Industry news

arvato has joined up with analyst firm NelsonHall to produce a UK Quarterly Outsourcing Index on the value of deals completed, and Q1 2014 results show the value is significantly on the up, with a 168% increase on Q1 2013 results.

The Index reveals that 39 new contracts worth a total of £2.1bn were agreed in the period, representing a 65% increase on figures from the first quarter of 2013. Three quarters (75%) of the contracts were completely onshore agreements, with all work being delivered in the UK. In more than half (59%) of deals, the services in question were being outsourced for the first time, representing new work for businesses in the sector, rather than contract renewals or work transferring between vendors.

According to the Index, the public sector dominated deal activity accounting for 74% of total spend in the first three months of the year. The local government sector alone saw a 58% year-on-year increase in deal values. In contrast, the value of private sector deals decreased by 20% in the same period.

arvato expands into Philippines

The Driver and Vehicle Standards Agency (DVSA) has announced a tender for their End User Computing (EUC) tower services. They are looking for a single supplier for the £12m contract where the successful bidder will be in charge of installation, maintenance and continued support for their end user devices. This is the second tender the DVSA have announced so far this year to replace current arrangements they have with Capita and Atos which both expire at the end of 2014.

DVLA told to increase digital transformation programme

The London Bullion Market Association (association of banks, fabricators, refiners, shippers and brokers involved in precious metals trading in London) is currently preparing to implement new benchmarking regulations from the international Organisation of Securities Commissions (IOSCO), and is contemplating outsourcing the administration of its gold forward offered rates (GOFO) to a third party.

The IOSCO is a global umbrella group for market regulators and outlined a series of principles after the Libor scandal in 2012 (a series of fraudulent actions connected to the Libor (London Interbank Offered Rate) and also the resulting investigation and reaction) with which any institution providing a financial benchmark should comply.

The LBMA is responsible for GOFO benchmark prices which are globally regarded as the international benchmark for pricing a variety of bullion transactions and products.

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