Industry news

In the 2015 Budget, Chancellor of the Exchequer George Osborne removed VAT charges for private sector bidders on many public contracts.

From 1st April 2015, non-departmental public bodies and privately owned service providers will be eligible for VAT refunds when they procure services and operations from the government.

The government has gone into more detail regarding this change in policy on its website, which specifies that: ‘There has been no provision to refund VAT to non-departmental public bodies sharing services with their parent department or between themselves… With the expected wider take-up on shared services, the government wishes to ensure that these bodies are not at a VAT disadvantage when they enter into such arrangements.’

The website also clarifies why private suppliers are included in this policy change: ‘Because of competition issues, this will also include situations where they procure an eligible service directly from a private sector provider.’

Government departments are expecting to save £13 billion as a result of these changes. Further government outsourcing is also anticipated – the amount the government spends on outsourcing has already doubled to £88 billion since 2010, when the coalition government first took power.

Audrey Fearing, a partner at Ernst & Young who is involved in government and public sector tax, said: ‘this opens the way for public sector bodies to explore innovative ways for reducing cost of delivery, by sharing back office functions, or indeed outsourcing third parties who can drive greater economies of scale.’

Kerry Hallard, CEO of the National Outsourcing Association, had high praise for these changes. She said: ‘We applaud this common sense initiative from the government. The coalition has already invested £88 billion into outsourcing; they have done so because they know it works.

‘The introduction of VAT refunds for suppliers will enable many more public departments to take advantage of the cost savings and service improvements that outsourcing can provide. As a result, we expect this change to bring significant growth to the outsourcing industry.’

However, Hallard also warned that government departments will need to shape up in the way that they manage their outsourcing contracts, if they’re going to make their new outsourcing deals effective.

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Members of Parliament have concluded that ‘taxpayers have been left exposed’ after the failed outsourcing of an NHS hospital to private operators.

Hinchingbrooke Hospital in Cambridgeshire was outsourced to Circle Holdings in 2012. However, Circle Holdings opted to pull out of the deal in January, after it became apparent that the Care Quality Commission (CQC) was on verge of releasing a damning report on their operations.

The independent regulator found causes for concern regarding management, patient safety and staffing. The trust also became the first in England to be rated as inadequate for medical care. Circle Holdings has since disputed these claims.

MPs have condemned the fact that the bill for this ‘ultimately unsuccessful experiment’ will be paid in part by UK taxpayers, as Circle Holdings and the NHS were both culpable for some of the financial risk.

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After winning new outsourcing contracts with a global telecommunications provider and a prominent UK bank, BPO and call centre provider Firstsource are initiating a recruitment drive to fill 200 jobs in the North East of England which will soon become available.

The new roles will be split between work sites in Middlesbrough and Sunderland. A series of Firstsource recruitment open days will be held over the next four weeks in those regions, beginning tomorrow at the Marriott Hotel in Sunderland, then later at Fountain Court, Grange Road, Middlesbrough on the 25th and 26th of March.

Firstsource Solutions HR officer Niki Barker commented: “Firstsource is delighted to be able to continue to bring new employment to the area at the same time as boosting the level of service we are able to provide to some of Britain’s best known companies."

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A survey conducted by campaign group We Own It has found that the majority of the UK public would like to be consulted before the public sector outsources major operations.

68% of those surveyed believe that the public should have a legal right to be consulted before the public-private contracts are signed, with the same individuals believing that they should be given greater access to information regarding those deals.

Individuals of all political leanings supported these ideas, but the majority identified themselves as Labour and UKIP supporters.

Roughly half of those polled were opposed to the number of services being procured by the private sector, with less than a quarter hoping for more public services to be run by private companies.

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BDO’s 2015 Technology Outlook Survey has revealed that the number of tech firms that either offshore or outsource their IT services has doubled in the past two years. Furthermore, the number of firms who say they are likely to outsource either IT or manufacturing processes to offshore locations has tripled, from 5 per cent to 14 per cent.

Amongst those firms that do currently outsource, the percentage that are outsourcing IT services and programming stands at 70 per cent, an increase from the 54 per cent of firms that answered similarly last year.

Aftab Jamil, partner at BDO, attributes this rise to the decreasing pool of skilled labour in the domestic market, remarking that “Locations like India and China are producing more engineers than the United States at this point in time, so given the talent pool that is available in the locations it is easier – even it’s no longer much more cost effective – to find the talent that you need.”

The survey found that 23 per cent of CFOs consider a lack of skilled workers as the greatest challenge to industry growth.

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Davide Cervellin, Head of EU Analytics at eBay, has said to Sourcingfocus that outsourcing data analytics to third party specialists can be a good move for companies looking to speed up their processes.

Cervellin had previously been giving a talk on how to make your organisation data-centric. A large portion of his talk emphasised the importance of data analytics to the financial side of any business. He also claimed that the modern Chief Financial Officer (CFO) needs to have a good understanding of technology and data - Cervellin himself reports directly to eBay CFO Robert H. Swan.

In a short chat after the talk, a Sourcingfocus representative asked Davide Cervellin whether outsourcing analytics is a good idea for companies. He responded that there are clear benefits to outsourcing anayltics, such as speeding up the process and attaining results more quickly, but that companies also need to approach outsourcing analytics with caution.

'It can be a good idea but can also be risky.' he said, 'you need a very strong contract in place with your [supplier] to protect your data.'

So outsourcing analytics is best left to smaller companies, while large companies are best off keeping those processes in-house?

'Not necessarily. The thing is, regardless of the size of your company, outsourcing analytics can speed things up massively.'

To a company the size of eBay, data is one of the most valuable resources available, hence why it has to be protected so assiduously. EBay itself suffered a major data breach last year, resulting in all users having to change their passwords.

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Read this next: US Healthcare Companies Embrace Non-Traditional BPO

Copeland Borough Council is faced with growing pressure from staff unions following the authority’s decision to outsource services to private sector providers.

Dan Gow, regional organiser of the GMB trade union, claims that “History has shown us that privatisation will clearly have a huge impact on employees terms and conditions whilst private employers seek to increase profit margins from their contracts”.

Three trade unions are calling for a vote of no confidence in Copeland Borough Council’s leadership structure, as well as a series of public meetings and debates.

Copeland Borough Council is facing an enforced budget cut of £1.48m in 2015/16.

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Saturday saw luminaries ranging from David Cameron to Bollywood superstar Amitabh Bachan gather to unveil a statue of Mahatma Gandhi in Parliament Square, marking 100 years since Gandhi left South Africa for India to begin his independence struggle.

Today it has emerged that Indian ITO provider Infosys contributed £250 000 to the metalwork figure, the highest donation so far. Earlier this year, the firm’s cofounder N R Narayana Murthy donated £200 000 for the statue, amongst a host of contributions from fellow Indian business leaders.

Continuing Gandhi’s philosophy of mutually beneficial Anglo-Indian relations, Infosys - headquartered in London - employ 3000 people in the Britain, earning almost $1 billion in revenue from business within the UK.

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Yesterday, Serco announced that it intends to sell its BPO operations. This news is hardly a surprise after Serco Group's poor performance in 2014, for which the company has announced operating losses of £1.3 billion.

Serco's BPO portfolio includes offshore operations Intelenet and Infovision, based in Mumbai and Delhi respectively, and Serco Listening Company Ltd, a call centre business that the company acquired in 2011.

The group has initiated a rights issue in order to raise £555 million - Serco desperately needs to reduce its current state of debt. The sale of Serco's BPO businesses will begin after 17th April when the rights issue closes.

'The sale of the BPO portfolio has two distinct disposal transactions, with a view to maximising the enterprise valuation.

'The first transaction is in respect of the majority of Serco’s private sector BPO operations, including the businesses acquired through the acquisition by Serco of Intelenet in 2011 and Infovision in 2008, and selected additional delivery locations in the United Kingdom, Poland and the Middle East,' the group said when filing with the LSE.

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Parts of India’s iconic state-run railways could potentially be outsourced in future, following revelations by Railway Minister Suresh Prabhu today.

Speaking at a panel discussion at the India Today Conclave, Prabhu admitted that "Neither privatisation nor total government control is the solution to the problems of Railways." The Minister refused to elaborate upon the "legislative changes" he is seeking to address these issues, but there remains a strong possibility that the state will seek large-scale outsourcing contracts in an effort to improve the finances and efficiency of the embattled Indian Railways.

This follows the announcement in latest Railway Budget in February that the state would look to enter into joint ventures with the private sector, and soft-financing from other nations, as it seeks to modernise. In October, the railway invited private organisations to sell reserved and unreserved tickets, much to the chagrin of local trade unions.

The rail network, which is the 4th longest in the world and carries a record 8 billion passengers, has suffered from a lack of investment, upkeep and repair in recent times. To remedy the neglect, the railway operator plans to add 4,000km of new lines by 2017, as well as significant gauge conversion, doubling and electrification of its existing aging lines.

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