Atos Origin sign MOU with UK Government to reduce costs; share price rises rapidly

Atos Origin have become the first of the UK Government's major suppliers to sign a formal agreement following the initiative around "negotiating contracts with major suppliers across Government to reduce costs" (Cabinet Office).

So, by how much has cost been reduced?  Well, we don't know because both parties have refused to disclose this,  for "reasons of commercial confidentiality".

So presumably there will be less work around? How many Atos projects have been terminated?  According to their own announcement, Atos;

"will continue to deliver all its existing IT contracts to UK Government, and will look for further business opportunities, building on the agreed centralised approach. It will also resume a number of projects in IT and outsourced operations that were placed on hold while the negotiations took place."

So that's as you were guys, plus some new opportunities ?

But surely, as the Atos executives crawled blood-stained and weeping from the negotiation room, they must have issued a profits warning given the £ millions of margin we were led to believe they would have to give up?  No profit warning.  In fact, their share price went up 7% yesterday in a flat market.  (In the absence of auditable figures being released, we could argue that the market - the share price - is the best indicator of whether Government has really 'captured value from the supply chain' as Professor Andrew Cox would put it).

What has been revealed is that there will be "a new single-client approach to engagement with central UK Government".  We will have to wait and see what that means.  Does every hospital and local authority have to ask permission before they speak to Atos?  Or is a purely central Government move (I suspect that is the case)?  Whether that in itself delivers any savings at all is hard to predict.

The true test of these re-negotiations and indeed all current public procurement activity (see our White Paper for a pre-election discussion of these issues) is this; how many public sector jobs and services can be saved by improving value and taking real cost out of third party supply spend? Because what can't be saved from suppliers will have to come out of staff costs and services.

I'm not suggesting for a moment that the negotiators haven't achieved some worthwhile outcomes here.  But, based on this first case, it looks as if we may get little objective evidence to show whether this major supplier initiative is delivering that fundamental contribution to minimising the pain of fiscal retrenchment.






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