Fujitsu ICL's announcement two weeks ago that it will form a global alliance with Microsoft to develop consumer-focused IT systems for education, retail, government and enterprise markets was the latest step by the former hardware vendor to reinvent itself as a systems and services company.
The deal also drew attention to Fujitsu ICL at a time when it wishes to remind the industry, as well as the City, that it is still on course to float on the UK Stock Exchange in the year 2000.
The highly publicised agreement promised to create 1,000 additional jobs in Europe, half of these in the UK. It also signalled the UK-based company's commitment to Microsoft as the dominant provider of software platforms for complex and wide-ranging IT projects.
But in the wake of controversial revelations about ICL's existing #1.5 billion contract with the government, as well as blatant contradictions over the nature of the Microsoft agreement, could it be that the alliance was forged from more immediate concerns than the stated desire of kick-starting a 'citizen centric IT revolution'?
International Computers Limited (ICL) was formed exactly 30 years ago by Harold Wilson's Labour government. In 1990, an 80 per cent stake was sold to Japan's Fujitsu and in 1996, Keith Todd became CEO and set about reinventing the ailing company which was losing more than #2 million a year. Like the rest of the industry, ICL has now realised that an efficient services operation was the key to long-term success.
Traditionally, ICL has been a forthright proponent of open systems and the Unix platform. But a gradual swing towards Microsoft, and NT in particular, has culminated in the Microsoft agreement and what appeared to be a public commitment to the Windows empire.
Todd said: 'Our future application development will be on Windows NT.
We will continue to support our existing customers but going forward, applications will not be available on Unix.'
But on closer inspection, how solid is this commitment? Steve Ballmer, Microsoft executive vice president, said: 'There is no exclusivity in this contract.' And when pushed, ICL agreed: 'Microsoft platforms will become the preferred choice within these sectors unless technical or customer requirements dictate otherwise.'
So it seems that ICL is keen to have its cake and eat it. Yes, it is more than happy to accept the 'tens of millions of dollars' in investment from its partner but it will not offer any guarantees in return. And the deal is only good for three years, which is not a long time when you consider how long it can take to roll out projects of this size. Even within this period there is nothing to stop 'technical or customer requirements' demanding a system other than one based upon Microsoft software.
Which leads to the conclusion that perhaps there is something more to the alliance than both parties are letting on.
ICL plans to float on the stock market in 2000. This year it reported a return to profit of #30 million before tax, equivalent to a little over one per cent of its revenue. In order to make flotation plans viable, it needs a healthy set of accounts to show to prospective shareholders.
The manufacturer said new projects forged from the alliance will generate about #500 million. Considering the costs associated with retraining 4,000 personnel, building seven solution centres in the UK and Europe and setting up these systems, this figure is extremely unlikely to translate into the kind of profits necessary to attract investors in time for the flotation - especially when they have to be split with a partner.
In financial terms, ICL's Pathway project to automate the benefit payments system in the UK's 19,000 post offices is far more important. It's worth at least #1.5 billion and is based on the NT platform.
According to a leaked government memo, the project is seriously behind schedule and ICL was demanding more investment from the Public Finance Initiative fund in order to continue. The company will not actually see a penny until the system is up and running, after which it will receive a payment for each of the estimated 900 million annual transactions.
It is a touchy subject for all concerned. The indications are that ICL bit off more than it could chew. A Post Office representative said problems with the scheme centred on scalability difficulties associated with installing a networked system which has to accommodate large City-based offices and tiny or isolated family-run branches.
But all parties now insist that the project is back on course and will begin to generate income for the company before 2000 and the planned flotation.
This information aside, no one is prepared to further discuss Pathway.
But why shout from the rooftops about plans to build revolutionary IT systems but refuse to discuss existing projects?
Is the alliance with Microsoft not so much a long-term partnership to secure new contracts but in fact an attempt by ICL to save its most lucrative deal in the face of technological difficiencies, lack of qualified personnel and a pressing need to generate cash before 2000? We wait to see.
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