ICL's annus horribilis got even worse last week after the supplier saw losses treble for the first half of its financial year compared with 1999.
As a result, acting chief executive Richard Christou said that job losses are now inevitable as part of a serious cost cutting exercise. The deficit of £24.8m for the half year ending 30 September was a significant increase over last year's loss of £7.6m.
And the bad news comes on top of a cancelled stock market flotation, the loss of major contracts to rivals and the resignation of several senior personnel. Chief executive Keith Todd was the biggest scalp of the summer, a victim of the company's failed £5bn initial public offering.
But each successive setback has led to predictions from some in the analyst community that Japanese parent company Fujitsu is nearing the end of its tether and is now ready to offload the ailing subsidiary, or break it up, ditching unprofitable elements in the process.
Christou is certainly under no illusions about the role Fujitsu has to play in ICL's survival. In a communication to employees last week, he said: "If we were not supported by Fujitsu at this moment, the company would not be able to carry on its business, and none of our employees would have any jobs at all."
But not everyone believes that Fujitsu is ready to cut its European services arm loose just yet. Anthony Miller, an analyst with Richard Holway, said: "Fujitsu is somewhat inscrutable about what its grand plan is, but my feeling is that it won't want to get rid of ICL in the foreseeable future because it still very much values having a European foothold."
"Not having this would relegate it to being a Far Eastern supplier of hardware and air conditioning units. It'll give it another couple of years yet," he added.
A brave face
While the mood within ICL may be sombre, the company is trying hard to maintain a hopeful demeanour. "Our aim is to break even by the end of our financial year, which is 31 March. The whole of the services market has been sluggish this year, post Year 2000, but we're through that now," said a source within the organisation.
The source also revealed that cost cutting measures will include a further rationalisation of office space, with more staff being encouraged to hotdesk and work from home and on the road.
"We'll be continuing our focus on e-services, which has seen triple digit growth this year. We have signed some significant contracts in this area, such as a £50m one with WH Smith to provide the IT infrastructure to underpin its move to ebusiness," the source explained.
But some industry watchers believe that more drastic action than simply trimming a few costs and conducting ebusiness as usual may be needed to turn the ship around.
Miller said: "Is ICL screwed? No, I don't think so. It has some really excellent parts that are doing well such as outsourcing, system integration and its retail and finance vertical divisions. The trouble is that it's also got some rotten bits like ICL Multivendor Computing, its reseller arm. This has no future whatsoever in a company with a software and services remit."
But ICL has so far given no indication that it intends to take such drastic steps. The source at ICL said: "We are not considering any sort of wholesale break-up. Some small, non-core activities maybe, but ICL Multivendor Computing is an important part of the overall scheme. If Fujitsu disagreed with us and was planing to offload us, then I hardly think it would have just launched a multimillion pound marketing campaign featuring our name."
But whatever gloss ICL might put on things, it has certainly been a year in which it has had to confront a number of difficult truths. This summer, the vendor narrowly held on to a 10-year, £350m deal to modernise the Home Office's IT and telephony systems as the leader of a consortium that included PricewaterhouseCoopers and communications supplier Global Crossing.
Admission of failure
But this was only after the Home Office and ICL admitted to having made catastrophic mistakes on previous projects. "Lessons have been learnt," said a humble Christou.
ICL was selected as the preferred Home Office bidder in July. The following month, after the supplier canned its flotation, the Home Office mulled over its decision, but stuck with ICL.
The Home Office does seem to have something of an IT jinx on it though. A year ago, it admitted that 13 of its 17 major IT projects were either late or over budget, while a contract with Siemens to computerise the Passport Agency cost the taxpayer £12.6m and led to a massive backlog in passport applications.
ICL has been just as hapless. Last year, it helped to lose the Department of Social Security and the Post Office some £878m in the wake of the aborted Pathway swipe card project.
But on this occasion, ICL did not win the second chance it was given by the Home Office. Another major public sector tender, this time to modernise the Department of Social Security's IT systems, was awarded to BT which beat rival bids from a consortia headed by ICL and EDS.
So it appears that the next 12 months will be touch and go for the once mighty flagship of a now defunct UK IT sector. E-services may yet prove to be its saviour, if Fujitsu's patience holds, but it is not the only player in this space. Every old school service provider under the sun is queuing up to try and service ebusinesses, even though no-one is quite sure whether there are enough to go around.
Unisys, for one, has already proved that simply calling yourself an ebusiness service provider is no guarantee that you will be perceived as one. But all this means that ICL may not only have a battle on its hands to persuade Fujitsu that its business model is a valid one, but also its customers too.
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