and customisations that rely on products where the IPR is not owned by Government.

Also, this approach could potentially increase maintenance costs for Government. Within my company, Radius our normal approach for making most customer-funded bespoke modifications to our own products was to retain the IPR, but roll the modification into the standard product and make it available to all other users (Public Sector or not). This way the modification was taken forward in new releases, and maintained, under the standard maintenance agreement, at no additional charge.

If the IPR is retained by Government, then the code cannot be rolled into the standard product (i.e. to be made available to others outside the Public Sector), and presumably the Government will be happy to pay for its maintenance and inclusion in all future releases of the standard software....

I’m also bemused by the statement – “The Government will use open standards in its procurement specifications and require solutions to comply with open standards. The Government will support the development of open standards and specifications.” I can’t think how many times I’ve seen this statement over the past 25 years, be it for mainframe, Unix , e-government or general interoperability – great in theory, but never been implemented effectively in practice.

I won’t repeat the arguments contained in my post Conservative’s move to Open Source – a major mistake?, other than restating that the trick is to learn to live with the proprietary software suppliers (accepting that the UK Government software market is a significant, but still very small percentage of their overall business) rather than build ways to avoid them.

AGM week for IDOX and Gladstone

2009-02-24T08:34:00.001-01:00

This week sees two AGMs for software suppliers to the Public Sector – IDOX (Thursday) and Gladstone (Friday) – when we will hopefully be updated on their prospects and fortunes to date.

Both have seen their share prices drift downwards over the past few months – but for different reasons.

Gladstone saw off its unwanted bidder, Constellation, in December and has since seen its share prices drift from just under the bidder’s offer of 25p towards the 18p level it was at before the bid was announced. Gladstone is also trying to repel a request from Constellation to have a post on Gladstone’s Board. Gladstone desperately needs good news – recent attempts to generate good news from announcements of the new software updates and the first very small user of its new Orbit package have been judged too weak by investors – let’s hope that the AGM will include some positive, hopefully quantified, news about new business wins.

IDOX has similarly suffered from a lack of good news, with only a weak announcement of a “me too” strategic partnership with Kirona since the announcement of its results over two months ago. Shareholders seem to be fretting about IDOX’s ability to maintain profit levels during the current recession, and rumours abound of further rationalisation of IDOX’s business units. Hopefully the AGM statement will include updates on the continuing absorption of IDOX’s Plantech and CAPS acquisitions, again including some quantification of the cost savings achieved.

I remain a (small) shareholder in both businesses – I believe that, as dominant leaders in their chosen markets, properly managed, they will have the strength to not only survive the current downturn in spending in the markets, but thrive in years to come. As I’ve noted before, I believe that both are likely to lose their independence at some time - but unless they trip up over the coming few months, I think it will be at least another year before any reasonable offers are forthcoming......

Capita/IBS – Competition Commission progress

2009-02-23T08:32:00.003-01:00

The Competition has continued with its investigation into Capita’s completed acquisition of IBS, and has apparently completed its initial collection of information, including meeting with a number of third parties. The CC has also published copies of some of the documents submitted and summaries of some of the hearings held with interested parties (unfortunately, but understandably, the published copies of these documents have had confidential and commercially sensitive information deleted). I also note that, whilst the CC has published summaries of its hearing with Civica, it has not done so, to date, for its hearings with Northgate.

In summary, it is hard to find any organisation other than Capita that doesn’t believe that Capita’s acquisition of IBS will reduce competition for Revenues & Benefits (R&B) systems. Likewise, I think all parties seem to agree that the same does not apply to the Social Housing (SH) market where, even after Capita’s acquisition of IBS there remains a significant number of other suppliers around to ensure an adequate level of competition. Quoting from Doug Forbes' (Barony) response – “there should be a minimum of 3 vendors to maintain adequate competition in this important [R&B] market ..... the only solution seems to be — let Capita have the Housing System and auction the R&B to anyone but Capita and Northgate.”

As noted in my posts last year (see Capita/IBS – OFT’s final text - what next?), based on the criteria used by the Competition Commission, it is likely to have little choice but to conclude that the acquisition has resulted in a reduction in competition for R&B systems. But if you read the documents and summaries carefully, you can see some agreement that the market for new R&B back office systems is now very small – the numbers of open tenders in 2003 and 2004 was round 50 per annum, dropping to 14 in 2005 and 12 in 2006.

With English LA reorganisation we are seeing a continual reduction in overall market size – with 2009 reorganisation expected to see the market reduce by 33 systems, and 2010 likely to be around another 22 systems. There is also a general acceptance that the IBS back office system is more suited to small to medium sized authorities, and therefore is unlikely to be seriously in the running for the new unitary council contracts (although I’m sure IBS would disagree with this). As before the merger, Northgate and Capita are really the only two serious contenders in this market for R&B back office systems for larger authorities. If one views district councils as the target market for IBS’s R&B systems, then, over 2009 and 2010 there will be a c 24% reduction in the size of IBS’s market – potentially a major problem for the IBS R&B business both now and in the future.

With such a small number of potential new business wins per annum, it will be increasingly difficult for any supplier to justify extensive speculative development of new functionality or support for new technology. Indeed, it is highly likely that smaller suppliers like IBS would have had to cut back significantly to retain profitability, and may even had to follow other R&B suppliers into just a “support & maintenance” operation for their R&B software.

Certainly, based on the figures quoted, there is virtually no chance of a new supplier entering the market – the upfront cost and risk is immense – the likely revenue totally insufficient to justify the development expenditure – the time to market too great – and then there is always the chance that, just as the development completes, Central Government introduces local income tax, abolishes Council Tax, and/or introduces a centralised system to manage consolidated benefits and remove the need for LA Housing Benefit systems. (Let alone local authorities’ own aversion to taking new, untried systems – most LA’s wish to see three live reference sites before even short-listing a supplier).

Let me repeat that I believe the likely cost of development and testing of a new suite of back office R&B applications from scratch to be near £10M. I would agree with Capita’s assertion that existing financial systems suppliers have some of the necessary functionality and technology already, but that this would only lower the initial development costs by 10% or less. I would also agree with the comments of several parties that LA’s are unlikely to band together to fund or part-fund the development costs for a new entrant.

So where to from now?

The Competition Commission has published new directions for Capita to increase the formal separation of IBS and its management as a totally independent subsidiary of Capita so as to “preserve the possibility of restoring effective competition in the markets affected by the merger through the separation from Capita of a viable, saleable, competitive IBS business”. So clearly the CC is considering a complete separation of the whole IBS business, (i.e. including Social Housing), even though I would have thought that the SH business could have been retained by Capita (perhaps the SH and R&B systems/staff are more inter-twined than implied by the published texts).

In isolation, I still think this would be wrong. Perhaps Central Government could act in a more joined-up way, with the DWP coming up with a clear strategy (and funding?) for R&B software suppliers to enable increased investment (by both existing suppliers and new entrants) – although I fear this is unlikely, and most probably impossible. Unfortunately, the DWP’s funding of LA’s to purchase R&B systems over the past few years has not resulted in what the DWP would have wished for. Going forward, if it wants more than two real competitors, there must be more money put on the table – but hopefully in a way that delivers what Central Government wants.

Without it, even if the CC forces Capita to divest IBS, I suspect that there is a strong chance that there will still only be two main suppliers – Northgate and Capita – with a strong possibility that existing IBS customers will not have the security, nor negotiating power, that they would have had with IBS as part of Capita.

If the Competition Commission were to let Capita continue to own IBS, it has a great opportunity to put in place protection for the interests of existing & future IBS users, and possibly even some safeguards for other Capita R&B customers. Unfortunately, Central Government is not joined up, and I fear that the CC will have no choice but to act against its own restricted remit, and will be unable to provide the initiatives that this market really requires.

Requirements vs. specifications – an analogy

2009-02-18T09:15:00.003-01:00

To illustrate my earlier post, and continuing the theme of teaching grandmothers to suck eggs, consider this analogy between buying a car and an application software package.

Joe goes into a number of car showrooms – he explains to the salesmen that he’s looking for a car for his family of four. He wants a fast car, one that’s reasonably economical, and he has a budget of £15,000. After viewing some of the cars, he takes a test drive in one which he likes – it accelerates fast and reaches 70 mph quickly, has two doors and four good seats, the salesman says it returns 30 mpg, and it only costs £14,000 with a manual gearbox. He asks about accessories, adds in a roof box and a towing bracket, and leaves the showroom with a quotation and a copy of the brochure for the car. On his way home he sees that several of his neighbours have purchased the same model of car, but doesn't speak to any of them about their cars.

After a quick discussion with his wife Joe decides to buy the car, it is duly delivered and after a couple of weeks he returns to the showroom complaining that with the roof box in place he’s not getting 30 mpg, and when he tows the caravan, he’s not getting the acceleration nor the speed that he expected. Even worse, his two 6ft teenagers can’t get into the back seats easily, and his wife can’t drive it because she can only drive automatics.

The garage quickly falls back on its contract of supply – which is against the specification included in the brochure supplied with the quotation – and which specifies the conditions for the quoted fuel consumption and performance, and included measurements of the rear seat sizes and doors. The fault lies with Joe - a purchaser who failed to involve all the users (his wife and children), failed to define fully his requirements (his family and the caravan), and failed to check the specifications contained in the brochure before he ordered the car. He also failed to recognise that if you use a product in a non-standard way or change the specification (e.g. adding a roof box, or towing a caravan), it can dramatically change the expectations of how the product will perform.

The car salesman does however, point out to Joe that there is a 4-door version of the car, with a bigger engine and automatic gearbox, that would tow the caravan easily – and an estate version that would remove the need for the roof box. However, it costs £20,000 and is not so economical to run.

So Joe decides to live with his new car........

Requirements vs. specifications

2009-02-17T09:02:00.002-01:00

This may be a post to teach grandmothers to suck eggs, but the question has been asked – why do I go on so much about the importance of separate requirements and specifications stages – surely they are the same?

This is, unfortunately, a common problem with IT projects these days – I would say that the vast majority of the problem projects I’m asked to deal with have had core problems in this area – and mostly for suppliers/developers who have contracted against incomplete and/or inaccurate requirements, without a specifications stage for the customer to sign off before development/implementation starts. When analysing such projects, when I ask for the “specifications” I am invariably given the “requirements” – without either the customer or the supplier having realised that the specifications have never been produced.

As my ex-managers and sales staff will testify, this is one area that, as MD of a software house, I drummed into my staff – the difference between requirements and specifications, and the importance of a customer agreeing not just the requirements (i.e. what he wants the system to do) but also the specification (how the system will fulfil his requirements) – and how difficult it is to estimate accurately any development work until a specification has been agreed.

Yes – it is possible, with good in-house IT department and development teams, to short-circuit some of these phases – but not in customer/external supplier, fixed price contracts – the risks can be just too great.

Contracts involving existing software application packages should be a lot easier, but in some cases, despite the supplier’s statement of compliance against the customer’s requirements being accurate, the supplied solution turns out not to be what the customer really wanted – why? – it comes back to the difference between requirements and specifications.

With modern application packages, most common requirements can be met, but in most cases the supplier’s Tender/proposal doesn’t spell out how each requirement will be met – e.g. the customer may expect (want) a single screen format and transaction to meet a specific requirement, yet the supplier’s solution is to use two or more screens and transactions – if the customer hasn’t spelt out the his needs in detail, there can be problems.

More importantly, some customers do not recognise their own responsibilities in the pre-contract stage of buying an existing application package – namely that of satisfying themselves (and their end-users) that the intended solution operates the way they want their requirements met. At the end of the day, most application software packages are purchased on the basis of a statement of compliance (typically against requirements) and then a specification of the software package – which, typically, has been the subject of demonstration and reference visits – and if these latter stages have been skimped, or the wrong staff drafted in, the customer can fail in his part of the procurement.

Buying or supplying systems against requirements can be highly risky – for both customer and supplier. For application products, they can be procured safely without a separate specification stage, provided both parties work together to agree that the proposed solution will meet the customer’s requirements. For bespoke developments (including large changes to existing packages), I always recommend that final fixed price contracts are not let until a firm specification has been agreed between the parties – possibly using the phased fixed price approach I’ve discussed in previous posts.

P.S. I provide consultancy to both customers and suppliers on both the pre-contractual stages of procurement of new systems/services, and the resolution of problems in projects after contracts have been let. Visit my web site at www.systemsolveconsultancy.co.uk for further details, or contact me at phil@systemsolveconsultancy.co.uk .

Gladstone/Constellation battle rumbles on

2009-02-16T13:04:00.001-01:00

Failed bidder Constellation Software Inc continues its battle to win a place on its target, Gladstone’s Board, and after a technical hiccup, has succeeded in getting an EGM to be held on 16 March to vote on its proposal for Constellation’s CEO, Mark Leonard, to be appointed to as a Director of Gladstone.

Gladstone has two main arguments against this, firstly that Constellation is a competitor (for both its main membership systems and fledgling education products), and secondly that it might enable Constellation to obtain information that would enable it to buy Gladstone “on the cheap”. In both cases, Gladstone argues that having a Constellation representative on the Board would endanger the interests of all other Shareholders.

Constellation has yet to respond to make its case for a Board position, but it will no doubt focus on the existing Board’s failure to exploit its dominant market position more fully, and its relatively poor returns to shareholders.

Unfortunately, I do not see this stalemate resolving itself. From the (very few) discussions I’ve had with Gladstone shareholders, it seems that – as with their failed takeover bid – Constellation will not get the shareholder backing necessary to get a place on the Gladstone Board. Meanwhile, Gladstone’s management will have to expend some considerable time and money in repelling this request, an unwanted diversion from running the main business......

Too much haste – not enough speed

2009-02-16T09:16:00.003-01:00

Following my post on how to manage large projects, I’ve been reminded by one of my ex-managers of an example on the importance of the requirements stage – I’ll keep the names confidential to protect the.....

A few years ago, Radius was the leading supplier of applications in this specific area for local authorities – on the back of this we were invited to bid for a Central Government project to supply similar functionality. The competitive procurement was being managed by a major consultancy, but would be very quick – all suppliers were to be given just 7 working days to respond to the tender.

When the tender arrived, the requirements were obviously both incomplete and, in some places, plain wrong (some of the requirements even breached accounting rules). We knew that, as a small company with very little experience of working with Central Government, we were unlikely to win the business; so we decided (perhaps incorrectly) to take the high-risk approach of re-writing the requirements to include those areas that were obviously wrong or missing, and add options for some additional elements that users would normally need.

Our solution existed, could be piloted almost immediately, and could be put live in the few months required by the aggressive timetable - we bid a low price, but we admitted that the system would have to be re-engineered after a few years to meet vast transaction levels predicted in year 5 (something that we built into our project plan and costing). Our bid was rejected, primarily on its inability to meet the year 5 transaction levels. We never did find out officially who won the bid – the system didn’t go live as required a few months later – or even a few years later.....

Many months after the bid I spoke to one of the other bidders – again a supplier who had a working solution – they had also been ruled out (reputedly on price). He believed that the contract had been let to a major services organisation to develop from scratch against the original (flawed) statement of requirements, and that with extensions caused by changes in requirements identified after the contract had been signed, the Government had already paid out more than their original fixed price bid.

I’ve never been able to confirm whether that is true or not – certainly the system as initially specified never saw the light of day, and a stop-gap, partial solution was put in place several years later – a solution that has apparently never achieved the forecast transaction rates for year 2, let alone the suggested year 5 volumes....

Did the contractor pocket a 7-figure sum for his work on this failed project? And what happened to the Central Government sponsor (the project took over two years, so no doubt he had moved on before the project was marked as having failed)? The consultancy that managed the procurement is still a major services supplier to Central Government.

Whatever happened, it highlights the problems of rushing the all-important requirements stage – too much haste – not enough speed.....

Projects over 2 years....

2009-02-11T07:52:00.003-01:00

Another comment I’ve received on last month’s posts, relates to how would I handle IT projects that couldn’t possibly be completed in a two year period?

Yet again we’re back “eating an elephant” – breaking the project down into smaller, more manageable bites. But perhaps more importantly, it’s also down to ensuring that the requirements for the project have been accurately and completely defined – prior to a specification stage that includes detailed walk-throughs with real-life end users. This is the most important phase of an IT project – yet is typically rushed or overlooked, and frequently completed without adequate reference to the managers and end-users that will be using the system.

I’m a great believer in “phased fixed price” contracts for dealing with large projects that require the development of customised software – splitting out each phase into separate contracts where the current phase is on a fairly firm basis (ideally fixed price against an agreed definition), with budgeted prices for the next phases (typically based on some broad brush assumptions of what will come out of the each phase). Such an approach allows for the requirements collection phase to be contracted separately and carried out by potential eventual developer (if you want to know how to do this in a way that allows for subsequent changes in contractor, please contact me).

When dealing with my managers and team leaders, in the early stages of such projects, I’ve encouraged them to “define the box” – not necessarily what’s in the box, but where the edges are – so that we can know when the project “slips out of the box”. Sitting down with a customer to discuss those box outlines during the requirement stages then proves to be very enlightening – normally for the customer who starts to realise both those areas that he’d forgotten about, and the sort of size/scope of his project.

I also like to see throw-away prototypes, different screen layouts and sample reports as early as possible in the specification stage (but don’t try to turn the prototype into something used in production – every time I’ve seen this tried it’s failed). I remain a firm believer in documentation for all requirements and specifications – particularly for large projects.

“Rapid development” approaches can be adopted for individual “boxes”, but only on the basis of a clear, documented definition of the “box outline”, and full recognition by the customer of the implications of such a development route – but personally, I would try to stay away from such an approach in large projects, unless they are being completed by your own in-house development team (and even then, I’d look for a track record of success on smaller projects before employing this approach on large projects).

Contracting for the technical infrastructure can be handled in parallel, or more likely with large projects, after the detailed specifications for the major “box” elements have been signed off. Hopefully the needs of the training and roll-out stage will have been identified in the requirements collection and subsequent phases, to ensure that topics such as software installation and upgrades can be as automated as possible, and the need for end user training minimised.

There are many potential downsides to this approach but, handled properly, this way can add a level of certainty to projects that is sadly lacking for many current, large projects. Yes – as requirements grow, or specifications change, costs and timescales can increase – but then informed decisions can be made about subsequent phases, expectations set better, and there is a much better chance that the whole project will see the light of day as a success.

P.S. For some of the laws on project management for large projects, including the “90% complete syndrome”, O’Malley’s corollary to Murphy’s Law, and many others, please visit my website.

In support of generalist CRM and ERP systems?

2009-02-10T08:49:00.001-01:00

The immediate response to my post in support of best of breed software packages was an even mix of support for my view, and defence of generalist CRM and ERP systems.

Leaving aside the supportive comments, the comments defending the CRM/ERP systems tended to focus on the role of the consultants or System Integrator - that win the contract to implement a solution around the chosen CRM/ERP software – and their level of specialisation in the needs of the customer.

In this area there are good and bad suppliers (and good suppliers who sometimes don’t get it right). I could give examples of supposed “specialist” ERP/CRM service suppliers who win business on the back of their extensive experience in a sector, and then ship in a horde of highly-priced consultants with no previous experience of the sector – who then go back to first principles in trying to tailor and implement the system. I can also give examples of specialist ERP/CRM suppliers who have an excellent understanding of typical user requirements, supply consultants with real experience of their customer’s operations, and look to implement the chosen system as quickly and cheaply as possible – rather than find reasons for supplying even more consultancy days.

For potential customers – having decided on implementing a generalist CRM/ERP system - how to decide on which service supplier?

As I’ve posted before, it is essential to follow up on reference sites – and not just those nominated by the services supplier – get a list of all their customers and get to meet some of those who have not been nominated. Try to get to see their Post Implementation Report – how did the implementation succeed against the original business plan, budget and timescale – and is the system truly delivering benefits? Get to meet end users and their managers – is the system doing what they want – or have they had to change the way they work to match the system (and has that business process change helped or hindered their organisation?).

And don’t be afraid to draft in specialist applications to overcome shortfalls in particular areas – for instance, it’s amazing how many local authorities using ERP applications have found it easier, quicker and cheaper to buy specialist best-of-breed applications to work alongside their ERP system. Yes, the ERP supplier will try to fight against it, but many authorities have seen that the supplier’s arguments are unfounded – and several systems integrators now use those specialist applications in the tenders to help them win the overall business.

Above all else, ensure that your supply contract has a clear definition of what is being delivered – it’s amazing how many contracts I’ve seen that have taken months to negotiate, but still lack basic definitions of deliverables – indeed, whilst there may be “expectations” in the minds of senior managers and officers, many contracts still refer just to delivery of the software package against a standard specification, and a number of “warm bodies” at certain per diem rates.....

In support of best of breed software packages

2009-02-09T09:54:00.002-01:00

My post on the NHS NPfIT also appears to have re-ignited a discussion on the benefits of buying a number of best-of-breed systems rather than one “umbrella” application from a single supplier (e.g. buying best-of-breed sales order processing, accounting, e-procurement, debt management, and similar applications, or buying just one supposedly all-embracing ERP system).

As you may have guessed, I’m a supporter of the best-of-breed approach – looking at an analogy, if you were seriously ill and needed treatment, I’m sure that we’d all want to see a doctor/consultant who specialised in treating our illness, not just any general doctor – and the same can be said for software applications – we would like to use a specialist supplier.

As with illnesses (we would deal with a cold and a serious illness differently), a lot depends on what applications are most important for our business/organisation – which applications can help best to increase sales, avoid cost or improve service? These are the applications where best-of-breed solutions should be adopted first. For many fast growing businesses, this means that they are happy taking a generalist view of, say, their finance function, whilst really focussing on benefits from implementation of best-of-breed CRM, marketing and sales applications geared towards their particular market. Meanwhile, established companies may wish to focus more on specialist applications to address costs and/or assist manufacturing or service delivery.

Yes, there are potential drawbacks of having to deal with a larger number of suppliers (rather than just a single, say, ERP supplier), and dealing with disputes between suppliers over whose problem a fault is, but these can be mitigated if the supply/support contracts are negotiated properly. I’d argue that you’re more likely to get better support from a smaller, best-of-breed supplier, who has a reputation to retain in his chosen (possibly, only) market, rather than a global supplier whose focus may not be in your chosen market.

Unfortunately, there can be too many of the wrong reasons for buying software solutions. The type of phrase “you can’t get fired for buying IBM” lives on in markets such as ERP and CRM – particularly when there can be a gravy train of seemingly never-ending services work for consultancies employed to shoe-horn a badly fitting generalist application into a business/organisation for which the application was never designed.

In the Public Sector I continue to be amazed at the number of authorities that have paid vast sums of money for full-blown CRM systems that are now used as just advanced call-handling/routing systems; or ERP systems where, after changing the organisation’s business practices so that they matched the way the ERP system worked, the promises of “one data warehouse for all financial information” is nowhere near realisation, even though the project is years late and way over budget.

All the big successes though, seem to be the best-of-breed applications, developed, implemented and supported by companies that really know their chosen market and requirements.

I’m a firm believer in solving the “how do you eat an elephant” riddle by taking “one bite at a time”. As regular readers will know, I’m not in favour of projects which take longer than a couple of years to complete – changing requirements and staff over any longer period than 2 years will elongate the project, put it over-budget and put at risk the planned benefits from the implementation. An incremental approach using best-of-breed applications will almost always be cheaper and faster than an attempt at a big-bang approach, and have the added benefit of actually doing what end user and management want, delivering real business benefits.

Hence my views on How NHS NPfIT should have been procured. Small is not only beautiful, it’s also practical, cheaper and faster – and is more likely to succeed......

e-procurement marketplaces - and one to watch

2009-02-03T10:06:00.005-01:00

Following on from Monday’s post on pure play e-procurement suppliers, I was asked about e-procurement marketplaces, how they fit into the e-procurement market and how well are they performing.

The dot.com boom saw the rise of a plethora of e-procurement marketplaces - too many – and it was inevitable that there would be a severe rationalisation. I believe that now there are only two marketplaces/suppliers that will survive long term....

E-Governm ent Solutions (EGS) did well to partner with IDeA to create the IDeA Marketplace, and see off most of the other public sector marketplace suppliers in England & Wales. They seem to have continued to grow on the back of developing partnerships with both customers and suppliers, although I’ve always thought that their partnership with OGCBuying.Solutions would give them more problems than benefits. However, EGS appear to have managed to get that all important critical mass – processing over £1bn of transactions each year – and developing specialist marketplaces for specific markets - that should see it survive long-term – provided it keeps meeting it customers’ and suppliers’ needs.

eProcurement Scotl@nd (ePS) appears to have achieved the same in Scotland – but only on the back of a massive investment by the Scottish Executive. The PR coming out of ePS is strong – “The eProcurement Scotl@nd service is one of the most comprehensive and successful Public Sector eGovernment initiatives in the world” – and take-up by both suppliers and organisations appears to have been good. But I keep hearing doubts raised by senior Officers in some customer sites that ePS is not delivering the benefits that they want to see – partially on purchase prices, but particularly in the area of back office processing.

I continue to believe that the way for any marketplace to succeed is to partner effectively with all parties involved. EGS has done this, and in particular has partnered with Financial Management System (FMS) suppliers rather than try to compete with them. ePS, meanwhile, seems not to have partnered so well with FMS suppliers, but seeks to replace their procurement systems – i.e. rather than be a true hub-like marketplace, it is seeking to extend its footprint too far into the customers’ sites – meaning that their customers cannot achieve the full back office integration.

My personal opinion is that ePS needs to adopt a more open approach to partnerships if it is to survive. Also, I would doubt that ePS could survive long-term if The Scottish Executive removed its very active support. Meanwhile, EGS has a business model that should let it survive, indeed thrive, long term.....

One to watch – is Due North, a subsidiary of AIM-listed Access Intelligence – which supplies e-sourcing systems on a hosted basis to a small number of local authorities, emergency services and other Public Sector organisations. Although a very small business that had no clear focus to date, Access intelligence has just had a cash injection by Elderstreet Investments, appointed Michael Jackson (former Chairman of Sage) as Executive Chairman, announced the divestment of most of its acquisitions of the past few years, and a focus on SaaS.

I always regarded Due North as a strong supplier on the few occasions we met them in tenders – their solution is liked by its end users, is seemingly quick to implement, and providing it on a SaaS basis is the right way forward. I doubt that they will develop their “portals” into serious competitors for IDeA Marketplace (nor ePS), but will aim to stay in their e-sourcing niche and no doubt aim to work with the established marketplaces. And if they have access to additional funds, perhaps they may seek out an acquisition or two to help them build on what is currently a very small base. They may be a minnow at the moment, and have quite an uphill struggle ahead of them – but I suspect that they may have the ideas and the funds to become a significant player.

Update on e-procurement suppliers

2009-02-02T08:51:00.003-01:00

Following on from my post on e-procurement – supplier take-up is still the problem I’ve been asked what has happened to the pure-play e-procurement suppliers to the UK Public Sector that I commented on last year in my post After Anite and IBS – where’s the next big acquisition?

From what I’ve seen, the situation for those companies, Proactis and @UK, in the UK Public sector has deteriorated over the past year. I can but repeat my assessment of last year “My own belief is that pure-play e-procurement companies are unlikely to survive long term – no matter how good their products, in the longer term most customers will look to buy procurement systems along with their financial and/or other systems.”

This seems to have been borne out by the Public Sector procurements of new systems over the past year - limited in number, they have typically resulted in the purchase of a financial management information system with its own e-procurement or spend control functionality. Without firm partnerships with those FMIS suppliers, I fear for both suppliers in that market.

Proactis

Since its float on AIM back in 2006, Proactis has seen its share price decline 90% from a peak of 109p down to it current 10.5p, valuing the company at just £3.2M, under half of last year’s reported revenue of £6.6M (when the company reported a £0.5M loss after large one-off costs for restructuring following (in)digestion of its acquisitions).

With its move into other markets, and international coverage, Proactis will, I believe, survive and, once we move into a more positive financial environment, should thrive as companies look to replace outdated back office systems. Whilst they do sell directly, they have focussed on building their network of accredited resellers, and have diversified their offerings away from just pure e-procurement and spend control. Although loss-making, they are cash generative and do not, apparently, have to go to their bank to refinance any loans.

However, as a company that came to the market with great expectations, Proactis has suffered from poor investor confidence through the unexpected profits warning last year, and it market cap now sits at a level equal to just its recurring revenue, and its shares on a large bid/offer split of 8/13p. Apparently now unloved on AIM, where will Proactis go?

As I noted last year, I believe that there is a strong chance that Proactis will be acquired by a bigger player (see my post from last year for the names of some potential candidates). Proactis should give a trading update when they announce their interim results around the mid- to end- March – it will be interesting to see how they’ve survived the current credit crunch.....

ATUK

It will be even more interesting to see how (if?) @UK is surviving. By my calculation, unless it’s seen a big improvement, its continuing cash burn will mean that this runs out of cash sometime later this year. It appears to have done well to win an OGC buying solutions framework for data manipulation and spend analysis last year, but is only one of 8 successful bidders, and it’s difficult to see how much revenue will flow @UK’s way.

As I noted in my post from last year, I don’t think @UK’s business model will fly – it’s been constantly loss-making since its formation, losing £2.37M in the last full year, and reporting a £0.67M loss at last interims, on revenue declining by 7% to £1.08M, and burning £0.6M in the six month period.

With only c £1.2M cash in the bank at 30 June 2008, @UK needs to do something pretty drastic to survive long-term. I’m not sure that any of the major players will be interested in buying a company with such minimal revenue and large annual losses – the only possible purchaser might be a company running a marketplace that could integrate the @UK business at minimal extra cost.

Perhaps @UK will back out of its e-procurement market (or try to sell it?) and concentrate on just its company formations business, which would appear to be profitable. Last year saw the ousting of both CEO (the very competent and experienced Grant Oliver) and Chairman (Bernard Fisher), and the forcing through of an ability to raise £500k by a highly-dilutive share placement (not open to all shareholders) that will triple the shares in circulation and value the company at just £840k.

Rumours are also circulating that attempts to purchase the company formations arm have been rebuffed; and that now the business appears to be back in the hands of the original founders, it will de-list and split into two separate companies – the e-procurement bit (to be sold off or closed?) and the company formations bit.

Even with an additional £500k, the current rate of cash burn sees the company run out of cash around the year-end - so I’m sure that 2009 will be a crunch year for @UK – it will be interesting to see how it all pans out.....

NHS planning for termination of NPfIT?

2009-01-29T09:57:00.002-01:00

Perhaps we will not have to wait for a change of government before we see the termination of the existing NPfIT projects – a little bird tells me that the NHS is already planning for the failure of its LSP projects.

As I understand it, one of the two problem projects still under investigation by BT to decide on provisions against overruns (see my updated post BT deep losses illustrate NHS IT problems) is their London £966M LSP contract. But at the same time the NHS is still negotiating with BT for BT to take on some of the projects that Fujitsu walked away from last year (although Fujitsu is caretaking the support of these projects until a new supplier is found). My understanding is that BT has not been able to assess its exposure to the London LSP as it is playing hardball with the negotiations over the Fujitsu projects, and linking the London LSP into the negotiations.

In return, presumably to keep up the pressure on BT, the NHS is preparing contingency plans both for the failure on negotiations on the Fujitsu contract and BT walking away from the London LSP contract. If both were to happen, the NHS NPfIT would effectively be over – with CSC the only remaining supplier – currently contracted as LSP for England outside London and the South – and the NHS is (rightly) unwilling to have a single, monopoly supplier.

As I have predicted almost since the NPfIT projects were let, these are projects destined for failure, the only question is when they will fail. It would appear that it may be sooner than I previously thought.....

At the moment, unless an NHS trust has foundation status it has a duty to buy the NPfIT Care Records Service software from its local service provider. But if the LSP projects failed and this mandate were removed, the NHS would need to control/supervise the way individual trusts procured systems so that their vision of truly interoperable access to records across the UK is still achievable.

However, given a free hand, would Trusts purchase the (iSoft) Lorenzo system – a system that is way behind schedule, currently has limited functionality (with promises of increased functionality over the coming years) and a tarnished track record to date – or the Cerner system - that has been a successful product in the US and elsewhere, but has required substantial modification to meet NHS requirements (with more changes yet to come), is a 1990’s developed client/server system without a very intuitive user interface, and requiring massive amounts of training for end users before it can be implemented live.

I’m not sure what the NHS’s contingency plan will be – but I would be looking to ensure that there were at least three potential suppliers of core software rather than just Lorenzo and Cerner – hopefully the NHS might follow some of my recommendations in recent post How NHS NPfIT should have been procured.

P.S. I recommend the following Holway’s post for further information on BT’s position - BT Global Services and the NHS - Part 3 – it’s also worth following his links to the Ovum article.

Conservative’s move to Open Source – a major mistake?

2009-01-28T10:11:00.004-01:00

I can’t disagree with one of the comments in George Osborne’s statement on Improving IT procurement and encouraging open source software – namely the introduction of new standards that means that the “UK Government should never again have to sign an IT software contract worth over £100M” (well – I could disagree slightly – I think £100M is still far too high a figure). It’s almost as if he's read my recent blog on the NHS NPfIT project....

But I do disagree with his comments on Open Source software – I think they are a major mistake – and suggest that when in Government the Conservatives will continue the focus on upfront costs than longer-term value. One only has to look at the recent Socitm report to see that, in UK Local Government, only 12% of the £3.2bn spend is on software, whilst over 60% is spent on the costs of internal and external services – and I suspect that Central Government’s split of costs is even more biased towards staff and services costs.

I firmly agree with his comments on open IT procurement, but I believe it should be on a “level playing field” that recognises not just the upfront cost of the software, but also the ongoing support costs, including the training/support costs for the end users and how well the software meets the end user requirements. If one focuses on the overall value and quality of the proposed solutions - rather than just the upfront costs – then Open Source solutions can still win business - provided they can show that they are better than the proprietary software in more than just upfront cost.

The problem is that Open Source software is, by its very nature, starved of significant speculative investment to make it better than proprietary software. Why should developers invest money in software unless there is a return on that investment – the problem is that many such “returns” are hidden in the sale of their hardware and support services – hence the need to take all these costs into consideration – rather than just the upfront software costs.

Yes, we have historically allowed monopolies to grow and exist in the software market, be it from Microsoft, Oracle, SAP or many others, and we would be better off if such monopolies had not been allowed to grow (I prefer to think of them as ‘dominant suppliers’ as there is competition against all of them – it’s just that dominant suppliers have been better, both commercially and technically, to achieve their dominance). Love them or hate them, one has to accept that they have invested vast sums in developing their software, on the back of protected IPR, and without that the software world would be much weaker than it is currently.

The trick is to learn to live with these global giants (accepting that the UK Government software market is a significant, but still very small percentage of their overall business) rather than avoid them – cue OGC to get their act together better?

I am trying to get hold of a copy of Mark Thompson’s full report, and will update this blog if/when I get to read the full copy.

Tribal trading statement

2009-01-28T08:29:00.001-01:00

Tribal Group (one of the listed service suppliers to the Public Sector that I rate highly since its refocusing in 2007) has released a positive statement on trading for the year to 31 December 2008 – “it is confident the Group will perform in line with its expectations for 2008”.

As I noted in my blog on Tribal’s acquisition of Newchurch Ltd, I would expect an annualised profit of around £12M (eps around 14p) – and with the new acquisition, annualised revenue in excess of £200M going forward.

However, I note some caution, both in the wording of the trading statement – e.g. “our business model continued to prove resilient” - and the statement that Tribal entered “the new financial year with approximately 38% of 2009 planned revenue already committed”, disappointingly less than the 40% reported going into 2008 and, given Tribal’s supposed focus on longer-term projects, a figure that I would regard as quite low. I feel that Tribal’s confidence on its ability to achieve significant organic growth in 2009 is somewhat muted.

Realistically, I suspect that this is no more than would expect in the current financial environment, and I would fully expect Tribal to use its “resilient” business model to help it avoid cost wherever possible and achieve some profit growth in 2009. Tribal has made great steps forward since the disposal of it Mercury Health venture, and I remain a strong supporter of its abilities in the UK Public Sector.

How NHS NPfIT should have been procured

2009-01-26T11:05:00.003-01:00

“Put your appendage on the block” – or so some of the comments I received on my recent NPfIT posts have suggested – and say how the NHS should have managed the procurement of the National Project for IT. OK - so here goes......

Firstly, I need to put my approach into context – I come from a background of software application package development, roll-out and support – and from a market where multiple software houses compete against each other to supply their products and services. I do not come from a Central Government services background which, I believe, is focussed on big bespoke solutions for single departments with large end-user counts. I believe that the NHS fits better into the former market rather than the latter “big bespoke project” market.

Unfortunately, the current NPfIT has tried to treat the procurements as big bespoke projects (yes, those procurements are planned to use software products – but in a manner totally different to the normal way that software packages are developed and sold in a competitive environment).

One of the aims of NPfIT should have been to develop a competitive environment where software houses compete with each other the basis of price, quality and innovation – a self-managing environment where success is driven by meeting end-users needs accurately, introducing innovation, delivering quality products on time, and implementing projects to budget.

The Central Government services approach discourages suppliers to innovate, but encourages the identification of opportunities for changed requirements to justify price increases – effectively stifling innovation by both supplier and end user – and leading to drawn-out change control procedures, demands for increased funds and even more delay – let alone the deterioration in relationships between customers and suppliers.

No – the NHS should have adopted a totally different approach to procurement. On the back of realistic budgets and timescales for development, testing, implementation and roll-out, there should have been a central body responsible for the setting of common standards for security, data storage and interoperability between systems, and the coordination of the production of baseline statements of requirements for individual applications – to include the areas that must be capable of customisation, without programming changes – i.e. where additional charges are not due from multiple customers in the future.

The NHS should have procured/funded demonstrator projects from at least three separate suppliers in each application area. (I would also state that I think they should have given preference to smaller, more innovative suppliers - ideally with track records in both the UK NHS market and the development of package software– rather than bigger, more established software developers with little or no track record in the development of application packages for the health market). Where necessary, this should have extended to providing support to the best developers through consultancy or the promotion of partnerships with other suppliers. Above all else – although difficult in a Government environment – the selection of suppliers for the demonstrators should not be decided on price, but on quality and value, and on the likelihood of getting quality solutions that would meet end user requirements.

The suppliers of those demonstrator projects should have been encouraged, within reason, to respond to the changing requirements identified during the development (and subsequent) phases through the availability of limited contingency funding, available to all suppliers, that could be drawn down quickly without high levels of bureaucracy to cover significant changes to the requirements identified initially (although with some controls to avoid excessive requirements creep). To a certain extent, the projects would become self-managing – suppliers would recognise that the true value of each project would not be the profitability of the demonstrator, but the opportunity to build the best product that would be sold to multiple trusts later during the roll-out – and would look to self-fund some of the innovations to ensure that they maintained a competitive edge over the other suppliers.

With the NHS managing standards and interoperability centrally, final acceptance tests would include confirmation of adherence to those standards, through the use of published test plans. There would be the need to manage changes to those standards – and where necessary in the early stages, through the provision of limited funding to suppliers to make the necessary changes. (Although, hopefully, by the end of the demonstrator projects, further significant changes would not be necessary, and the detailed changes required on a year-by-year basis would be funded by the suppliers themselves and supplied to all customers under software maintenance agreements).

After completion of the demonstrator projects, the NHS would have a centralised library of baseline requirements for individual trusts to use in their own individual procurements of new systems. Each competitive procurement would be decided locally, based on the relevance (commercial and functional) of each supplier’s offering to each Trust/department – although the NHS would have to manage the adherence to standards through mandated phases of acceptance test – possibly once per supplier/release rather than per Trust/customer.

Major infrastructure projects could still be let centrally or regionally against the standards laid down centrally, allowing for subsequent individual trust/departmental procurements to bring in servers, specialist hardware, and possibly communications requirements.

This approach does at first sight to have many drawbacks – timetable (although I would argue that this approach would at least succeed in delivering a solution for the whole of the UK – and most probably in a shorter time than the current project – if were ever to succeed), and the perceived extra costs of multiple procurements (and here I would point out that this additional cost could be mitigated through good centralised support, and even then is most probably significantly less that the current cost of the existing projects’ management infrastructure).

Going forward though, the potential is dramatic. A strong UK software industry in the health market, possibly leading the world and opening up the export market for us, motivated by competition to embrace innovation and keep its products up-to-date both functionally and technically. And an NHS that has systems that meet the varying needs of its many users, who are able to have their systems customised easily to reflect local requirements and working practices.

Meanwhile, the NHS retains control and polices centrally adherence to standards in all the major areas, including security and interoperability. In the end, a true partnership – between local departments, trust managers and centralised NHS directors, working with the software industry, (rather than in a combative environment where each seeks to get the best financial deal out of the current procurement), to implement a set of systems that will yield real benefits for the NHS generally, and end users locally.

LA IT spend to reach £3.2bn in 2008/09

2009-01-26T09:30:00.003-01:00

Socitm’s annual IT Trends in Local Government report is again essential reading by suppliers to the UK Public Sector. It reports that ICT spending by local authorities is forecast to increase by around 5% in 2008/09 (i.e. around the level of inflation in 2008 – so no surprise). The £3.2bn breaks down to:

44% staff costs
13% external services
12% software
11% hardware
9% data and voice communication
3% consultancy

As in previous years, I would not recommend using the absolute figures as entirely accurate, but use the report - as its title suggests - to identify trends. In this area it is interesting to note that hardware spend seems to be relatively static, whilst expenditure on data and voice communication has reduced slightly – but given the price competition in both these areas, this would suggest that LA’s are buying more in both these areas, but at lower prices. The report attributes this to the need to replace technology bought as part of the e-government programme, but I suspect the price reductions disguise an even bigger increase in procurement than e-government replacements.

External services and consultancy seem to be on the increase, but I suspect that the figures do not take into account the amount of ICT spend that has been outsourced as a result of BPO (Business Process Outsourcing) and departmental initiatives (like BSF – Building Schools for the Future – for secondary schools). Overall, I believe that the real increase in ICT spend (i.e. above the rate of inflation) is therefore even larger than identified in the Socitm report.

Is the increased spend on ICT delivering real benefits for LA’s?

The report suggests that it is - noting that “a range of initiatives are being pursued to deliver efficiencies both at the tactical and strategic level” and “new technologies could offer opportunities to deliver more radical changes in public service provision”. However, I suspect that the comment “ICT is too often regarded as a utility rather than a means to transform public services” reflects more the frustration of IT Directors and Managers that end-user departments are not seeing the full potential of investments in ICT.

John Serle, editor of IT Trends, noted: ‘There remain some big opportunities for ICT to transform local public services. The things that were easy to do have been done. Organisations will need to be bold and ambitious with their use of technology in the next few years. Some of the new emerging technologies can be exploited to transform local public services, delivering better more cost effective customer service’.

I believe that this emphasises the importance of ongoing education of Officers and Managers in departments outside ICT. There is no doubt that ICT is an enabler in the current move to transformation of services and processes. Unlike some colleagues in LA’s, I do not see it as the driver – to be truly successful, that drive must come from end user departments – it is the role of ICT directors and managers to educate those non-ICT staff in the opportunities and benefits offered by ICT.

BT deep losses illustrate NHS IT problems

2009-01-23T08:24:00.003-01:00

Yesterday’s announcement by BT that it will take a £340M one-off charge against large projects being undertaken in its Global Services Division is rumoured not to reflect the full depth of its problems on its NHS contracts.

BT’s Chief Exec Ian Livingston yesterday confirmed that the charge only relates to 15 of the largest 17 contracts in BT Global Services – as I understand it, the last two are NHS projects, where Ian has indicated further substantial provisions might be required – and possibly “many hundreds of millions of pounds”.

Update - it would appear that only one of the two remaining projects relate to the NHS - which I find surprising, unless BT has lumped more than one of its NHS contracts together.

Regular readers will know my view on these NHS contracts so I won’t repeat it here, but where now for the main contractors that entered into these disastrous projects? Will the Government (NHS) bail them out?

Some of my colleagues believe that BT should be penalised, along with the other remaining suppliers, for being so foolish to enter into contracts which everyone recognised were fatally flawed. IT professionals saw this – but the businessmen carried on bidding – now those responsible have moved on – and the companies are left with major headaches.

Personally, I think that Government has a moral responsibility to help these suppliers out – the procurement was fatally flawed – with large, existing suppliers to the NHS knowing that if they didn’t bid against the flawed requirements and harsh contract terms they would be writing off that market for the next decade. I wouldn’t suggest writing a blank cheque – but introducing new, realistic targets, and recognising significant changes in requirements, would start to help.

But in practice, I believe that the suppliers only need to hobble along for another 18-24 months (possibly less) on these projects before the existing contracts are terminated, and a professional approach is adopted for the procurement of systems that reflect health professionals true needs, against realistic budgets and achievable timescales for implementation....

e-procurement – supplier take-up is still the problem

2009-01-22T09:32:00.004-01:00

I received a comment from a reader - writing his thesis on e-procurement - referring back to one of my articles article on IT Adviser "e-procurement's missing link - supplier adoption”, and agreeing that supplier adoption needs to be successfully addressed.

Although that article was written a few years ago, its message still rings true today. From the authorities that I’ve been in contact with lately, supplier adoption remains at the top of the list of factors preventing the realisation of the full benefits of e-procurement.

Commercial organisations have tended to use their commercial strength (“if you want to remain a supplier to us you must use our e-commerce facilities”) to ensure speedy take-up by their suppliers, but many authorities seem unable to go down that route as their political leaders are (possibly rightly) against using compulsion of this sort. However, given the potential savings in LA back office costs, I would argue that all major suppliers to a LA should be compelled to go down this e-commerce route.

For smaller suppliers to local authorities, I have long supported the principle of the carrot rather than the stick in this area. LA’s should encourage their suppliers to adopt the LA’s e-commerce systems through offering tangible benefits, not forcing them to pay to join a supplier database, and certainly not just the promises that some LA’s project.....

Yes – it may cost LA’s in the short term, but the long term benefits of having the majority (all?) of their suppliers using e-commerce fully, will vastly outweigh the short term costs.

When Project Managers and Directors disagree.....

2009-01-19T09:26:00.002-01:00

This post could also be subtitled - Letting the bad news drip out ....

I find the current situation with the banks and their toxic loans as analogous to bad projects (and, for that matter, bad company results generally). Looking at the banks, their managers and analysts know the potential depth of the problems with their toxic loans and derivatives, but when senior management add up all the bad news they arrive at a number that is unacceptably large – announcing it would be disastrous for the bank and its balance sheet – and even more so for the bank’s directors and managers.

This is why the concept of a “bad bank” has failed to get off the ground. Banks would have to agree a valuation of each toxic asset (and the Government – once bitten twice shy – with taxpayers in mind, would insist on a worst case valuation, or close to it); those valuations would be disastrous and so this option would inevitably lead to full nationalisation, and the demise of many senior bank staff. So let’s not value the assets but talk about risk levels and insurance premiums – that will let us off the hook for a few more months and, perhaps, we can get the Government/taxpayer to take on responsibility for some of the worst assets at a limited cost to the bank....

Bad projects tend to have the same problem, with the bad news dripping out – rather than the true depth of the problems being revealed in one major announcement. A lot of this is down to human nature – hoping against all odds that a miracle will happen on the project to turn it around – rather than biting the bullet, truly identifying and evaluating all risks, extrapolating current progress and coming up with realistic timetables and budgets to complete the project.

A good Project Manager will do this when he takes a project on board – the equivalent of “due diligence” on the project. Unfortunately, a good PM frequently comes into conflict with the director or senior manager that employed him to sort the project out – the size of the problems identified, and the costs of the resolution can sometimes be unacceptable to the individual and/or his company. So a plan is derived to let the bad news drip out – keeping the customer and company, hopefully, happy and sufficiently locked into the project to accept regular but small increase in budget and timetable. Until, possibly after months or years, the true depth of the problem is recognised publicly.

As many of you will know, one of my roles is as “fire fighter” on problem projects (advert – give me a call if you’d like an initial, free consultation). I’ve seen several where senior directors/managers find themselves unable to accept the truth/depth of the problems they’re in – and yet in many cases, were they to admit the truth, and do something about it whilst there is time, in the longer term they will come out of it better off. Curing the problem with surgery and a spell in intensive care can be a better than applying lots of sticking plasters and hoping that the core problem will go away.

With three of the “fire fighting” projects I’ve dealt with, I’ve recommended that the projects be halted, most of the work to date thrown away, and a new approach adopted to complete the project. Only one company took my recommendation, went to their customer with the truth – and was surprised that the customer already suspected the depth of the problems, was pleased that the company had come to him both with a full statement of the problems and a proposed new solution – and agreed to the new solution.

Needless to say, both the companies that carried on with the projects largely unchanged lost a great deal of money, time and respect with their customers. In the end, both incurred losses much greater than the option I recommended, and their businesses were irreparably damaged in their chosen markets – their project managers bore much of the blame - but the senior management survived....

So with the banks, how will it end up?

As I predicted last year, and repeated earlier this year, full nationalisation seems inevitable. I predict that the banks will be unable to agree risks and premiums with Government for the toxic loans that are to be insured by the taxpayer. It will take a few weeks or months, but in the end Government will call a halt, and nationalisation will go through as the only solution (and it doesn’t require the banks nor the Government to fess up to the true size of the banking black hole created over the past ten years).

Tribal acquires Newchurch

2009-01-16T08:41:00.004-01:00

Tribal Group (one of the listed service suppliers to the Public Sector that I rate highly since its refocusing in 2007) has announced the £10.5M acquisition of Newchurch Ltd.

Newchurch is effectively a supplier of consultancy services at a senior level to healthcare organisations, primarily in the Public Sector, although it has a significant presence in the private sector also.

This seems a useful acquisition for Tribal, extending the services offerings that Tribal has in the UK healthcare sector. The acquisition also increases confidence that Tribal will confirm that last year’s trading to 31 December 2008 has been firm and in line with expectations, with its trading statement due on 28 January – I would expect an annualised profit of around £12M (eps around 14p) – and with the new acquisition, annualised revenue in excess of £200M going forward. Tribal’s share price at the time of writing this post is 80.5p (down from around 140p in September), giving a market cap of c £71M and an enterprise value of c £93M.

P.S. I will own up to having sold my Tribal shares back in September, and have not yet bought back in, despite the share price having fallen to 66p late last year.

A successful project for supplier HBK

2009-01-16T08:40:00.003-01:00

In response to my definition of a successful Central Government project (namely one that lasts more than two years), I was reminded of the definition of a successful HBK project (I’ve protected the name of the supplier – well, ..... just) – one that goes wrong, but that the HBK Project Manager can prove was not his fault.......

I agree with the comment I received that this could be applied to many Central Government projects – including the NHS’s NPfIT – it’s going to go wrong, but provided the manager can prove he's not to blame, let’s keep going.

In many cases, this is what separates a good project manager from a bad one – a good PM identifies risks and problems in advance, then works to minimise the risks and solve the problems – a poor PM might recognise the risks and possibly documents them, but doesn’t bother to take the necessary action (sometimes painful and unpleasant) to minimise the risks and solve the problems in advance of them actually arising.

NHS NPfIT – a successful Government project?

2009-01-15T09:45:00.004-01:00

Sitting alongside Parkinson’s and Sod’s Law on project management is the definition of a successful Central Government project, namely one that lasts more than two years. As civil servants typically only stay in their positions for around two years, this ensures that the person that started the project doesn’t finish it, and the person that finishes it doesn’t start it. If the project is a success, both can claim the credit; whilst if it fails, both can blame each other.

And so the National Programme for IT in the NHS must be a successful project....

Unfortunately not. Yes – the person who started it has moved on – and it’s now being run by others – but it is years late, £billions over budget, several contractors (and subcontractors) have come and gone, and there are serious doubts that it will ever meet its objectives. I don’t intend to pick over the bones of this project (there are far too many articles on the topic – I recommend Private Eye and e-Health Insider for some of the best), but how should it have been procured and implemented?

Unfortunately, NPfIT was procured centrally, arguably by people who were out of touch with technology, the needs of the end users, and the basics of developing large computing projects successfully for multiple organisations. Major suppliers (and subcontractors) had no choice to become involved in the procurement if they wanted to remain in the NHS market, even though they saw the flaws in the way the programme was planned. As with many Central Government projects, they expected to be able to use the flaws to change the scope of the contracts once awarded, to both introduce delays and increase revenue.

In fairness to Granger, he setup the contracts in a very confrontational way (something that regular readers know I oppose), that has seen those delays and increases minimised (if one considers 100%+ over budget and years late as minimised) and two suppliers already withdrawing. Everyone in the IT industry knew that the plans for NPfIT were seriously flawed, many said so, but no-one in Government listened.

How should it have been done?

Rather than a number of centrally-procured, large contracts, the NHS should have seen its role as one of creating the framework under which individual Trusts, GP practices and other NHS organisations could have procured systems locally to meet their own specialised needs.

Initially, there should have been a major project for the collection of core requirements, involving end users from all levels, across most disciplines and geographic locations.

It’s been reported that NHS wished to use the introduction of the NPfIT systems as a way of imposing change of NHS working practices – something that IT professionals know is the way to guarantee end user resistance and a problem project – much better to develop systems that enable business process change rather than require it. Also, centralised requirement setting (with low levels of local and end user involvement) may be the quickest way to proceed initially, but as the current delays prove, it’s rarely the fastest way to implement new systems successfully.

In parallel with focussing on the core requirements, standards for interoperability and security, the NHS could have funded a number of demonstrator projects with smaller, specialised software houses to develop and trial the key applications. These would have allowed the developers to get closer to the eventual end-users, clarifying requirements and produce functionality that worked in practice before any attempt at large-scale roll-out.

Most importantly, the software houses should have been those companies that understand how to build packaged applications that can be easily tailored to meet the varying needs of multiple customers. Central Government typically procures large bespoke systems for individual departments from large IT service suppliers who are used to big one-off projects – i.e. not focussed on the production of easily customised, re-usable software modules. Using companies experienced in the development of application software packages would potentially avoid the current major excuse of "the customisation has been more extreme that we envisaged at the beginning of the programme."

The supply, installation and ongoing support of the core computing hardware (e.g. PC’s, network servers, etc ..) and network infrastructure could have been procured separately, leaving application servers and specialist hardware (e.g. handheld computers, scanners, etc ..) to individual local procurements - possibly against centrally procured call-off contracts.

Overall, such an approach would have delivered the new systems in a timetable far longer than the initial NPfIT schedule, but most probably earlier than the likely timetable for the current projects (which, already years behind schedule, will inevitably slip even further). Most importantly, such an approach is more likely to deliver systems that meet end user requirements and actually bring real benefits to the NHS.....

I think there is a serious risk that a change in Government will result in the abandonment of much of the current NHS NPfIT. In practice, this may be the cheapest option for the taxpayer, but if it happens, what a missed opportunity - £billions and years down the drain – money and time that could have been used, not only to have completed the groundwork for an integrated Health IT system, but also helped take UK software houses to the forefront of health applications software packages – and just think of the exports that might have brought.

Central Government gravy train to hit the buffers?

2009-01-13T09:57:00.000-01:00

Hot the heels of my post last week What now for UK Public Sector service suppliers? in which I noted “for the rest of central Government I see the current ‘gravy train’ of services work continuing at virtually the current levels”, Johm Ozimeck on the The Register suggests asks Is the UK.gov IT gravy train heading for the buffers?

John notes that IT contracts worth several billions of pounds may well be up for review within the next 12 to 18 months, including some contracts for new systems that a change of government would more than likely terminate, e.g. the ID cards scheme, the ContactPoint project and the Central NHS Spine – all projects that the Tories have already stated they are likely to chop.

Tory IT policy is generally aimed towards a more de-centralised approach – a policy that I believe is potentially far more successful than the current Government’s preference for large, centrally managed initiatives – many of which fail to involve local users sufficiently in their early stages of development (and tend to fail miserably when an attempt at roll-out is started).

Yes, there will be some new project cancellations, but there will be other projects to fill those gaps. However, I fear that in the early years of a new government, existing relationships between civil servants and the major service suppliers will drive the way new projects are procured – Ministers will be more focussed on policy rather than implementation – and it will be some years before we may see any fundamental changes to this market.

I think the buffers are still a long way away from the gravy train.....

iPhone - 12 months on

2009-01-09T09:30:00.003-01:00

Despite being very much a “Microsoft person” in the past, many of you know that I was totally sold on the Apple iPhone’s user interface, and moved across to a 2G iPhone a year ago. How has the past year gone, and do I regret the move to the iPhone?

Looking back, the initial months went extremely well. The screen display is superb and the touch user interface extremely easy to use. Within the first day I was able to synchronise with Outlook on my PC, giving me access both to my contacts and calendar on my iPhone. Collecting e-mail from my Microsoft Office Live email account was not so straight forward (the account supports neither IMAP nor POP access), and I had to use the Izymail service to gain access – and even then whilst access via WiFi was good, access via the Cloud (the 2.5G mobile network) was patchy and slow – so I tended to seek out WiFi sites to view e-mail on the go.

The Safari browser gave good, if somewhat slow, access to websites, although the lack of support for many standards, e.g. Flash, does restrict some content. The shares facility proved excellent, with both my portfolio and watchlist stored on the iPhone and giving me up-to-date prices on the go. Voice coverage on the O2 network proved (surprisingly) better than I had been getting on Vodafone, with a good voicemail service in the UK (but distinctly variable when abroad).

Then, around the middle of the year, the automatic update to the next versions of iTunes and iPhone software (for the release of the 3G phone) caused mayhem for a couple of months. The iPhone would no longer synchronise with Outlook on my Vista PC – hundreds of posters on Apple’s support site reported the same problem – and calls to the Apple support line generated the response that it was due to problems with Microsoft software, and came up with many different, time-consuming ways of configuring Outlook to try to sort the problem – all failing.

Two months later, after apologies from Steve Jobs, multiple updates to the Apple software, and after totally rebuilding my PC from scratch, the problem was fixed. I should have known that mixing Apple and Microsoft software was bound to cause problems.....

I've also been able to use many of the free iPhone applications - varying from the highly useful online Tube Status and BBC News Reader, through demonstrations of the iPhone technology like a spirit level and iPint (which still amazes anyone who has not seen an iPhone before), to a variety of games that occasionally keep me occupied whilst I'm travelling.

However, Apple has hooked me on its iPod and iTunes store functionality. My PC now holds c 15Gb of music, from which I extract around 6Gb of playlists onto the iPhone – something that I’ve found of great use when travelling or on holiday. Most of the music is 60s/70s, and I’ve found the iTunes Genius service too tempting to ignore – it throws up tracks from the past that I’d forgotten, which I subsequently download and add to my growing collection of “old” music. So, although I have backed up all my purchases to audio CD, I guess Apple has succeeded in locking me in, and with the software having stabilised over the past few months, I suspect an upgrade to a bigger, 3G iPhone is beckoning.....

Constellation to seek place on Gladstone's Board

2009-01-08T08:39:00.004-01:00

It would appear that rebuffed bidder Constellation does not plan to let Gladstone continue unchanged....

"The Board of Gladstone announces that, on 6 January 2009, it received a letter .... requiring the convening of a general meeting pursuant to section 303 of the Companies Act 2006 (the 'Act') for the purpose of considering a resolution to appoint Mark Leonard, Constellation's chairman and president, as a director of Gladstone."

Clearly the current Board will not agree willingly to this - but it will be interesting to see if the major shareholders see this as a way of generating value for shareholders.

However, looking at Constellation's and Gladstone's markets, there is a major overlap with Constellation's Jonas subsidiary which supplies systems in similar leisure markets to Gladstone (albeit Jonas doesn't appear to have much market penetration in the UK). Thus the expected argument from Gladstone about "conflicts of interest" and "competitive information" are likely to ring true with many investors......

What now for UK Public Sector service suppliers?

2009-01-08T08:32:00.003-01:00

Having looked at 2009 from the point of view of the software suppliers, what about the service suppliers?

Firstly, some background - I count the majority of IT suppliers to Central Government as service suppliers, not software suppliers. Most Central Government systems are unique developments or heavily bespoked packages where services form the vast majority of the costs. Local Authorities (and other organisations such as the police) meanwhile tend to purchase software packages (with implementation/maintenance services) from software suppliers (and true services from services suppliers), although this whole area is being muddied by the supply of Managed Services and SaaS (Software as a Service).

LA’s tend to use IT service suppliers for outsourcing part or all of their IT department requirements (but noting that they can also outsource whole business processes, which include some IT elements), and the supply of support and maintenance services.

I’ll cover Health in a later post, but for the rest of central Government I see the current ‘gravy train’ of services work continuing at virtually the current levels – although, at last, I detect that Central Government will be less tolerant to poor performance by its suppliers. However, unless a change in Government brings in a change to the way Central Government procures its IT systems and services, I can’t see any fundamental changes in this market.

Amongst Local Authorities, I detect a move to bring IT back inhouse over the next few years. If I’m right, the impact will not be felt for some considerable time – most existing contracts are for multiple years, capable of early termination on the grounds of default or mutual agreement. But some of the LA’s I’m talking to are saying that they believe they can save significant costs by bringing the IT operation back inhouse and, perhaps more importantly, respond more quickly to the changing requirements of their departmental users.

Specifically, they point at the high fixed annual costs charged for some maintenance elements – where the costs were fixed some time ago when maintenance/support was more labour-intensive than it is now with modern technology. Existing suppliers therefore have the option of reducing their charges (potentially reducing their overall margins) or seeing contracts terminated – either way, I believe we will see service suppliers having an increasingly hard time with, no doubt, some notable terminations and company failures.

Then there is the area of Managed Services and SaaS. To my mind these are effectively ‘bureau’ services that remind me of the time the old Systemsolve ran a bureau, and then we went through an era of convincing those bureau customers of the benefit of owning and running their own systems. Eventually Systemsolve’s bureau closed and the company moved to being a traditional software house.

Now many software companies are trying to persuade customers of the benefits of not owning the software and letting the supplier run the software on the customers’ behalf. For the Public Sector with internal departmental barriers to cross, this can put the procurement control back with the eventual end user departments; and, typically with a much shorter implementation time, I believe that we will see a growth in this area – be it labelled Managed Services, SaaS, Cloud Computing, Aspire or some other new name.

However, the accounting (particularly cashflow) problems for software suppliers are likely to keep this route for software supply limited to those suppliers who have the financial strength to support lack of large upfront fees. This may generate opportunities for service suppliers to act as managed service consolidators, although I think that this will generally be avoided by software suppliers who fear losing control of their customers. (There are other solutions to the financial challenges of SaaS - contact me if you'd like to discuss them).

Shared Services represent a variant of the bureau/managed services solution – and in some cases can extend to a full BPO service. Within local authorities, there is potential for tremendous benefits and cost savings – provided individual authorities are prepared to lose some independence, make compromises and accept changes to historic business processes..... which, of course, many Officers and managers within local authorities would never openly agree to .......

So, Shared Services should be a growth area – but won’t be - my cynicism tells me that it will never gain volume acceptance without significant carrots or sticks wielded by Central Government – something I don’t see before the next General Election (and possibly not afterwards either).

In summary – in Central Government the services ‘gravy train’ will continue with levels largely unchanged. Whilst in Local Government we will start to see a gradual decline as work is taken back inhouse (with a few notable hiccups).

Riding the Tiger

2009-01-07T09:12:00.001-01:00

The Indian software company Satyam's Chairman, B. Ramalinga Raju, tendered his resignation yesterday after admitting accounting irregularities. In a letter he talks about inflating cash balances and over-stating profits (2008Q3 operating margin being an actual 3% against a reported 24%). It would appear that his attempt to cover this up by acquiring assets from his son’s infrastructure and property companies was thwarted by shareholders, such that it would appear that he had no choice but to fess up.

The Satyam share price fell over 70% as a result, but more importantly, the disclosure has knocked the reputation (I think unfairly) of the whole Indian offshore software and services industry. This story can be found on the FT with some good coments on Holway’s TechMarketView.

Mr Raju describes the past few years as "like riding a tiger, not knowing how to get off without being eaten" – a comment similar to those I’ve heard from senior directors of UK software companies that have failed in the past. Although the Satyam problem does not appear to revolve around revenue recognition or capitalisation of R&D costs, these are areas open to easy manipulation in the accounts of software companies to give misleading results. Once started, it is difficult to stop without fessing up – unless there is an external reason or opportunity like a major acquisition to hide the problem.

With the current economic gloom, shareholders are expecting poorer results from companies. How many companies will use this current period to unwind some of their accounting excesses – revaluing assets, writing off capitalised developments or providing for bad debts?

Perhaps some other Chairmen will be taking the opportunity to step off the tiger over the coming months.....

What does 2009 hold for software suppliers to the UK Public Sector?

2009-01-07T09:06:00.002-01:00

With the economy in recession, but the Government making noises about maintaining (or increasing) levels of public sector expenditure to help retain jobs, what does 2009 and beyond hold for Public Sector software suppliers?

In short – not a lot of new business from Local Authorities or Central Government. Local Government re-organisation in England in April 2009 offers some prospects for new business – but in many cases those procurements and decisions on systems to be adopted have already been taken. Systemsolve has been tracking tenders in the OJEU, and has seen a big decline in the number of OJEU advertisements for new systems over the past few months, a trend that we expect to continue throughout 2009, despite Central Government statements that it wishes to maintain levels of expenditure.

Areas where business is expected to grow (albeit only modestly) include Education (although yesterday’s Commons Schools Select Committee comments on BSF may suggest otherwise) and possibly Social Services (although I’ve received differing views on this), whilst the Housing area is expected to maintain its current level of new business. Most other areas are expected to see continuing reductions in the levels of new business coming out to tender.

The effect for most Local Authority software suppliers is that there will be harsh competition for any new business that does come out to tender, resulting in tough discounting and reduced margins. Long term, this can be damaging for the market, as it discourages all but the bravest established companies from putting extensive investment into developing new systems. But unfortunately, with the current financial situation and a General Election in 2010 (following which there will inevitably be significant reductions in Public Sector spending, irrespective of who wins), I fear that we will need to keep the hatches battened down for a few years to come.

Thus the focus for suppliers will be on ownership of the customer base, and looking for virgin areas for new applications or bolt-ons to existing applications. Weak suppliers (and even some strong, but smaller ones) are likely to become targets of the larger, more financially secure companies, and we will continue to see further consolidation.

Existing suppliers will continue to maximise revenue from existing customers, both through increased services offerings and new modules & functionality for existing systems. Larger suppliers will attempt to cross-sell between departments within existing customer sites with limited success, although customers will be tempted by the lower cost of procurement. Surprisingly, procurement routes like Catalist will remain under-utilised, despite their likely lower costs and shorter timescales in procurement.

However, the corollary to all this, particularly for the smaller or bolt-on applications, is that we may see the arrival of new, smaller players with new offerings that are significantly cheaper and potentially technically superior to existing suppliers who have not invested enough in their products. (These new suppliers eventually becoming of a sufficient size and market penetration to be acquired by one of the larger suppliers.......).

So 2009 – a tough year for the software suppliers.

The situation may be different for service suppliers - I’ll cover that and the move to Managed Services and SaaS in later posts...

Is the UK in Recession or Depression?

2009-01-06T08:24:00.001-01:00

There is an old joke that states:

A recession is when your neighbour loses his job.

A depression is when you lose your job.

The difference between the two terms is not very well understood for the simple reason as there doesn’t appear to a definition that has been universally agreed upon.

Before the Great Depression of the 1930s any downturn in economic activity was referred to as a depression. The term recession was developed in this period to differentiate periods like the 1930s from smaller economic declines that occurred in 1910 and 1913. This leads to the simple definition of a depression as a recession that lasts longer and has a larger decline in business activity.

Now, the common, accepted definition of a recession is a decline in the Gross Domestic Product (GDP) for two or more consecutive quarters.

The widely accepted definition of a depression is now any economic downturn where real GDP declines by more than 10 percent.

So, is the UK heading for a depression? The last 6 months of 2008 is expected to see a decline in GDP of just over 1%, and whilst predictions for 2009 vary widely, the worst predictions seem to be a decline around the 3% mark, meaning that there would have to be a major adverse change in the UK’s fortunes for us to come anywhere close to a depression in 2009.

Even the pessimistic view that the recession will continue into 2010, at say another 3% reduction in GDP, would leave the UK avoiding a depression (although, were this to happen, there would clearly be a great cloud of depression across many households).

My own view remains that we will not enter a depression, but will remain in recession for the whole of 2009, with the green shoots of recovery visible towards the end of 2009, and the UK leaving recession around the middle of 2010 (just around the time of the next General Election) – something that I suspect Gordon Brown is gambling on....

However, once we start any serious recovery (and after the General Election), we as taxpayers will have to start paying back the huge public sector debt that we will have accumulated – so there will be no sudden boom in growth. My suspicion is that we will have several years of minimal growth amidst significant political turmoil as the parties argue who is to blame......

Rebellion supports Pssst view of 2009

2009-01-04T17:15:00.008-01:00

Building on yesterday’s blog post on predictions for the coming year, I’ve just collected the 2009 beer planner from my local brewery, Rebellion Beer Company – OK I’m biased, they’re only 400m over the road from where I live, but they do brew some of the best beers around (the surrounding chalky Chiltern hills providing water high in minerals and salts essential for producing high quality and distinctive real ale).

In addition to their normal beers, every year they brew 12 monthly specials, that in the past have had interesting names like “Trolleyed”, “Overdrawn” and December’s “Roasted Nuts” and “Mince Spy”. For the coming year the 12 special beers will have the topical names of:

January - Weary Banker (no – not Beery......)
February - Bailout
March - Credit Crunch
April - Meltdown
May - Fat Cat
June - Market Collapse
July - Investors Revenge
August - Stockbroker Blues
September – Freefall
October - Liquid Assets
November - Recession Ale
December - Frozen Assets

So perhaps my predictions for 2009 have some liquid support .....

If you’re interested in further information on Rebellion, visit their shop or web-site at www.rebellionbeer.co.uk

Or, as a member of their beer club, I have a number of spaces available for guests to their members' evenings on Tuesdays (second Tuesday each month – including a tour of the brewery and all the beer you can drink between 7.30 and 9.30) – please e-mail me if you’d like to put your name down for one of them........

OT- FTSE prediction for 2009

2009-01-04T16:30:00.007-01:00

You may remember that I predicted the FTSE100 to be at 4,800 at the end of 2008 and at 3,200 by the end of 2009. Well it finished at 4434 on 31 December, so I suppose I wasn’t too far out.

In practice, the slump went faster than I predicted, and one could argue that, with the low spot of below 3,800 in November combined with a 25% reduction in the value of sterling, the FTSE dropped near the 3,000 level in real terms......

Looking forward, let me repeat my belief that the majority of UK banks will be nationalised over the coming months (with perhaps Barclays opting for middle-eastern sovereign funds rather than UK taxpayers’). They still haven’t come clean about the extent of their exposure to toxic loans, CDO’s etc ... and with the impending defaults on corporate loans by many UK companies they will just not have enough cash to survive.

With the banks nationalised, what will happen to some of the businesses that fail? As I’ve noted before, the UK Government seems destined to nationalise several major business over the next few months, many unintentionally. I believe that as highly leveraged organisations default on their loans to banks that will by then be 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.

My view is that the FTSE100 will drop to 3,200 – most probably around April – followed by a dead cat bounce, and then a return to around 3,300 by the middle of the year, with a recovery starting in September leading to the FTSE100 rising to around 4,200 by December.

For the sake of completeness, my other main predictions are:
* Sterling to remain at or below its current level for the majority of the year, with some improvement towards the end of the year, as...
* the Euro starts to fall apart, with Spain and Italy leading an exit from the common currency, most probably followed by Portugal and Greece.
* Oil to return to the $70 per barrel price by April on the back of political instability in the Middle-East (possibly higher if Iran becomes actively involved).
* House prices to continue to come down, most probably by around another 15% in 2009, continuing into 2010/11 until they bottom out at around 50% of the peak reached in 2007.

Note: This blog is not intended as investment advice – please DYOR (do your own research) on all topics covered.

Constellation bid for Gladstone lapses

2009-01-04T15:48:00.003-01:00

It will come as no surprise to regular readers of this blog that Constellation’s cheeky 25p bid for Gladstone has failed to attract sufficient interest (only about 11% on top of Constellation’s own 29.9% holding), and the bid has lapsed.

Quoting from Gladstone’s own RNS: “The Board will continue to build on Gladstone's investments, which are not yet fully reflected in the trading results of the Company.” So it’s appendage on the block time – it’s time to deliver real growth (difficult enough without the existing credit crunch), or if the potential is really so great, could we see an MBO attempt?

My expectation is that, barring another bid, in the short term 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.

Merry Christmas

2008-12-23T09:22:00.002-01:00

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.

FiReControl – success or failure?

2008-12-22T09:12:00.001-01:00

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.

FiReControl – success or failure?

2008-12-19T15:34:00.002-01:00

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.