Wednesday, 12 December 2012

AccountingWeb's top ten outsourcing failues

If there are any Barnet Councillors out there who are unaware of just how dangerous outsourcing can be, they should consider the experience of the first ever major outsourcing cock up. Hanno the Great outsourced his army to 20,000 Numidians. The result? Rome won. I have a great interest in ancient military history and whilst researching Roman military tactics came across this article on the AccountingWeb site (

It details the top ten outsourcing failures. Hanno's defeat was number ten !  What is interesting is the way Barnet Council seem to think they know more about business than Sainsburys,

1. The NHS’ NPfIT
Estimated overruns of £7.6bn, ridden with security problems, loathed by doctors, and way behind deadline already. Impossible, according to some. EDS came and went. Now Fujitsu, CSC and Capital Care Alliance are amongst the names taking the blame.
2. HMRC’s Tax Credits
They tried EDS, they tried Capgemini, they’ve paid over £300m and the site still doesn’t work properly. The credits system has already had to write off £1.4bn in overpayments – proof that handing money out isn’t the taxman’s forte.
3. Sainsbury’s ‘Business Transformation Programme’
Accenture’s new stock system apparently couldn’t track stock. Sainsbury’s take a £550m charge to profits and draft in 3,000 new shelf stackers – quickly. Meanwhile Accenture respond by blaming Sainsbury’s for insufficient due diligence.
4. DfES’ Indivudal Learning Accounts
Remember these? The ubiquitous Capita oversaw a project that at its height saw 10,000 accounts opened daily, the vast majority entirely unverified. The project led to a £70m overspend, the ILA budget itself overshot by £93m, and there were at least 133 police investigations. The amount paid to fraudsters is still unknown.
5. Swansea City Council’s e-government
Swansea (pop 226,000) signs ten-year, £83m deal with Capgemini to implement the government’s e-government initiative. Spends £40m. Realises “cash realisable benefits” not quite what were budgeted. Stops, after 18 months (and a couple of strikes – nice).
6. Cable & Wireless’ global IT services
C&W outsource IT to IBM. 14 months later a benchmarking process reveals an overcharge of £115 m for UK operations alone. The Big Blue thought otherwise. Went all the way up to the High Court before being settled in an “amicable resolution.” Proceedings meant C&W couldn’t insource again until the agreement had expired.
7. Cahoot’s security systems
Internet bank Cahoot, owned by Abbey, outsourced its security testing to Qinetic. After an unmonitored systems upgrade customers’ were able to wander in and out of each others’ accounts just by guessing user names and bookmarking the page. Could have been kerput! for Cahoot, but according to security consultant Neil Bartlett, the lapse was so dumb none of the hackers even noticed it. Qinetic still enjoys good relations with the company.
8. DWP’s change management
The Department of Work and Pensions outsources its IT to Microsoft and EDS. Somebody – we don’t know who – decided to upgrade a single desktop to Windows XP and accidentally applied the changes to the entire network, which consists over 80,000 computers. They all crash. Widely regarded as the worst computer crash in government history. Edward Leigh MP, PAC chair, put things into perspective by pointing out the DWP’s IT system was losing it £1.5bn a year anyway.
9. Lloyd TSB’s customer service
The UK’s biggest current account provider closed its Indian call centres after a petition signed by 400,000 customers. Now they can ring their branch instead, and listen to a British voice, albeit a recorded one, as it drones endlessly through the options on their selection menu. Not the first bank to pull out, and won’t be the last. Rivals estimated the move cost around £30m.
10. Carthage’s First Punic War
Hanno the Great outsources his soldiering to 20,000 Numidians. A one-nil away defeat to Rome causes a contractual dispute that sees Tunis seized by a rebellious mercenary army that soon decides to march onto the capital. Changes at board level result in the restatement of previous manager Hamilcar Barca, who resolves the matter out of court. By killing them all.

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