theaphotography - stock.adobe.co

News

Post Office scandal fallout for Fujitsu could open UK public sector to Indian giants

Post Office scandal has damaged public trust in Japanese IT supplier Fujitsu, which could open door to primed rivals

Karl Flinders
By
Published: 21 Mar 2024 12:45

IT services companies are primed to sweep up UK public sector business if Fujitsu’s huge share of the sector declines, amid fury over its role in the Post Office scandal.

Suppliers such as India’s Tata Consultancy Services (TCS), already a giant in the UK and global corporate sector, now stand to benefit if Fujitsu’s UK public sector legacy begins to crumble.

Since an ITV drama raised the profile of the Post Office Horizon scandal, Fujitsu, like the UK government, has been forced to act.

Nothing new was revealed in the Mr Bates vs The Post Office drama, which aired in the first week of 2024, but it did provide the public anger the campaign for justice needed to force the government into action.

Fujitsu stood by and watched, and even supported the Post Office, as it used data from its error-prone computer system as evidence to prosecute subpostmasters and demand money it said was missing, when it was actually the result of errors in the Horizon accounting software it supplied to the Post Office.

It was not long after the drama caused public outrage that Fujitsu, for the first time, admitted its part in the scandal, apologised for it, promised to pay towards the costs of financial redress, and said it will support victims and their families.

Computer Weekly had asked Fujitsu for comment ever since 2008, only to be offered “no comment” at every attempt.

Fujitsu admission, apology and offer of help

The shamed Japanese supplier put all of its public sector bidding on hold while the statutory public inquiry into the Post Office scandal goes about its work.

Fujitsu has a huge UK public sector business for its IT services. In the 1990s, it took over British computer company ICL, which had significant contracts with the government, including with the Post Office. The lure of the huge Post Office contract was an incentive for Fujitsu to take over ICL.

Despite its involvement in the scandal, Fujitsu has continued to be awarded lucrative contracts by the UK government. Last year, it was awarded IT services contracts by the Home Office, HM Revenue & Customs (HMRC) and the Foreign, Commonwealth & Development Office (FCDO).

Fujitsu will be paid £250m by HMRC to replace an in-house service, the FCDO has contracted it to provide networking and communications services in a deal worth £184m, and the Home Office is paying it £48m to support the technology underpinning the Police National Database.

According to figures from Tussell, Fujitsu has active contracts with the UK government and public sector worth over £4bn. The biggest of these, worth nearly £2.4bn, is the supplier’s deal to supply and support the Post Office’s Horizon system. This contract is being phased out with the Post Office’s ongoing project to replace the controversial system.

Ready-made accreditation

The use of ICL in large government contracts gave Fujitsu a ready-made accreditation to supply government organisations.

The same cannot be said for the likes of India’s TCS. For many years, there were fears over outsourcing work to IT suppliers based in India. The perception was that confidential data would not be safe. There were also concerns that jobs in the UK would be moved to India.

But TCS, for example, has invested heavily over the years, now employing 23,000 people in the UK, and has begun to build a public sector business in the UK. TCS already boasts the world’s biggest corporates as customers, but its UK public sector business has remained very small in comparison with its private sector work.

Now trusted in the UK, TCS is targeting public sector customers, and any Fujitsu loss could be its and others’ gain. Infosys and Wipro are other examples of Indian heritage suppliers seeking public sector opportunities in the UK.

Speaking to Computer Weekly recently about TCS’s UK plans, Amit Kapur, its UK country head, said there is potential, paucity and action with “good engagement”.

TCS already provides services to the Department of Work and Pensions, public sector organisation pension provider Nest, the Department for Education, the BBC and Cardiff City Council in local government.

TCS in the public sector

Kapur said that as a percentage of its UK business, the public sector share is still in single digits. “It has grown a lot recently, and given the names of customers in the sector, it has the potential for further growth within existing and new customers,” he said.

Growth could eventually see the likes of TCS take over huge contracts at major government departments such as HMRC and the Home Office.

Sam Kingston, former UK head at IT services firm EDS, now CEO at software services company Zenitech, said Fujitsu’s future in the UK is uncertain. “Whenever a company comes under this much scrutiny, it has to consider all the options,” he said. “This could include refocusing the customers it targets or even leaving a country.”

Kingston added that the current problems being experienced by Fujitsu in the UK could “absolutely” give opportunities to competitors such as TCS.

Mark Lewis, expert IT services lawyer and senior consultant at Stephenson Harwood said TCS is a good shout for a company picking up government business from Fujitsu. "I would broaden this to smaller tier two or three Indian players picking up smaller contracts." He added that in Europe there could be opportunity for suppliers such as Capgemini.

Computer Weekly first exposed the scandal in 2009, revealing the stories of seven subpostmasters and the problems they suffered as a result of the Horizon system (see below timeline of all Computer Weekly articles about the scandal).

• Also read: What you need to know about the Horizon scandal •

• Also watch: ITV’s documentary – Mr Bates vs The Post Office: The real story •

Read all Computer Weekly articles about the scandal since 2009

Read more on IT outsourcing