Atos and Nest part company two years into 18-year £1.5bn contract
Insiders claim investment trust demanded design changes but didn't adjust deadlines, job cuts loom
Exclusive The UK's National Employment Savings Trust (Nest), an occupational pensions scheme, has ended its £1.5 billion ($1.8 billion) deal with French IT services supplier Atos just two years into its potential 18-year term.
The Register understands the collapse of the contract may lead as many as 1,000 Atos job losses in the UK and India.
Both parties have confirmed the early termination of the deal, which had been intended to develop and run business processes for the scheme operated by the public Nest Corporation of the Department for Work and Pensions (DWP).
Atos was contracted to provide software, networking, and IT infrastructure necessary to run the service, under an agreement set for an initial 10-year term, with options to extend for another five years, plus a three-year transition. The £1.5 billion value relates to the maximum 18-year term. The categories in scope of the Nest procurement included software packages, databases, operating systems, and IT consultancy services.
According to details seen by The Register, Nest pushed the termination of the contract after Atos argued that product delivery deadlines should be extended because the publicly owned investment trust had persisted in requesting last-minute design changes. Nest refused to renegotiate the delivery timeline and cited terms and conditions in the contract to try to keep the timetable on track.
In a prepared statement, Gavin Perera-Betts, Nest chief customer officer, said: "We want to thank the team at Atos for all their support and partnership over the past two years. They have been instrumental in helping us transition to becoming a more data-led organisation. They have also helped us crystallise our digital transformation journey, setting us up for a strong future.
"As we start to plan the next phase of our transformation programme, we're taking some time to review the support we'll need. The services Nest offers to members will continue to operate as usual."
It is understood that Nest and Atos have now finished their active program of work and Nest will continue to work with its existing partner, TCS, while it reviews its longer-term requirements and plans.
In an email to The Register, John Ainsworth, head of Atos Business Transformation Services, said: "We are proud of the work we've achieved with Nest and have helped set strong foundations for the organisation's digital transformation journey. We are working with our teams and partners to manage the transition of the contract."
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We asked Atos and Nest to give us their perspective on why the contract is ending well ahead of schedule. Nest declined to comment.
Nest was set up by the UK government under the Pensions Act 2008 to support the automatic enrolment of employees. Launched in 2010, it is free for employers to use.
The loss of the potentially lucrative contract comes at a difficult time for Atos.
Earlier this year, it held "exploratory talks" with potential investors – believed to include Airbus – about taking a minority shareholding in the IT services group's breakaway security, digital and big data businesses. The move followed Atos's rejection of a €4.2 billion ($4.09 billion) bid from tech consultancy Onepoint and Brit private equity fund ICG to buy the same business in September 2022.
In June last year, Atos's share price plunged 27 percent after it confirmed it was exploring a two-way split of operations, a decision that made the position of recently installed CEO Rodolphe Belmer untenable.
The CFO soon followed the CEO out of the door. Atos disclosed Stéphane Lhopiteau would be replaced by Nathalie Sénéchault, former deputy CFO of the company.
Meanwhile, Atos could be set to lose another big chunk of UK government work. In May last year, state-owned bank National Savings & Investments (NS&I) began the search for IT suppliers to help overhaul its customer and banking systems in a procurement set to be worth £756.1 million ($938 million). NS&I is an executive agency of the UK Treasury and a longstanding customer of Atos, which provides core IT services via a contract scheduled to end in 2024.®