I don’t want to get party political, but if David Cameron’s aims for saving money by cancelling government IT projects are anything to go by, voters need to scrutinise Tory plans for cost cuts elsewhere to test their veracity.

 

Cameron told his party’s Spring Forum yesterday that, as part of his plans to cut public spending, he would: “Scrap the ID cards scheme. Cancel the ContactPoint database,” and highlighted “over twelve billion wasted on the NHS computer.”

 

Good, populist, vote-winning statements for the party faithful, of course. And not the first time those three IT projects have been singled out by the Opposition for special attention if they were to win the next General Election. Previously though, the objections have been mainly political, not financial.

 

Politically, there is always a case to be made.

 

Financially, as a way to cut public spending, the argument doesn’t stack up so well.

 

With ID cards – much of the project is going towards overhauling the passport system and introducing biometric passports, which is an international obligation. And at some point, a government of any hue has to tackle the problem of electronic identity management. So we might not have ID cards, but it would not save much cash.

 

ContactPoint, the controversial children’s database, is already live. Not much to be saved there apart from a few maintenance and service fees.

 

And as its critics are loath to acknowledge, £12bn is not being wasted on “the NHS computer”. That figure covers a range of projects, many of which are already complete and successful, and none of that cash is being spent until working systems are delivered, so it’s hardly going to waste.

 

Cameron also said: “One part of it is the electronic patient records system - a central state-run database designed to let GPs, hospital doctors and nurses share your medical notes. Now I want you to imagine how we’d have gone about it, if we’d had the chance. We would have said: today, you don’t need a massive central computer to do this.”

 

Erm, there isn’t going to be a massive central computer to do this. Every NHS region will have its own system, linked together by the NHS Spine.

 

“A web-based version of the government’s bureaucratic scheme, services like Google Health or Microsoft Health Vault, cost virtually nothing to run” said Cameron.

 

Now come on, can you honestly see anyone being happy with Microsoft or Google being given the go-ahead to store our most sensitive personal medical records? Privacy campaigners would have a field day. Or that either provider would house 60 million UK records for "virtually nothing"? And besides, those services are designed for a very different US healthcare system.

 

Now I’m not standing up for Labour here – far from it. Their record of IT spending certainly deserves the closest scrutiny. It's hard to single out the Tories without sounding party political, but that's not my point.

 

My concern is that if the Tories think that scrapping a couple of politically-controversial IT systems and asking Microsoft to store our health records is central to their plans to save the economy, then such naivety deserves being seriously questioned.

 

Computing has always been quick to attack the xenophobic mindset of those “little Englanders” that resent and reject the success that Indian IT service providers have had in the UK.

But our story that former Legal & General (L&G) IT staff may be replaced by Indian workers shipped into the UK is a very different case.

There is no getting away from the globalised business world that technology has created – even if its downsides have become dramatically apparent through the effect globalisation has had on decimating the financial services industry.

Nonetheless, the top Indian outsourcers have revolutionised IT service delivery, bringing high quality and low cost to the market and forcing their Western rivals to radically re-think their once-cosy dominance.

It is hard for many to accept that people in the UK will lose their job because someone can sit at a desk in India and do the same function more cheaply and often to the same or even higher levels of quality and service.

But that is the way of the world, and if India is able to provide such services, the UK’s challenge is to respond competitively, not to bleat about the consequences and engage in attempts to prevent offshoring that have at times in the past verged on borderline racism.

However, in the current economic climate, the Indian suppliers need to realise the sensitivities they face and the responsibilities they must accept.

It is one thing to provide a service from a desk in India that may cause someone in the UK to lose their job. It is entirely another for that UK worker to be replaced at his or her own desk by an Indian worker shipped to the UK on a work visa at a time when thousands of IT professionals are losing their jobs in a recession.

The merits or otherwise of Gordon Brown’s rather unfortunate use of the phrase “British jobs for British workers” aside, the reality is that we have already seen examples of industrial unrest caused by firms bringing foreign employees to work in UK sites. The wildcat strikes at Lindsey oil refinery may only be the first such example. The IT industry is not immune from this.

Former Legal & General (L&G) IT staff outsourced last year to TCS have told their union, Unite, that they fear they are being discriminated against and that the Indian firm plans to replace them with lower-cost staff on a working visa.

Ultimately, that is a business decision for TCS – no doubt the pricing of their contract with L&G was based on such an assumption.

But TCS and others need to be smarter than that and realise the climate they now compete within. They are treading a very fine and delicate line, one that could spill the wrong way if they are not sensitive to their newly outsourced employees’ concerns.

Indian IT rightly fought against discrimination for many years and proved itself capable of competing on a global stage as an equal player. It cannot allow itself to be perceived as discriminatory itself in such a difficult economic climate when UK staff they employ fear for their futures.

BT’s third-quarter financial results press release runs to 26 pages – yet the letters “NHS” are not mentioned once.

When BT won contracts for the £12.7bn NHS National Programme for IT (NPfIT) in December 2003, there were quite a few raised eyebrows around the industry.

At the time, BT was still firmly seen as a telecoms company, albeit one with a small IT services arm, then known as BT Syntegra.

The firm was hardly viewed as one of the major players, certainly not of the calibre of an IBM, EDS or Accenture, the US outsourcing giants who would typically be expected to pick up most of the big government IT projects.

Although Accenture also won one of the NPfIT deals, IBM and EDS had been giving journalists off-the-record briefings that they were not trying to win the NHS deals because they felt the contractual terms and conditions were too onerous and high risk.

The then-director general of NHS IT, Richard Granger, had enthusiastically developed a reputation as a hard negotiator, and clearly wanted to push the balance of power away from the big suppliers – and rightly so. Too many government IT projects had foundered because vendors were perceived to have too much influence and control.

“"[I will] hold suppliers’ feet to the fire until the smell of burning flesh is overpowering,” Granger told Computing at the time.

But most observers felt that BT was willing to take the risk because such a high-profile contract win would open so many doors for its fledgling business – later renamed BT Global Services (BTGS).

At first, BT was a model of sensible planning. As other NHS suppliers started to suffer – Accenture blamed profit warnings on delays in its NPfIT commitments, for example – BT’s then-chief executive Ben Verwaayen said the company had not budgeted to make any money from the project in its initial years. The payment-on-delivery model written into the contracts made this a wise move.

A little more than five years later, Accenture has quit the programme because it decided to cut its losses; Fujitsu Services was effectively sacked after it wanted to renegotiate its contract; and now BT has been forced to take a £336m hit and has warned that further substantial losses are likely.

BT is making no public comment on NPfIT and will not confirm or deny to what extent its problems are down to the ongoing delays in the delivery of the programme.

The only official company statement to Computing said: "We are working closely with Connecting for Health on the delivery of our contracts."

The 26-page press release blamed the problems at BTGS on “ongoing commercial discussions in respect of two of our largest contracts” without specifying which they were. Clearly at least one is for NPfIT – but given that the firm signed multiple contracts with Connecting for Health, it is not unfeasible that the two contracts referred to are two separate deals with the NHS.

Certainly nobody at the firm is denying that NPfIT is central to BT’s problems.

I’ve written before about the challenges that NPfIT faces and won’t go into those again here, but BT cannot be allowed to fail and nor can its contracts go the way of Accenture and Fujitsu – just to add to the complication, BT has also been negotiating with Connecting for Health to take over the Fujitsu deal which is still in limbo.

BT takes more than its fair share of criticism and opprobrium, much of it a legacy of its past as a quasi-public sector bureaucracy (a culture that some insiders say it has not entirely shed). But it remains the UK’s largest indigenous IT and communications company, and as such is vital to digital Britain and our knowledge economy – even before you start to consider its importance to the NHS IT programme.

The likes of EDS and IBM must be rubbing their hands with “I told you so”-like glee.

BT chief executive Ian Livingston has a massive challenge on his hands – and regardless of whatever mistakes have been made along the way, it will be to the benefit of UK IT when and if the problems are resolved.

BT Global Services has until very recently been a shining star of the telecoms giant, and even after its shock profit warning last week, the division still accounts for £9bn of the group’s £20bn revenue.

In all the recrimination, resignation and share price falls since the financial announcement, one potential aspect of Global Services’ problems has been little discussed.

I’ve heard a few people wondering how much of the division’s troubles are down to its involvement in the NHS National Programme for IT (NPfIT).

BT is one of only two major contractors still involved, along with CSC. Accenture and Fujitsu have already pulled out due to concerns over potential losses, and BT had been expected to pick up the region ceded by Fujitsu’s departure.

Former NHS IT director general Richard Granger negotiated some tough terms and conditions for the key suppliers to the programme – in particular, that payments would be made on delivery of finished product. This is great news for the NHS – now that key parts of the project have been delayed, it doesn’t have to worry about the costs of software and services that are not yet fully operational.

This was a big factor in Accenture’s withdrawal as the supplier saw its costs increasing and its revenue being pushed further into the future.

In the early days of NPfIT, former BT chief executive Ben Verwaayen was asked by reporters about the impact on the firm’s bottom line, and he proudly explained that BT had not budgeted for a profit from the programme for some time ahead, seeing it as a long-term investment. A wise move – but one now wonders exactly when those profits were expected.

The core part of NPfIT –electronic patient records – is an area BT is most exposed to, and is the area most delayed. Recent reports suggested that many NHS trusts are refusing to implement software until they can see it working elsewhere. Considering that one of the BT pilot sites, the Royal Free Hospital in London, has just revealed it lost £7.2m due to the project, it isn’t looking promising.

BT meanwhile, is funding development and providing services to implement software and try to make it work – essentially without getting paid for it.

There has been no official word from BT one way or the other, but observers cannot help but speculate that the troubled National Programme may be a factor in Global Services' current struggles.

And if it is, and BT feels it has to reconsider or renegotiate its involvement, then the risks to the NHS IT scheme would be significant.

The turmoil engulfing the financial services sector is causing a lot of head scratching and navel gazing across the IT industry.

Vendors are worried about the effect on sales in their most profitable market. IT professionals are worried about their jobs in the light of Lehman Brothers’ collapse and dire warnings of 100,000 job losses in the City of London.

Certainly few people will be worrying about skills shortages in the City – there’s likely to be plenty of spare IT staff looking for work.

But one area of the IT industry is almost certainly smiling – it’s time, once again, for India to benefit.

Computing blogger Mark Kobayashi-Hillary has speculated a lot about the effect on offshore outsourcing, and I’d tend to agree with his view that many finance firms are going to look overseas to help cope with the crisis.

The pressure will be on struggling banks to cut direct costs (which means people), reduce capital spending (which means big IT purchases), and generally to cut operational budgets.

Most big financial services firms have experience of offshoring work by now and understand the pitfalls and opportunities it presents. In tough times such as these when difficult decisions have to be made quickly, there are two easy, quick wins.

One is to say to an IT services company – can you run some of our proven processes in exactly the way they operate now, but cheaper. Effectively, keep the lights on, but do so for less cost. So, IT support, systems management, network management and other aspects of technical infrastructure support can easily be transferred to lower cost centres in India.

The other action is to look at transformational IT projects and ask two questions: Do they need to be staffed with in-house resources, and can hardware infrastructure be externally hosted? If the same benefits can be delivered from these important initiatives by offshoring more of the development work to India, or by outsourcing the hardware operation, then it becomes an easy move to make in the current climate.

I met with Pradipta Bagchi, the head of global communications for India’s number one IT company Tata Consultancy Services (TCS) earlier today for a catch-up. Bagchi certainly sees opportunities for TCS and others from the financial upheaval. Most of the big Indian vendors have established relationships with firms in the sector and are ready to take advantage of any opportunities that arise.

Bagchi said that TCS already has experience of the complex integration and separation tasks involved in mergers and acquisitions among finance firms – another area of expertise that is likely to be in demand. TCS is one of the major suppliers to ABN Amro, in a deal signed before the Dutch bank was bought by a consortium of Royal Bank of Scotland, Fortis and Banco Santander.

Imagine how valuable that knowledge will be if, say, Lloyds TSB and HBOS merge, or when banks pick apart the remains of Lehman Brothers and take over parts of their operations and want to merge them with their own.

A global crisis in the most globalised sector of all will inevitably lead to opportunities for the most global of IT suppliers – and they are increasingly found in India.

Yet again the theme of ruthless standardisation has come through strongly in interviewing some of SAP's biggest customers here at Sapphire.

Kraft Foods is one of the very biggest – 12,000 users in Europe, 30,000 more in North America by 2010, Asia Pacific to follow later, and with the software in use since 2001.

Kraft used to have disparate systems in every country in Europe, but was very much an early mover in adopting a single, standard, unmodified version of SAP across the continent.

One of the great benefits of this was realised in October last year. The firm wanted to upgrade to the latest release of SAP to take advantage of new functionality. For most companies, the prospect of a major version upgrade to 12,000 users in many countries would make them shudder. The cost and complexity of such a project is what has historically kept too many organisation stuck on older versions of applications, with a system update taking on all the characteristics of a total re-implementation.

But for Kraft, the decision to standardise paid off – the entire upgraded system was built remotely, offsite, and implemented in just three months.

To add to the achievement, the food giant also chose to change its whole IT infrastructure at the same time – and completed that in the same three month period, working with outsourcer EDS and key supplier IBM.

Kraft senior director, SAP competency centres, Jan Ziskasen, is so laid back now about his standard implementation blueprint for SAP that he was able to be in Berlin this week despite a major part of the US project about to go live this weekend.

How many IT directors would be confident enough in an impending deadline to be happily thousands of miles away on another continent?

“We have a goal to double our services business in three years, and that will make us number two in that market, but IBM will still be bigger.”

HP UK managing director Steve Gill revealed this objective to me in an interview with Computing in February 2004. It seems he was only a year or so too ambitious.

Now that HP’s $13.9bn acquisition of EDS is going ahead, it will establish the combined company as global number two in IT services and outsourcing.

The previous year, in May 2003 on the first anniversary of HP’s £12bn acquisition of Compaq, Gill predicted that the firm would overtake IBM as the world’s biggest technology supplier within the next year.

This milestone took a little longer – until 2007 – and needed IBM to sell its PC business to Lenovo along the way, but nonetheless HP got there.

For a company that has, at times, hit the headlines for all the wrong reasons – a spying scandal in 2006 that led to the departure of chairwoman Patricia Dunn; the ousting of former chief executive Carly Fiorina; the acrimonious purchase of Compaq against the wishes of one of HP’s founders’ family – current chief executive Mark Hurd has quietly gone about doing the business in the areas that matter.

HP is today a very different beast from the rather fuddy-duddy firm that entered the new millennium and had its foundations shaken during Fiorina’s often controversial tenure.

The combination with EDS will  give HP serious presence in every major boardroom conversation about IT - and lead to fevered speculation about further mergers in the sector.

Watch out for moves by the big Indian outsourcers to buy second-tier US or European rivals such as Atos Origin, Logica or CSC. Will even Accenture find itself a target – or decide it has to be an acquisitor – to compete long term with IBM and a joint HP/EDS?

And don’t rule out HP from further quiet but influential purchases along the way.

I wonder what Steve Gill is predicting now?

I’ve just been compiling Computing’s news reviews of 2007 for our web site, looking back at the big stories that made the headlines during the year. With such an overload of articles, how can the past 12 months be best summarised?

Well, to be honest, it’s been something of a case of same old, same old. What have we learned this year? 

The government continues to embarrass itself where technology is concerned, sadly negating all the good work that is increasingly taking place in public sector technology. 

Green issues have leaped to the top of IT managers’ agenda, and rightly so. But really, most of the current advice available is simply common sense, good practice IT operational management. We are still painfully short of genuine vendor-free best practice green computing – although there are a few leading companies that are starting to write the rulebooks. 

IT security is just as much of a pain as it has been, but the law enforcement community seems to be drifting further away from being able to address the concerns of business leaders. The great fear is that e-crime will only be tackled once something really bad takes place to make the authorities act. 

What else? 

There are still skills gaps; the profile of the IT leader continues to change; more work is being outsourced; and offshoring is expanding faster than ever. 

Web 2.0 has become the new internet and e-commerce buzzword; stock market valuations for online companies are becoming very silly again; and broadband is an increasingly important economic driver (so let’s hope we get moving on the next-generation infrastructure). 

All in all, it sounds very much like how you would summarise any other mature, business-critical sector of the

UK

economy. The more things change, the more they stay the same, as the French would say if they translated into English. 

In that light, perhaps the most important story of the year came just this month, with news that the UK IT sector is now the second biggest industry in the country, after financial services, contributing 6.4 per cent of the economy – some £66.5bn. 

Maybe in years to come, we will look back at 2007 as a pivotal time, one when IT continued to grow up and establish itself as central to the UK's international success. Technology is increasingly just a part of business, it flows with and influences our lives every day, and perhaps it is a good thing that as the year ends, we are not looking back on any one trend as a defining influence. 

Just another year for a vital part of the way we live, work and play. 

Merry Christmas from everyone at Computing, and best wishes for a prosperous and incident-free technology new year.