Crystal Umbrella

Contractors working in the public sector are already starting to feel the squeeze as spending cuts get underway. IT firms who supply the public sector have been advised they will need to cut their fees by 20%. This request was made at a meeting of all nineteen IT suppliers to the government. At present these firms charge the government in the region of £16 billion.

Francis Maude, cabinet officer minister, confirmed that this “marks the start of the process to renegotiate key government contracts” regarding “everything” that these businesses “do for the government” in a bid to cut costs.

The suppliers involve include such technology giants as BT, IBM, Fujitsu, HP and Serco. According to IT analysts TechMarketView the government will probably choose to curtail the extent or length of contracts rather than seek to cancel them altogether. The government’s CIO, John Suffolk, will be the man responsible for the contract renegotiations.

Mr Maude commented: “Given the really difficult economic climate we now face, we have to do everything we can to deliver better value for money for taxpayers and that involves taking some tough decisions. I am laying down the challenge to major government suppliers to ask them what they can do to take costs out of contracts. Some of this will come out of margins, but we will also invite ideas on how we can structure things differently to reduce complexity and cost.”

An investigation by Radio Four’s File on 4 has discovered that British IT contractors have been losing out on jobs to non-EU workers because they are cheaper. This programme had previously uncovered BT’s large-scale use of ‘onshore offshoring’ in their quest to reduce costs. A former BT contractor was told that he was being replaced by a worker from India who would cost about half of what he was costing. BT themselves said that they were trying to stop depending so heavily on contractors and that the Indian company was merely providing them with specialist staff.

Businesses can use intra company transfer visas to employ staff from outside the EU, permissible through immigration law if the staff can provide skills which are not available in the UK. BT said that they have a “long standing relationship” with Tech Mahindra and are now just tapping into their “highly skilled workforce”.

The Professional Contractors Group (PCG) has condemned this situation. Their managing director, John Brazier, said: “We had been hearing for some time from contractors that BT may perhaps be one of the worst offenders, replacing contract staff with workers on Intra-Company Transfer visas. Such behaviour reduces opportunities for IT contractors that exist in the UK, and in a recession opportunities should be created, not limited.” He continued, “We believe the system should be amended, and Professor David Metcalfe’s recent comments stating that the Migration Advisory Committee (MAC) will be exploring potential options for doing so are encouraging. We will shortly be making our submissions to the MAC calling for significant amendments to the system. Ideally we would like to see no position filled by Intra Company Transfer without first enduring that no UK worker is available to fill the post.”

Action for Children is seeking 700 ‘techies’ to sleep on the streets for a night in order to experience “what it would feel like to be homeless”. Byte Night is an annual fundraiser involving IT staff and IT contractors. Senior executives from HP, BT and Dell have already asked their staff to join them on the outdoor sleep alongside IT recruiters and politicians. All IT companies, large and small, are requested to become involved. The sponsored sleep-outs will take place on October 2^nd in London, Manchester and Edinburgh.

The aim is to tackle the issue of homelessness among young people and the event has grown considerably since it was launched by 30 technical workers back in 1998. £470,000 was raised by the event last year and it is hoped that this year they can beat the recession and raise £500,000. Suggested sponsorship is £500-£2000 for an individual and £2,500-£5,000 for a team. This is a charity event but it is also likely to be a great networking opportunity for IT contractors and permanent staff alike.

Founder of the event, Ken Deeks, had this to say, “With the country engulfed in a recession, many have predicted this year will be a tough one for fundraising. However, when it comes to the tech industry, the appetite for charitable giving is higher than ever.”

Action for Children Director, Polly Neate added, “The event has allowed us to continue to provide safe and secure accommodation to vulnerable youngsters at risk of homelessness. The continued support from the tech industry is second to none.”

It has been announced that within the next year, 20,000 agency and contract positions with BT will be lost as part of their £1 billion plan to cut costs. The number of external job losses is much higher than expected. This follows 10,000 external positions becoming obsolete last year. It is expected that a similar number of indirect roles will be lost in 2010.

The telecommunications giant has already cut 15,000 jobs during 2009, 5,000 of which were during the past couple of months alone. Global Services, BT’s IT unit, posted a quarterly loss on revenues of around £2 billion, contributing to a loss for BT of £134 million before tax this year. It is, therefore, expected that job cuts at this unit will account for one third of the overall cuts. BT Chief Executive, Ian Livingstone publicly commented that the performance of the unit was unacceptable. The Global Services Unit has been affected by clients searching for cheaper alternative IT provision. It has also misjudged the value of its efficiency savings. To add to its problems, it is also thought that BT has overestimated the value of its key contracts.

The difficulties at Global Services have eclipsed the departments that have been performing competently in this difficult market, such as the Openreach, Wholesale and Retail units.