Serco commits to existing ICT contracts

Outsourcing firm Serco says it is committed to its ICT contracts with local government in the UK, following its decision to exit environmental and leisure deals in the wake of financial difficulties.

The company last week announced that it was writing down the value of its business by £1.5bn after problems with a small number of contracts, including some for health services in the UK.

The company has announced that it will now seek to refocus its business – exiting from local authority leisure and environment services contracts – but remaining focused on back office arrangements, including ICT.

A spokesman for Serco said: “We have highlighted the future strategic direction of the business and will focus on being a business to government provider in the fields of defence, justice, healthcare, transport and back office services.”

In a statement last week, Serco said it had made two “strategic mis-steps” which had led to the current problems it had experienced.

Firstly, it said it had diversified into areas requiring different skills than those held by the company.

It added that it had concentrated too much on winning new business and had failed to “manage effectively the fact that over recent years there have been significant advances in public sector contracting, particularly in the UK, with new models that transfer substantially more risk to suppliers”.

It said that its offer to government would be improved by the narrower focus it has defined for itself.

The statement said: “We believe that skills in serving governments in critical areas are hard to learn and do not easily co-exist with those required in commercial markets.

“Furthermore, political forces and fashions do not walk in lock-step across jurisdictions. Being able to offer a portfolio of different services in a number of different segments will allow us to adapt to the requirements of changing governments, whilst offering a degree of diversification not available to those who offer services in a single country or segment.”

Serco’s chairman Alistair Lyons today announced he would be stepping down in the wake of the crisis, which saw the company’s share price fall by up to 35% last week.

As part of the firm’s corporate renewal process, it announced earlier this year that it would be splitting its government division in two – one for UK central government and one covering local government in the UK and Europe.

Serco currently has a number of deals to provide ICT services with UK local authorities.

In February, London Borough of Enfield councillors voted in favour of extending the council’s current ICT support services contract with the company after officers renegotiated the scope of the deal.

In March, Serco beat rival provider Agilisys to win a £70 million contract to provide back customer-facing and back office functions for Lincolnshire County Council.

Colin Marrs

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