NHS IT timescale questioned as iSoft CEO resigns
Published: 15 Jun 2006 09:40 BST
The chief executive of beleaguered health software developer iSoft has resigned following a disastrous week for the company.
Tim Whiston, who had been at the helm since August 2004 and whose stewardship saw iSoft’s share prices tumble by more than 80 percent, admitted in an announcement on Wednesday that his "continued role with the company may represent a source of negative speculation and comment, being an unhelpful distraction to those within it".
Whiston’s temporary replacement will be the company’s chairman, John Weston, who is reported to have sought headhunters to fill the top job even before iSoft restated its accounts last week.
Aside from throwing iSoft’s accounting practices into a negative light, this restatement wiped out its recent profits and knocked 40 percent off its share value. The company also announced that at least ten percent of its staff would be laid off.
Much of the "negative speculation and comment" referred to by Whiston stems from iSoft’s sluggish progress in delivering on the NHS’s Connecting For Health programme. The largest civilian IT project in the world, it should see the UK’s health records systems transferred away from paper and onto a vast, cutting-edge network.
iSoft is subcontracted — via primary contractors Accenture and CSC — to supply software for the project, which is reportedly running at least two years behind schedule.
These delays have already cost Accenture at least £260m. The full project was initially supposed to cost £6.2bn, but the government admitted last month that the full bill could reach £20bn.
John White, iSoft's corporate communications director, told ZDNet UK on Wednesday that the company was "working with our various direct customers and Connecting for Health to try and reschedule those deliveries and work through the issues", and that further comment would be impossible until that was accomplished.
But insiders claim that the delivery targets agreed between iSoft and the NHS were "at the outer ends of feasibility".
One source close to the company told ZDNet UK on Wednesday that, even at an early stage, some within iSoft were worried that the "ability and deliverability of the software was being sold on the back of PowerPoint presentations and screenshots".
"The business goals still work, but it’s been oversold," said the source. "The company thought: ‘The whole world will beat a path to our door as established suppliers’. The city saw the potential revenue that iSoft was talking about and totted up lots of money."
"However, the nature of government IT projects means that things go wrong and what’s happened is that [Connecting for Health CEO] Richard Granger had ensured, in terms of payment structures, that delays would result in iSoft not getting all the money they were expecting. iSoft didn’t quite manage it and didn’t get paid quite as much as they thought they would," said the source.
The source described iSoft’s delivery promises as "a ridiculous challenge", adding: "They pumped this business up and polished it until it shone. Everyone bought in, they handed it over and it will deliver, but it’s not worth what people paid for it."
"The penalties in the contracts are extremely harsh — the people who’ve lost money on this is the City, anyone who bought in anywhere between £2.50 and £4.50."
Last year, ex-chairman Patrick Cryne sold 3.5 million of his iSoft shares at £4.25 each. At the time of writing, shares in the company were selling at 57p (reflecting a 3 percent rise since Whiston’s resignation earlier on Wednesday).
The source suggested it might be difficult to find a replacement for Whiston, calling the position "a bit of a poisoned chalice at the moment".
"There will either have to be a hell of incentive for the new person to come on board such as getting paid regardless [of results], or there will have to be a plan put in place which the new appointee will buy into," the source said.
A spokesman for Connecting for Health refused to comment on Whiston’s resignation, but told ZDNet UK it was up to Accenture and CSC to manage their subcontractors.
"Under the terms those contractors do not get paid until they deliver," he added.
Both Accenture and CSC declined to comment on Whiston's departure.
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