By Andrew Buckingham, Senior Software Consultant, Waterstons.
It’s been difficult to avoid the recent resurfacing controversy over the Post Office Horizon system, another failed government IT project, due to the ITV drama ‘Mr Bates vs the Post Office’.
Horizon is a £1 billion IT system that enables UK Government departments to make social security payments, it was used by stateowned Post Office and its franchise-like sub-postmasters.
This piece of software was responsible for:
4,000 people being falsely accused of fraud or mismanagement.
700 people being prosecuted.
200 people being sent to prison.
Three people’s deaths.
But why? And how is this a lesson in acquisition due diligence?
The media has reported Fujitsu as the developer of Horizon, and much of the public anger is directed at them. This organisation that generates a net income of $1.2 billion, was generally unknown by the public until the recent ITV series – watched by 20% of the UK population. Now, the business is now directly linked with the system that ruined thousands of lives.
Fujitsu has been subject to reputational and financial penalty for an IT system that they didn’t directly create, but were in fact ‘stuck with’ due to their own lack of due diligence during acquisition.
Horizon was actually developed by ICL which was wholly acquired by Fujitsu in 1998 – when the system was already a failing project and subject to Parliamentary review.
It would appear Fujitsu either didn’t adequately assess Horizon as part of the ICL acquisition, or hoped to turn around this core failing product. While there doesn’t appear to be any evidence of the latter, we can only surmise that the due diligence did not adequately extend into its technology products, and now, 25 years later, presents a possible $1 billion financial liability and incalculable reputational damage.
Technology, software products and the services that are built upon them, are now such a critical factor in business value and valuation, there is an increased need for greater consideration as part of a of wellrounded business appraisal and due diligence activity.
Is this a mistake your business can afford to make?
When looking to the horizon of any deal, thorough technology due diligence is vital to not only understand the true deal value, but to uncover things that may cause significant damage in the future.
To find out more about due diligence and value creation in mergers and acquisitions, get in touch with our expert bruce.watson@waterstons.com
