Industry learns lesson the hard way

The consultancy industry has learnt ‘some harsh lessons’ on how to implement
major IT change after EDS’s £71m tax credits settlement with HM Revenue &
Customs last week.

A source close to the company told Accountancy Age that ‘big bang’
IT implementations would now be a thing of the past, that suppliers had learnt
to ‘push back harder on their clients’ when constrained by IT testing deadlines
and that firms would now demand ‘realistic timeframes’.

Last Tuesday, EDS paid £71.25m compensation to the government for problems
with the tax credits systems launched in 2003. Its contract dated back to 1994
and is one of many failed large-scale IT deals that have blighted the public
sector including the Department for Work and Pensions and the Child Support
Agency.

Eric Woods, government practice director at analyst Ovum (pictured), said:
‘The settlement should be read as part of the stronger supplier management
message gaining ground across the public sector. Over the last two or three
years the public sector has improved and now provides better value for the
taxpayer.

‘As far as the compensation is concerned the government has been keen to make
a mark on this issue and I think it will follow this through in the future’,
Woods said.

Despite hiccups with the DWP’s JobcentrePlus computerised call centres
leaving one million calls unanswered, EDS has learnt from past public sector
mistakes. It will receive around £520m a year over the next five years – around
£200m less than in its previous contracts – as the department’s main IT
supplier.

The deal was ‘realigned’ in August of this year with the aim of bringing
around 20 contracts into one for EDS and saving DWP millions in costs.

A DWP spokeswoman said that there were ‘strict financial penalties’ in place
if EDS ‘breached specific service level agreement deals’.

Nick Kalisperas, director at IT lobby group Intellect, said: ‘The way
government and its main IT suppliers work together is improving, but more needs
to be done.

‘Government needs to engage earlier with its supplier to learn more about
their approach and suppliers need to accept certain contract terms, for
example.’

The consultancy page returns next year. Next week: corporate finance.

To subscribe to our award-winning monthly consultancy e-book, go to
www.managementconsultancy.co.uk