As executive gaffes go, it may not have been in the Gerald Ratner league. But BT chairman Christopher Bland’s telling reaction to a series of IT services contracts with the National Health Service was still faintly embarrassing for his company.
Bland told a private event at London’s Barbican Centre that BT was excited by the challenge posed by the mega deals, but “somewhat frightened by the enormity and complexity of it”. Warming to the theme, the chairman went on to reveal that the board of directors “felt slightly like a dog chasing a car. What do we do if we catch it? Well, we’ve caught it.”
Publicly, BT says that Bland was stating the obvious – the NHS projects are ambitious and complex. Privately, the reaction of Bland’s colleagues can only be guessed at.
Projects on the scale of those BT has committed to with the NHS remain virgin territory for the telecoms giant. But the company is determined to refute any suggestion that it is in over its head. “This kind of win really puts us into another league,” says Tim Smart, head of BT Syntegra, BT’s systems integration and consultancy unit. It is in this league that BT believes it now belongs.
Certainly, Richard Granger, the health service’s famously demanding IT chief, thinks BT belongs in the premier league of IT services companies. Along with Accenture, Granger made BT the big winner (so far) in his National Programme for IT in the NHS, a £6 billion programme to overhaul the NHS’s IT infrastructure, applications and processes.
Both Accenture and BT stand to make at least £2 billion from a series of 10-year deals. BT might even have won more contracts but for the fact that Granger said he wanted to share them around.
All the same, BT has done well to secure the lead role in three major NHS contracts, as well as winning subcontracts in several more. They are, as everyone seems to agree, complex deals. But essentially BT will perform three key roles: it will design and manage an Oracle database of patient records; it will build a messaging service for NHS staff and patients; and it will create electronic prescribing and e-booking systems for the London area.
In a separate deal drawing on BT’s core strength, the company will also manage a broadband network for the NHS, the biggest of its kind in the public sector.
How has BT achieved all this? The most obvious answer is that its bids came in lower than the rest, although this is impossible to confirm. Its close historical ties to the UK government may have helped. So too might the fact that it is a UK company. There was also a strong sense that the public sector wanted a break from its EDS-dominated past.
But as its recruitment drive to fill the necessary posts continues, Bland must also be well aware that BT cannot afford to overstretch – as EDS did.
The last time that BT Group enjoyed strategic success on this scale, arguably, was when its mobile phone business won a 3G licence in the UK in 2000. But that proved to be a Pyrrhic victory. In its eagerness to dominate the wireless sector, BT massively overpaid for the UK licence and ended up running up enormous debts that could only be serviced by spinning off the entire mobile division.
Nevertheless, in its latest moment of triumph, it would be ungracious to assume that BT’s IT services business will face the same painful outcome. Indeed, if it succeeds in building on the NHS wins, BT could one day be as big as Capgemini. But if it fails, its fall from grace will be ignominious.
