NHS scale-back may hit IT firms

NHS scale-back may hit IT firms

Mumbai: The UK government’s decision to scale back its £12 billion (around Rs92,000 crore) national health services (NHS) project will likely hurt the prospects of Indian information technology (IT) firms expecting more outsourcing business from the UK public sector.

Taking the brunt of the scale down will be Tata Consultancy Service Ltd, or TCS, and Mastek Ltd, which have sub-contracts for the NHS project.

UK chancellor of the exchequer Alistair Darling told British Broadcasting Corporation (BBC) on Sunday that the government’s public spending, including on the NHS project, would be tighter as it was determined to halve Britain’s budget deficit over the next four years.

Nearly £10 billion worth of IT work was expected to be outsourced by the UK in 2010, according to British technology researcher Ovum.

“UK government spending landscape has changed significantly post the economic crisis and there is greater emphasis on prioritizing expenditure," said Kumar Parakala, global head, sourcing, at audit firm KPMG. “Indian companies will just have to look differently at public sector and offer even more compelling value proposition to be able to get business."

TCS had won a piece of the NHS contract in 2004 valued at £120 million, but a spokesperson did not say how the firm would be affected by the development. “As a company policy, we don’t comment on individual clients," a TCS spokesperson said.

Another IT exporter, the mid-sized Mastek, acts as a sub-contractor in the project for BT Group Plc, one of the IT suppliers for NHS. Mastek’s chief financial officer Fariz Kazani said the NHS project ramp down happened faster than the firm had expected. “We have been aware of the ramp down and have taken it into account while announcing our guidance during the latest quarterly announcements," he said. “We were doing application development work for the NHS project through BT and have completed it during the quarter ended September."

Mastek shares fell by more than 3% to end at Rs412.50 on the Bombay Stock Exchange on Monday. TCS shares were nearly flat at Rs697.85.

The NHS project, dubbed by the British media as the world’s largest civilian IT scheme, is aimed at creating a national database of citizen health records in the UK and making the records available online for around 30,000 doctors in nearly 300 hospitals. IT suppliers for the NHS contract include Japan’s Fujitsu Ltd as a primary supplier; US-based IDX Systems Corp. for building the core clinical software application; TCS, which as a part of the Fujitsu alliance will migrate patient data to the NHS database and implement clinical software application; PricewaterhouseCoopers Llp for securing the systems; and BT for integrating the various systems.

The project was launched in 2002 but has drawn flak because of a lack of measurable outcomes. It was to be completed by 2010, but according to the UK government’s latest estimates, is not likely to be completed before 2014.

“The NHS had a quite expensive IT system that, frankly, isn’t essential to the frontline. It’s something I think we don’t need to go ahead with just now," Darling told BBC.

Clarity on the spending cuts is expected in the pre-budget report on Wednesday.