ITNet bumped from £83m Cabinet Office deal

The Cabinet Office has ditched ITNet as the provider of hosting and management of three main building blocks of the UK's e-government push.

The deal is less than a year old and, given it was the UK provider's biggest ever win, worth some £83m over five years, it will be seen as a bitter blow.

In a research note this morning, analyst house Ovum says it is "extremely bad news for ITNet" and adds that there will be far-reaching implications.

ITNet has issued a statement in which it says: "ITNET is extremely disappointed to receive this communication in circumstances when it is making good progress in delivering the contract in accordance with milestones revised to reflect significant changes to the customer's requirements. The first of the three contracted services has been delivered subsequent to the commissioning of the Datacentre in January 2004."

Other components of the contract included responsibility for hosting and managing authentication and routing service the Government Gateway, the information-sharing Knowledge Network and the content-management system Delivering on the Promise.

The contract had previously been held by Cable & Wireless and Loudcloud, a start-up created by Netscape's co-founder but eventually split in two, with its hosting operation going to EDS.

Indeed the termination will lead to speculation that public sector giants such as EDS, Fujitsu Services and IBM will increasingly walk away with such deals.

Last July, when ITNet was awarded the Cabinet Office 'True North' project, it was the last of several companies to remain in the bidding.

ITNet this morning sought to assure investors that its business outlook for fiscal 2004 remains strong. Its shares were around £1.93 today – a drop of almost 32 per cent on yesterday.