2e2 - When Outsourcing Goes Wrong

A Joint Post from the Bloggers of Barnet

Barnet Council have been having trouble with their IT infrastructure for some time. Back in 2011 an internal report identified that the Council was having difficulties with their IT Infrastructure Supplier, 2e2. The report stated that:

“2e2 contract was put in place to transfer the operational management and risk of core infrastructure to a private provider. 2e2 no longer feel responsible for this and have passed all risks back to the council, on the basis that all equipment has reached EOL (End Of Life)”.

The report identified that a key risk was that,  “2e2 will pass all risk back onto the council and not deliver to their contractual arrangements” and that to mitigate that risk the council should, “Improve the relationship with 2e2 and look into terminating the 2e2 contract early and bringing services and staff, under TUPE, in‐house, if necessary”.

 

Unfortunately, Barnet ignored its own advice and continued to engage 2e2 at a cost of over £1 million a year, including an annual up-front payment of £400,000. In January 2013 2e2 went into administration and withdrew its services. This leaves Barnet £220,000 out of pocket for the unused up-front fees and scrabbling around to find someone else to run the IT infrastructure, without which the council would struggle to function.

To get themselves out of a hole quickly, Barnet Council have appointed Capita, without any form of tender, on the basis that it was an emergency and they had already had discussions with Capita to take over the running of this service. This new contract will cost £72,595 per month. 

The Council states that they did undertake a risk analysis of 2e2 in January “using Experian reports” and that “the report stated the company was satisfactory”. However a quick check on the internet would have shown that suppliers have not been able to get credit insurance on goods supplied to 2e2 for some time and that 2e2 were handed a number of County Court Judgements in 2012.

If Barnet had simply followed its own risk register advice back in 2011 and brought the service back in house, we would not be in this position. It also shows the massive risk that comes with outsourcing key services and that even large companies can go bust. 

Barnet need to stop taking risks with our services and abandon One Barnet now. 

Signed

Derek Dishman
John Dix
Vicki Morris
Theresa Musgrove
Roger Tichborne

Is Barnet's data being held to ransom? - One of the risks of Outsourcing

In today's ComputerWeekly.com newsletter there is a very disturbing article relating to IT infrastructure provider 2e2who went into administration last week. The administrator has been demanding immediate payment from companies whose data is hosted by 2e2 or risk losing their data. 2e2 are the infrastructure provider for Barnet Council and I am gravely worried that some local residents' data may be affected. Given that Barnet are proposing to hand over all of the Council's data to Capita, hosted away from Barnet, surely Councillors should be learning from the current problems that outsourcing bring significant risks. As ever, in Barnet, political dogma trumps common sense. When will they learn?

I would also question who was monitoring this contract, and why were Barnet using a contractor in such serious financial difficulties. Why wasn't this flagged up earlier. Maybe it is because all the current senior management's focus is on outsourcing these types of services not making sure they are properly delivered.

The article is reproduced below:

"2e2, the datacentre service provider and systems integrator that went into administration in January, is asking its customers for nearly £1m in funding if they want uninterrupted services and access to their datacentre facilities.
The stricken datacentre company’s administrators have asked for a total estimated funding of £960,000. 

While administrators have asked 2e2's 20 enterprise-level users to pay most of the datacentre costs, smaller businesses are being asked to pay £4,000 plus VAT.
In a warning letter to customers, the administrators from FTI Consulting said: “In the event that you do not provide a commitment to pay by 5pm on Friday 8 February 2013, we may be unable to continue to provide services to you with immediate effect.”
The funding will be used to meet the costs of operating and maintaining the datacentre infrastructure and key IT professionals to ensure smooth migration of the data and systems, the administrators said.
If customers do not pay, “We will be unable to maintain the datacentre infrastructure and we will have no alternative, other than to cease all operations without any managed wind-down of those operations,” it warned.

"We will have no alternative" FTI Consulting

The administrators have also made 2e2's UK staff redundant and closed services such as flexible resourcing, business application services, unified communications and field support services.
When 2e2 went into administration, many customers wanted to gain access to their data immediately to migrate the data and applications to another service provider.
“The levels of data held in the companies’ datacentres are such that this process could take up to 16 weeks and we will need to ensure that the integrity of third-party data and security is maintained,” the administrators wrote.
They calculated the £960k funding to cover employee costs, utilities, carriers, rent, rates, administration and other central expenses, including legal costs and administrators’ fees."

Barnet's IT infrastructure provider goes into adminstration

Oh dear. Today it appears that Barnet  Council's IT infrastructure supplier 2e2 have gone into administration. I blogged about this contract back in July 2011 when I express concerns about the company and the renewal of the contract. In 2010/11 Barnet Council paid 2e2, £1,077,913.62 and in 2011/12 Barnet paid 2e2 £1,370,356.83.

Capita are due to take over in the responsibility for the IT infrastructure in April but what happens for the next two or three months and will it cause problems? This should be a wake up call yet again for the Council that key suppliers can fail and when they do it is all of us that are left with a mess. Beware what you outsource!