Industry news

The NOA has commented on George Osborne’s budget as he unveiled tax cuts to lure major companies to London and promote growth through boosting enterprise.

The Chancellor announced a blitz on red tape and a reduction in the cost of doing business in the UK.

The budget includes cutting corporation tax by an extra penny. Combined with previously planned cuts that means a 2p cut on April 6 from 28p to 26p in the £, falling to just 23p in 2014/15, 11p less than France and 7p lower than Germany. A low rate of corporation tax of just 5.75 per cent will also be used to lure major multinationals who are especially welcome in the UK.

Andy Rogers and Bharat Vagadia, the National Outsourcing Association (NOA), commented: “The National Outsourcing Association welcomes the Chancellor’s budget, and in particular the commitment made to boosting enterprise in this country. New measures, including an increase in Income Tax relief on the Enterprise Investment Scheme, and the introduction of a new Enterprise Capital Growth Fund which will provide more than £37.5 million of equity finance to SMEs, are clearly aimed at easing the burden on SMEs.

“It’s clear that those looking for Mr Osborne to scrap the measures introduced after last year’s Spending review were always likely to be disappointed by today’s announcement. However, it’s clear that the government is looking to make good on its recent pledge to attack what the Prime Minister calls the ‘enemies of enterprise’ and by offering support to British entrepreneurs, it’s clearly good news for those looking for a more diverse range of outsourcing suppliers, and not just those able to offer the fattest contracts.

”Indeed, today’s budget announcement should ensure that the pool of smaller suppliers able to take a slice of the public sector pie will become even deeper, which perhaps signals a commitment from the government towards a rise in multi-sourcing.

“With this in mind, perhaps it’s a surprise that we’ve seen no pledge from the government in terms of training those in the public sector to deal with this rise? Very few workers in the public sector will have any experience of how to manage a number of different suppliers effectively, so perhaps it would have been a good move for the government to set aside some budget towards training public sector workers in this respect? Given the expected rise in more outsourcing, more private sector engagement within the public sector, and the likely scaling back of the public sector workforce, it would have made sense to invest more in training to make this workforce increasingly mobile.

“This investment in training might even have been expanded to further support smaller enterprises, which have no real experience in dealing with contracts. Another way the Chancellor could have demonstrated this commitment to enterprise is to introduce incentives to smaller organisations looking to bid for public sector contracts, perhaps by making the bidding process itself tax deductible.”

Not-for-profit business group argues tax and red tape plans should have gone further

One of the UK’s leading business organisations is welcoming several short-term measures to boost enterprise announced in today’s Budget – but arguing that more must be done in the long-term if small businesses are to truly drive economic growth and job creation.

The Forum of Private Business believes substantial measures on fuel duty – including an immediate cut from 6pm tonight and cancelling annual rises that had resulted from the introduction of the fuel duty escalator – should provide some cash flow relief for struggling small firms.

Equally, the Forum is welcoming a range of small business tax breaks including lower rates for businesses based in 21 new ‘enterprise zones’, increasing tax relief available under the Enterprise Investment Scheme and the decision to keep Community Investment Tax Relief contrary to recommendations made by the Office of Tax Simplification (OTS).

However, while the Forum also welcomes the Government’s continued commitment to reducing corporation tax overall, it is disappointed that small firms’ corporation tax bills are not being reduced by a similar rate to the higher level paid by big businesses, which the Chancellor is now slashing by 2% in April - double the reduction that had been planned – and from 28% to 23% by April 2014.

The Forum believes a number of opportunities have been missed for real root-and-branch tax simplification and radical reforms removing small firms from tax wherever possible – incentivising small businesses charged with leading economic recovery, rather than pandering to large companies. In its submission to the 2011 Budget the Forum called for the lower corporation tax rate to be cut to 17%.

In particular, the organisation is concerned that simply lowering from £18 to £15 the threshold price of goods shipped via the Channel Islands on which no VAT is payable will not stop large companies exploiting Low Value Consignment Relief (LVCR).

The Forum agrees with the pressure group Retailers Against VAT Abuse (RAVAS) that the real test is whether businesses that do not have offshore facilities can now compete on an equal basis with their counterparts on the Channel Islands. The answer for smaller retailers – including those selling CDs and DVDs which will still have to charge VAT – is clearly no.

It is important that the Government’s plans to work with the European Commission to limit the scope of the relief so that it can no longer be exploited for a purpose other than what it was not intended for stops the LVCR trade once and for all.

The Forum also believes that merging Income Tax and National Insurance (NI) into a single payroll tax is a step towards simplifying the UK’s complex tax system, and welcomes the announcement of a consultation into this, but is concerned that NI – a tax on employment at a time small businesses are charged with creating jobs - is still rising for most firms.

With the ability of small businesses to employ people under scrutiny, and a raft of employment legislation covering issues such as the default retirement age, pensions, parental leave and agency workers on the horizon for 2011, the Government’s plans for red tape have been keenly anticipated by business owners struggling to cope with the annual £12 billion cost of compliance bill.

Providing it produces measures that actually reduce small firms’ administrative burden, a review of all existing business laws is both welcome and long overdue - as is a specific review of health and safety law with a commitment to scrapping all unnecessary health and safety red tape.

In its capacity as Secretariat of the All Party group on Micro-business, the Forum is also backing the Government’s announcement that all firms with 10 employees and under – both start ups and established businesses - are to be given a three-year holiday on incoming red tape.

However, the organisation is concerned that the moratorium will not apply to red tape stemming from EU law – which creates the majority of regulatory hurdles for small firms - and is also calling for similar regulatory relief for larger SMEs that have also been charged with creating the jobs set to be lost in the public sector.

The Forum is also welcoming the announcement of an additional 50,000 apprenticeships over the next four years, but believes more support is required to help entrepreneurs create these apprenticeships within their businesses, and proposed changes to make planning laws more business friendly.

“It was important a Budget heralded as being pro-enterprise focused on easing the dual burdens of tax and red tape – two of the biggest barriers to business growth and job creation facing small businesses. In that sense, we weren’t disappointed and this was certainly more than just a nod in the direction of UK SMEs,” said the Forum’s Chief Executive, Phil Orford.

“However, while there have been some definite steps in the right direction the Government could have gone further in reducing taxes and making the tax and regulatory systems more proportional to all small businesses so that they incentivise to entrepreneurship rather than act as a barrier to it.”

Mr Orford added: “In summary, there are some good short-term measures here but more radical changes are required over the longer term.The lessons of history show that you achieve rapid, widespread small business growth – and therefore economic growth - by removing entrepreneurs from the stranglehold of tax and red tape as much as is practically possible.

“While they will broadly welcome many of the Chancellors’ announcements, British business owners will be looking for much more in the way of real actions in the weeks, months and years that lie ahead.”

Indian outsourcing vendors like Infosys, Cognizant and Tech Mahindra are set to gain new projects worth hundreds of millions from AT&T's acquisition of T-Mobile.

AT&T has announced that they have entered into a definitive agreement under which AT&T will acquire T-Mobile USA from Deutsche Telekom in a cash-and-stock transaction currently valued at approximately $39 billion. The agreement has been approved by the Boards of Directors of both companies.

With this transaction, AT&T commits to a significant expansion of robust 4G LTE (Long Term Evolution) deployment to 95 percent of the U.S. population to reach an additional 46.5 million Americans beyond current plans – including rural communities and small towns. This helps achieve the Federal Communications Commission (FCC) and President Obama’s goals to connect “every part of America to the digital age.”

“This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation’s future,” said Randall Stephenson, AT&T Chairman and CEO.

Renault has selected arvato to develop and manage a front-office contact centre for Renault owners across the UK and Ireland. From April, the multi-channel solution will be the first point of call for after sales enquiries including customer enquiries, requests for information and complaints reception handling. The dedicated arvato team will be based in Twickenham.

The appointment expands arvato’s existing back-office relationship with Renault, which has already saved the business over £1.7million a year since 2007, through streamlining its B2B fleet vehicle services such as appointment and demonstrator bookings.

“arvato has already proved its strength as a true business partner to Renault in our B2B operations, and has demonstrated its ability to continually improve processes,” said Andrew Kirk, purchasing manager, Renault. “Its professional team, combined with an innovative and flexible approach to service delivery will enable us to deliver excellent customer engagement as well as considerable savings for the business.”

“Renault’s strong brand reputation has to be matched by its customer service and engagement, so it’s critical any enquiries are dealt with quickly and effectively, and any commercial opportunities are qualified and correctly progressed,” said Mark Brown, Managing Director, Contact Centres & Loyalty, arvato UK. “We’re delighted to expand our long-standing relationship with Renault, which will enable us to develop even greater savings and efficiencies for the business and help support its continued growth in the UK and Ireland.”

According to IT recruitment specialists, Greythorn, the 2012 London Olympics will require at least 5,000 extra IT and Telecoms staff to develop and control the systems that are necessary in order for the event to run smoothly and to plan. The new personnel will be engaged in everything from making sure that news networks can upload their feeds to keeping cyber-terrorism at bay.

Greythorn have calculated that the average salary for the IT jobs will be £48,500 p.a. making a total of just under £250m in annual salaries.

IT support is rapidly becoming one of the UK’s largest employers with nearly 1.5 million workers currently engaged in the industry.

It is anticipated that the London Olympics will create well over 100,000 jobs which are expected to become permanent.

Cathay Pacific Airways and IBM have announced the signing of two multi-year agreements whereby IBM will provide Application Support and Maintenance Services and Application Development Services as part of Cathay Pacific's plans to change its IT operating model and tap into external service providers to deliver key services and solutions.

Cathay Pacific will leverage IBM's Application Support and Maintenance Services to manage over 80% of its application portfolio. IBM is also included in Cathay Pacific's panel of providers for providing Application Development Services. Both services will be backed by IBM Global Business Services consultants specialised in the travel and transportation industry, and IBM development resources through the company's Shenzhen Global Delivery Center and the Center of Excellence for the Aviation Industry.

"Partnering with IBM is consistent with our strategy to leverage the external market to assist in delivering solutions that support delivery of world-class service to our customers,” said Tomasz Smaczny, Director and Chief Information Officer of Cathay Pacific. "We look forward to a long-term relationship with IBM and being able to capitalize on IBM's capabilities across technology and business processes.”

"We are pleased to partner with Cathay Pacific to integrate our business insight and technology expertise to enable Cathay Pacific to deliver on its long-term growth strategy."said D.C. Chien, General Manager, IBM Greater China Group. "We believe we can help Cathay Pacific in its efforts to drive customer acquisition and loyalty while growing shareholder value and delivering sustained service levels and controlling costs."

Leading airport company BAA is outsourcing the delivery of its IT services to a consortium led by Capgemini UK plc in a five-year contract valued at approximately £100 million.

BAA says that the move will be key to improving the airport experience for all its stakeholders, including passengers, staff, airlines and retailers, at Heathrow and the company’s other five UK airports. The consortium, assembled and led by Capgemini as prime contractor, includes SITA, Atkins, Computacenter and Amor Group.

Capgemini will be responsible for the delivery of BAA’s core IT services on a day-to-day basis, including applications, infrastructure and projects, for some 10,000 users. The service will cover BAA’s six UK airports and will start in May after a two-month transition. BAA will retain responsibility for IT strategy, stakeholder management and ensuring the quality of IT services in collaboration with Capgemini. Some 200 staff will be eligible to transfer to Capgemini and its partners under TUPE conditions.

Philip Langsdale, chief information officer at BAA, said: "Because our focus is on running airports, it makes sense for specialist IT functions to be outsourced, which is also much more cost effective. We want to improve our resilience and ensure that we have the right systems in place to share the right information at the right time. Capgemini will have a key role in supporting this.”

The National Outsourcing Association has suggests areas it would like to see covered in the Chancellor’s budget.

Martyn Hart, the National Outsourcing Association (NOA), commented: “In the wake of the government’s Spending Review last year, the Chancellor’s budget will provide an early opportunity to gauge how successful it has been, and which areas will need to tighten their belts as a result. The outsourcing industry is one which seems poised to benefit more than most, but there are still a number of areas which the NOA would like to see the Chancellor supporting in his announcement on March 23rd.

“Perhaps one of the areas where we could see an increase in funding is training. The government’s recent focus on encouraging smaller businesses to bid for public sector contracts, means that we are likely to see a rise in multi-sourcing in the public sector, with a number of smaller suppliers providing a range of different services, instead of just one large single source supplier.

“But how well equipped is the public sector to manage multi-sourcing contracts? Very few workers in the public sector will have any experience of how to manage a number of different suppliers effectively, so perhaps we’ll see the Chancellor setting aside some of the budget towards training public sector workers in this respect? They might even feel that it would a good idea to expand this investment in training so that it includes smaller enterprises, who have no real experience in dealing with contracts.

“In recent weeks, we’ve seen the Prime Minister attacking what he calls the ‘enemies of enterprise’ and pledging to support British entrepreneurs as part of his plan to back small firms. Perhaps, however, the best way he could demonstrate this commitment to enterprise is to introduce incentives to smaller organisations looking to bid, perhaps by making the bidding process itself tax deductible?

“The NOA would also like to see the government investing in a means of measuring the performance of outsourcing suppliers, to ensure that the best providers are used, rather than just those capable of providing every service as part of a big contract. The government could use the budget to announce a new initiative aimed at kitemarking the performance of suppliers, with the best, most suitable performing suppliers receiving a green kitemark.”

Braintree district council has advertised for an outsourcing company to provide it, three other councils and a housing service with a wide range of ICT equipment and services.

The contract, with a value of between £14m and £34m over up to seven years, is being set up by Braintree along with Castle Point, Rochford and Colchester councils, which currently have separate deals with three companies.

The services will also be used by Colchester Borough Homes, a company set up by Colchester to run its housing services.

A tender notice in the Official Journal of the European Union says the deal will include information systems and servers, PCs, telecoms, networks and audio-visual equipment. Consulting, software development, internet and support, plus business and management consultancy and related services will also form part of the contract.

HR Steering Committee Summary

Wednesday 16th March

Developing talent and encouraging professionalism in the outsourcing sector has never been more important. The recession and subsequent spending cuts have had a serious impact on staff numbers and organisations have had to rethink the way in which they recruit, retain, interact and train their employees with the changing market.

This steering committee, chaired by Yvonne Williams, NOA Representative for Individual Professional Development, was brought together by the NOA with the objective of creating best practice and recommendations through a white paper.

Key Points

• BPO market is growing and the government is placing a lot more emphasis on outsourcing.

• Indian market is somewhat ‘overheating’ and is not as cost effective as it used to be.

• Latin American is proving to be a competitive offshoring destination, the central USA market is emerging while the Nordic market is also opening up.

• Growth potential in HRO but it can bring a lack of intimacy.

• HR aware that each department in an organisation has its own culture.

• More HR operational functions are being outsourced especially from companies who want to grow quickly.

• Outsourcing issues include length of contracts and exit strategies. Industry is nervous about long contracts but they are needed to gain trust and build relationships.

• Benchmarking is becoming more commonplace.

HRO Processes

• RPO - tendency for a single source supplier and this can be based offshore. Senior hirers generally have been kept onshore and most firms use Executive Search for this through their PSL.

• Payroll – traditionally outsourced, sometimes offshore.

• Learning and Development Training – delivery and development is rightshore and local.

• HR Operations – majority can be outsourced. Complex case management usually internal due to potential damage to branding. For example: Disciplinary / Grievance – usually internal.

• Reporting – usually internal

• Business Intelligence – data capture/mining – specialists used

• Vendor Management – internal to keep control

• Pensions / Admin – specialists used

• References / Security – specialists used

• Wellness / Staff Welfare – internal or specialists used – can effect branding

• Mobility / Tax / Visas - specialists used

• Repatriations – specialists used

• Psychometric Testing – specialists used

HR Challenges

• Branding

• Grievance / Discipline

• Motivation

• Cultural Awareness

• Legislation – pensions, employment rights, pan-European diversity, visa schemes, immigration.

• Work Councils

• Data Protection

General Challenges

• Supplier attrition

• Client Relationship Management

• Service Delivery Management

• Vendor Management (individual)

• Acquisitions / Mergers (of suppliers) and corporates

Action Points

• First Q2 steering committee to be organised mid-April focused on the HR outsourcing contract.

• Details of CSC research into employability and job creation to be sent to Yvonne.

• Steering committee notes / insights to be included in the upcoming lifecycle update.

• HR suppliers to present at next steering committee. Even balance of suppliers, end-users and analysts.

• EOA / Events calendar to be sent to all attendees.

Attendees

Yvonne Williams – NOA, Paul Corrall – Sourcingfocus.com, Anita Tilly – Capgemini, Diana Leleja – Runway, Rachel Lord – RPC, Jim Brannan – Bcerta, Kristina Holland – Bleum.