The proposed sale of troubled UK National Health Service (NHS) software supplier iSoft depends on the approval of lead NHS IT contractor CSC – and progress on its Lorenzo care records system – analysts have warned.

The healthcare software firm has agreed terms of a sale for around £140 million to Australian software firm IBA – a move that follows financial scandals that hit the company last year and led to delays in delivery of Lorenzo, a key component of the NHS's £12.4 billion National Programme for IT (NPfIT).

But Ovum analyst John O'Brien said: "There remains an element of risk to the deal going ahead. IBA still needs formal approval from CSC, which is the lead contractor four NPfIT in five out of three regions of England.

"Although CSC will retain the ability to step in and manage the development of Lorenzo, iSoft's strategic health-care application, it will need convincing that the combination of IBA and iSoft will be beneficial to its development going forwards."

He added: "In its presentation to the market iSoft acknowledged that although it is making 'good progress' with Lorenzo, there is 'still the potential for delays to milestones.'

"This is something that CSC, and indeed its key customer the NHS, will be keen to gain some clarification on, to ensure that the schedule doesn't slip even further. Delays so far have meant that Lorenzo will not be available to CSC for implementation till mid-2008."

IBA first revealed it was interested in acquiring iSoft earlier this year. Ironically, iSoft partner Torex – which is also currently mired in financial scandal after an expensive, two-year acquisition spree – used to be a distributor for IBA in the U.K. before the two firms merged in 2003. At the time an Office of Fair Trading investigation instigated as a result of a complaint brought by IBA against the merger was rejected, allowing it to go ahead.

Meanwhile, iSoft is still under investigation by the Financial Services Authority and the Accountancy Investigation and Disciplinary Board as result of discrepancies revealed last year in its accounting practices, which led to it posting a £14.6 million loss.