Accenture shocked Wall Street on Tuesday when it revealed that it took a $450m pre-tax profit hit for the second quarter of its fiscal 2006 for future deployment losses on its two NHS Connecting for Health contracts, due in part to significant delays caused by its software subcontractor.
Investors in Manchester, UK-based iSoft, which is the main application provider on the Accenture-led North East and East of England clusters, immediately rushed from the company’s London stock exchange-listed shares, wiping over 70m pounds ($120m) from the company’s value.
The company’s shares had already fallen by 40% in January after it warned that revenue generated from the contract during the current fiscal year would be some 55m pounds ($95m) lower than expected, reducing expected operating profit by 45m pounds ($78m). It admitted that it does not know what the impact of delays would be for the following financial year because the contracts are going through a rescheduling process. A spokesperson for iSoft told Computer Business Review that it would not be giving any further guidance until after the rescheduling had been completed, and that it did not know when this would be.
Connecting for Health is one of the largest public sector IT projects in the world, and consists of a number of contracts with a combined value of $6.2bn pounds ($10.8bn). Richard Granger, director general of NHS IT, has negotiated very tough terms with vendors in response to a number of high-profile UK government IT disasters of which cost overruns were borne by the public purse. His hard-line stance with vendors may well be giving iSoft executives sleepless nights. In November last year he likened the project to a sled being pulled by huskies. When one of the dogs goes lame, and begins to slow the others down, they are shot, he said. They are then chopped up and fed to the other dogs. The survivors work harder, not only because they’ve had a meal, but also because they have seen what will happen should they themselves go lame.
