The fortunes of embattled telco BT suffered yet another blow yesterday when the company lost the contract to provide the IT infrastructure services behind the government's massive UK Online project.

The deal was won instead by the Californian infrastructure services company Loudcloud, founded by Netscape browser inventor Marc Andreessen.

With the self-imposed 2005 deadline looming, the government has its work cut out to get all its services online in the next four years. And according to analysts, the vast project is already failing and will not meet that cut-off-date.

"Right now, only works like a giant search engine, and that is really the least of the government's problems when it comes to this project. They really are not putting enough effort into the spaghetti in the back end," said IDC analyst James Weir.

Loudcloud has been hired to provide site architecture, select the hardware and software to be used, and to service and manage co-location and network connectivity, according to a spokeswoman for the office of the e-Envoy, the cabinet office responsible for spearheading government's online efforts.

" is one of the most important sites in the government and the bid presented by Loudcloud won because it was the best in terms of value for money and innovation. We terminated our contract with BT over a month ago. Of course, we can't give the details of why the contract was cancelled but we were in ongoing negotiations that were terminated in September," said the spokeswoman.

Both Loudcloud and the office of the e-Envoy declined to disclose any financial details of their agreement.

"We are delighted to be working with the UK government and the office of the e-Envoy on what we consider a highly exciting and challenging initiative," said Loudcloud chief executive Ben Horowitz in a company statement.

And 'challenging' may prove to be the correct term. Research from Forrester suggests the biggest problem with the project is that those involved lack IT knowledge. Furthermore, only a feeble 13 percent of the vendors working with the government are confident that the 2005 goal will be reached.

"They still haven't got their heads around the idea of the internet and how it works — basic things like IP (internet protocol) standards. The problem of data transfer from legacy systems remains a massive issue. There have been years and years of institutional chaos with different systems being bought from different providers by different government departments. Local authorities are still making their own IT decisions," said IDC's Weir.