Oracle HR deal tells Microsoft, 'we saved the NHS first'

Oracle has announced it will be part of a £325m contract to replace and consolidate the human resources systems of the National Health Service (NHS). The system is intended to free resources and allow NHS managers to analyse skills distribution and shortages better than before.

Oracle may be hoping the announcement will eclipse Microsoft's own, unrelated, announcement of a three-year contract with the NHS for £50m of desktop software. As one of the largest employers in the world, the NHS is certainly worth wooing by the world's biggest enterprise software companies, although both deals may come in for criticism.

The Oracle deal is for the largest ever implementation of HR systems using Oracle's e-business suite 11i, a centralised system processing details of 1.2 million employees and accessed by up to 20,000 concurrent people simultaneously. Although the actual value of Oracle software involved in the deal is unknown, the company claims it will save the NHS £400m in its lifetime. It will include Oracle's Web-enabled Human Resources Management System (HRMS) software.

The contract was won by the McKesson consortium, led by McKesson Information Systems, and including IBM and PWC consulting. Back in June, the UK Department of Health chose the McKesson group over a rival bid based on SAP R/3, involving Sema SAP and KPMG. Last week, the contracts were actually signed and prices and roll-out plans were released.

The system will be piloted in 2002 and rolled out over the next two years, says Oracle, and will use Oracle modules for HR, Payroll, Self Service, Customer Relationship Management (CRM), Training and Administration, HR intelligence, and Oracle Tutor, running on a single very large Oracle9i database running on ten IBM servers at McKesson's data centres in Romford and Newcastle.

The solution, which is scheduled to be piloted early next year, will replace 29 different payroll systems and 38 HR systems currently in use throughout 550 different trusts. The new centralised system that will allow the NHS to accurately determine (for the first time, says Oracle) where staff are based and analyse skills distribution and skills shortages.

The deal is perhaps not so big a surprise, since McKesson already manages payroll at 220 of the NHS' hospital trusts. The company has been operating in the United Kingdom since 1990 and provides IT services to both the public and private health service. It employs 540 people in the UK.

"The savings we should achieve from the implementation of this standardized system should make available funds that can be used to improve patient care," said Andrew Foster, director of human resources for the NHS. "These savings should come from better staff management, the elimination of duplicate data entry and the introduction of uniform payroll and HR policies and procedures."

Microsoft, meanwhile, is wooing the NHS on the desktop. Its deal, agreed in October and widely publicised during a visit to the UK by Bill Gates last week, replaces 35,000 separate orders for Microsoft desktop software with one single annual software subscription. All NHS organisations in England are licensed to use Windows 2000 Professional, and Office Professional XP, including any Word, Excel, Powerpoint, Access, Frontpage and Outlook versions released during this period. It also covers the BackOffice client software.

Both deals are likely to get heavy scrutiny from observers. The UK's public sector has suffered from a series of failures of high-profile, consultancy-led IT projects, and critics will be concerned to make sure that the Oracle deal does not follow their pattern. Meanwhile, the Microsoft deal will be vulnerable to criticism from analysts who have suggested that deal which move users from licence fees to subscriptions charges may lead to higher charges in the long-term future.

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