NCC Group, a Manchester-based provider of IT security, risk and testing services, has warned investors that it will suffer a £7 million charge after an internal IT project failed.
"In 2009 NCC Group, after an extensive procurement process, selected a technology supplier to specify, install and implement a fully integrated solution across the whole group," the company revealed today.
"The new system was intended to provide a complete integrated solution for all the Group's business processes as well as a systems backbone for NCC Group as it grew organically and by acquisition, both in Europe and North America."
"Since going live the new system has caused significant disruption across the whole group that unless addressed, was going to impair business efficiency despite comprehensive efforts to make the solution work.
"Therefore the board has now decided to revert back to the previous group-wide IT system, while it determines whether the issues can be satisfactorily remedied," it said.
"This is a very frustrating position to be in," said CEO Rob Cotton in a statement. "We have invested considerable amounts of time and resource into the new system but have had to take the hard decision to revert to our old system as the new simply wasn't measuring up to our needs."
NCC Group would not disclose which supplier was behind the software in question. A research note from James Goodman, an investment analyst at Investec, said that based on previous discussions, he assumed the provider to be SAP. The legacy systems to which NCC Group has now reverted are from Sage, he added.
"On the call, management stated that the old Sage-based products are entirely suitable for the job," Goodman wrote. "But this begs the question of why the expensive migration?"
Besides software testing and security consultancy, NCC Group offers a software 'escrow' service. This is a legal agreement between a software supplier and a customer than means if the supplier goes out of business, the customer can access the source code of the application they use.
Last year, NCC Group's revenues were £71.0 million, and its pre-tax profit was £17.4 million. The company was spun off from IT membership organisation the National Computing Centre in 1999.