Industry news

Public sector organisations have spent more than £175m through the G Cloud portal, resulting in not only cost savings but more contracts for SME’s. 60% of the IT services being procured through G Cloud have been won by small and medium sized companies. Francis Maude has also claimed that a further £100m will be spent with small companies that provide IT services to the government by 2015.

Huddle sees 2012 G-Cloud success

With the aim of ensuring that £10billion of public sector spend on contracts is spent “in a way that delivers economic growth, advantages and benefits for our businesses and social benefits”, the Scottish Government passed the Procurement Reform (Scotland) Bill with a unanimous vote.

However, members of the Scottish Parliament (MSPs) voted against living wage amendments to be added to the bill despite the Scottish Labour party calling for action. Provisions that were previously announced relating to the living wage will still be retained.

Scottish Labour MSP James Kelly argued that by making the living wage mandatory within public sector contracts, it would make a “massive difference” to the 400,000 people on lower wages. The current living wage is £7.65 per hour, £1.34 higher than the national minimum wage. However, following on from previous comments, Deputy first minister Nicola Sturgeon said making the living wage mandatory within public sector contracts would breach EU procurement law.

Sturgeon commented that “We have done a difficult job well. We have provided a framework for public procurement that allows us to develop the guidance and the regulations that will give effect to the economic and social objectives that many people – rightly – want public procurement to deliver.” She went on to say “We are determined to clamp down on tax avoidance, blacklisting and the inappropriate use of zero-hours contracts and to do everything that we can to promote and further the living wage.”

The bill will be submitted for Royal Assent once it has been scrutinised by the advocate general, the attorney general or by the secretary of state for Scotland.

Lufthansa is planning to outsource 1,500 ground staff jobs as part of their cost cutting strategy. Lufthansa plans to transfer the staff to separate companies that will have to compete with third party suppliers for the Lufthansa contracts. This is to help them compete with the likes of Ryan air and easyjet.

SITA awarded multi-million IT contract with airline

Prison reformers have called for outsourcing giants G4S & Serco to be banned from bidding for any future government contracts until major fraud investigations have finished their investigations into their criminal justice operations.

A dossier has been published by the Howard League for Penal Reform, of a number of incidents where G4S and Serco have failed to deliver on their justice contracts.

Its been a mixed month for Serco

Retaining staff seems to be an industry-wide issue for Indian outsourcing service providers, and it’s been reported that Infosys are the latest organisation to be suffering. According to the Economic Times, “Infosys is losing its cachet as the employer of choice for a generation of young IT workers, with staff leaving at an unprecedented pace”. Attrition rates were a record 18.7% at end-March (2.4% points higher than last year), almost a fifth of the company’s workforce. As a comparison, the attrition rate at Tata Consultancy Services was 11.3%.

Infosys will need to work hard to keep their remaining talent and to ensure they attract new graduates, something that Infosys President, Pravin Rao is taking steps to rectify. After implementing changes to staff pay and promotional opportunities, as well as tackling the need for more sales, Rao is “confident that once these changes start sinking in ... and growth comes back, attrition will come down," he said.

Infosys raises forecast after outsourcing contract wins

The NOA shares its views on the industry in Lyonsdown’s Business Reporter which focuses on outsourcing and is distributed with the Sunday Telegraph. The report includes features on how many UK companies are in the process of reshoring jobs, the debate surrounding the financial incentives of outsourcing, and an update on the best blogs and apps.

Click here to download the full report.

New research from Grant Thornton indicates that two in five global companies either currently or plan to outsource back office processes. The International Business Report (IBR) from Grant Thornton shows the most common processes to outsource are tax (49%), IT (46%) and HR & Payroll (36%). From the three in five companies that have no plans to outsource, 44% use the reason that they don’t wish to lose control of a key process.

Grant Thornton highlights investment growth in the financial and UK business support services market

Serco recently held its annual AGM and in a bid to air their views, a small group of protesters gathered outside the central London location who say they are “Sick of Serco”. Amongst the protesters were Pat Waterman, Chair of Greater London for NAPO and Cat Hobbs, a director at the anti-privatisation campaign We Own It.

According to a recent poll undertaken by We Own It, nearly 80% of the public think outsourcing company Serco should be banned from bidding on public service contracts. In an interview with IBTimes UK, Cat Hobbs called for “more transparency, more accountability and more of a say for public service users”.

Ever since the controversial news that Serco had been reportedly overcharging the Ministry of Justice for tagging offenders, they have featured in the news almost every week. Some stories have been good (recent contract win with Qatar in the Middle East), but many have been damaging; contract losses, lower margins, requirements for emergency funding, 62% fall in profits last year and a warning that profits would fall a further 20% this year, plus the fact they are still under investigation by the Serious Fraud Office and had suffered a ban on being awarded new contracts by the UK government that ran until January.

Let’s hope their new chief executive Rupert Soames, incidentally grandson of Winston Churchill, can effectively lead the outsourcing giant into battle against these protestors and win over the general public.

BRIC dips, whilst Cognizant excels

According to the report by former City Minister Lord Myners, the Co-operative Group’s current board is "manifestly dysfunctional" and that "radical decisions on governance structure need to be taken very soon - and with resolution - if the Co-op, as my mother knew it, is to be saved."

Outsourcing professional take note!

We at the NOA believe that good governance should be at the heart of every successful outsourcing contract. Get this right and your outsourcing deals have a healthy chance of flourishing, get this wrong and the consequences could be felt for years.

The importance of good governance has increased over the years due to the growing complexity of outsourcing arrangements. Getting the right people, structure and frameworks in place from the get-go is vital and witnessing failures like the Co-op Group should further highlight to outsourcing professionals the importance of governance in outsourcing contracts.

The Co-operative announces plans for 3,000 jobs in Legal Services

A variety of results have been announced. According to HSBC’s emerging markets index, firms across the whole BRIC region suffered a drop in business activity. That said Chinese firms now take 5 out of the top 10 places of the world’s biggest public firms. The other 5 slots go to American companies, with European companies sliding out of the top 10 list this year.

G4S’ results showed a return to growth (4.8% up in Q1) – thanks to stability in developed markets and moreso growth in emerging markets (16% up). Serco by contrast was down.

Cognizant announced bumper results with 35% Q1 revenue growth. Overall revenues now stand at $2.42bn.

G4S profits hit by tagging charge