WEDNESDAY 1OTH NOVEMBER 1999: Did NatWest Miss the Boat on Tech Spin-off?
I meet with Jim Mann, who seems to be in charge of the project, for an update on Redgrave. He met the other day with Mark Fisher, Tim Jones and Andersens. Tim was not at all positive. He sees Redgrave as "low priority" - he believes the two big IT areas within his empire (Technology Services and RIS) are improving fast anyway. And even if he were going to do some sort of joint venture, he wouldn't choose to do it with Andersens.
Jim is very annoyed, as he thought Mark had got Tim on board with the concept, and this didn't look very good in front of Andersens. Jim thinks there is real opportunity to do something, particularly with the software development division, RIS, which is huge at around 1400 staff. It has always seemed a bit uncomfortable to me that we have what is effectively a software development company of this size sitting within a Bank. I question whether it is really a core business for us; on the other hand, IT is so important to everything NatWest does, I can see the argument that we have to have close control of it.
However, we have probably missed a big opportunity. Companies like Logica and CMG, who are not a million miles away from RIS in terms of capability, have seen their value shoot up this year as the market has got excited about technology stocks, and are now trading on crazy profit/earning ratios of 100 plus. If we had set up RIS as an independent company, as General Motors did with EDS, we might have created substantial shareholder value.
I am beginning to wonder if I am an idiot for being cautiously positive about Redgrave. I am trying to be genuinely objective, but it doesn't feel like anyone else in my position is taking this approach. Or maybe it just is particularly interesting for purchasing because we do need to spend considerable amounts of money to invest in the procurement future. A joint venture might be a way of helping to get that investment and have the benefit of an injection of expertise from Andersen or someone similar.