Thursday, 6 November 2008

Another NHS IT supplier bites the dust

(By Anthony Miller) CSW Group, the UK- based XML and knowledge management software provider, is in the hands of the receivers. CSW was an early supplier to the NPfIT for electronic health records and, as part of BT’s London cluster, was developing a child healthcare application. However, according to an article on the E-health Insider website (see here), problems with the CWS system were reported as early as 2006. CSW was also contracted to provide a healthcare records system in Wales. Our ex-colleague, Ovum’s excellent Tola Sargeant, reported that CSW signalled cash flow problems earlier this year and was banking (literally) on a shareholder cash injection which didn’t materialise. There may have been some clues that all was not well a few weeks ago, as the link to CSW’s North American website carries a repossession notice dated 10th October.

CSW’s demise is yet another blow to the NPfIT. We understand BT is in discussion with the receivers though it appears that the Welsh NHS IT agency is resigned to looking for a new supplier on the already delayed project. But no one is yet pointing the finger at the NHS as the primary cause of CSW’s problems. In fact, it looks like CSW may have fallen victim to the age-old problem of growing ‘too far, too fast’. In April, CSW appeared for the second time in the Real Business/LDC Hot 100 league table, which charts the UK’s fastest-growing privately owned businesses. CSW recorded pre-tax losses of £2.1m on £5.3m in revenues for the year to 31 Jan. ’08, though its ‘Hot 100’ press release alluded to £8.1m in sales. May be someone at CSW forgot that there can be a long wait before ‘sales’ converts to revenues and then to cash. Perhaps the underlying problem was actually laid bare in the self-same press release:

“CSW … has completely transformed its business from a consultancy/services-based company, to a leading product development company for standards-based electronic health records and knowledge management in the UK. At the end of 2006 CSW extended its operations with the incorporation of its US subsidiary, based in New York, as part of its ongoing strategy to become a global market leading product supplier for electronic health records and knowledge management.”

Grand ambitions, indeed. But no one should blame management for being ambitious. However, ambition always has to be tempered with realistic expectations and, of course, financial prudence, especially in tiny companies. It's a real shame. CWS’s demise is a loss for us as NHS users and a loss for the UK software industry.

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