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For UK consultants and systems integrators (CSI’s)

Vol. 4 No. 8, 4 April 2005

This issue is sponsored by:

This issue news

Parity predicts rise in pay rates
Unilog prepares for UK growth
HP hires new CEO from NCR
Northgate builds local government presence
SBS bids for £4.6bn defence deal
Further information - feedback/pass on to a colleague/remove from mailing list

RECRUITMENT NEWS

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1. PARITY PREDICTS RISE IN PAY RATES

Freelance consultants and contractors can look forward to higher day rates as a skills shortage returns to the IT market.

According to consultancy and services group Parity, businesses may have to increase contractor and freelance consultant pay rates by up to 15%, or outsource the management of contractor pools to specialised third parties, to secure qualified contractors and ensure projects do not overrun as the result of poor staffing.

Jeff Brooks, sales director at Parity Resourcing Solutions, commented: "High demand means that contractors and consultants are once again finding themselves in the fortunate position of being able to pick and choose the projects they work on. Businesses therefore run the risk of losing out if they do not offer much more attractive day rates, confirm contracts more quickly and secure longer-term agreements."

Brooks said that skilled project and programme managers, as well as IT development consultants, are in short supply, jeopardising project implementations and potentially causing costly delays.

To counter the problem, he suggests contracts must be reviewed and renewed at least six weeks before the date they are due to expire - businesses that fail to do this face losing not only temporary staff, but also expertise and knowledge built up during a project.

2. UNILOG PREPARES FOR UK GROWTH

Paris-based IT consultancy and services provider Unilog is planning to take on more staff in the UK and Germany this year, following an increase in employee numbers in France in 2004.

Unilog recruited 12% more staff last year to reach a total employee roster of 7,438 by 31 December. It said most of these additions were made in France, but confirmed that it will be running recruitment programmes in the UK and Germany through 2005 as these subsidiaries continue to recover in an improved European economic environment. Key appointments in the UK will be to the firm's SAP practice.

Alongside its recruitment plans, Unilog announced that its 2004 net profit rose 63% to €33.5 million (£23 million), on revenues rising 11% to €657.4 million. Unilog said France led the way last year with a gain of 11% in operating profit. The UK narrowed a 2003 €2 million operating loss to €700,000, while Germany reduced a 2003 operating loss of €5 million to €1.1 million. Switzerland showed an operating profit of €600,000.

The improvements across Europe have allowed Unilog to forecast stronger organic growth in 2005.

3. HP HIRES NEW CEO FROM NCR

HP's decision to name former NCR chief Mark Hurd as its CEO and president has created a backlash from analysts just a week after his appointment.

Hurd replaced Carly Fiorina who was expelled from the top job in February after failing to reach profitability targets set in the wake of HP's $19 billion acquisition of Compaq in 2002 and refusing to cave in to demands from analysts and investors to break up the company to create an IT services-led firm.

A 25-year NCR veteran and most recently president and CEO, Hurd was the unanimous choice of the HP board, based on his track record of leading a complex organisation and his strong executive and personal qualities, according to HP non-executive chairman Patricia Dunn. He built his reputation on turning around lacklustre NCR, and is expected to attempt a similar process of cost cutting and business optimisation at HP.

But analysts suggest he may not be the right choice for the job. With a one-company career at an organisation with revenues of $6 billion - against HP's $80 billion - Hurd will be under significant pressure to make a quick decision on how to keep services and products together profitably within HP or how to break up the company.

Some analysts believe such swift decision making is not his style and that he will take time to run the rule over previous acquisitions before cutting costs and finding a way forward. Like Fiorina, Hurd has no short-term plans to break up the company and free HP's IT services business from its PC and printer businesses - a decision that has drawn scorn from financial and industry analysts.

Despite the analysts' misgivings, HP held its ground saying Hurd faced no preconditions on strategy from the board.

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4. NORTHGATE BUILDS LOCAL GOVERNMENT PRESENCE

Northgate Information Solutions is extending its reach in the UK local government market with the acquisition of Viridian IT services subsidiary Service and Systems Solutions (Sx3). Northgate, a supplier of outsourcing and software applications to the local government, public safety and HR markets, will pay £155 million cash for Sx3.

Northgate claims the acquisition will add scale to its IT managed services, introducing new opportunities in the education and utilities markets, as well as broadening its appeal in local government through housing and revenues & benefits applications.

The acquisition is expected to be earnings enhancing for Northgate in the year ending 30 April 2006 and is expected to generate annual cost savings of £5 million after an initial spend of £6 million.

In the six months to 30 September 2004, Sx3 reported an operating profit of £4.8 million and revenue of £117.3 million. Its full-year results to 31 March 2005 are expected to show significant gains on the previous year. Sx3 closed the year with about 1,100 staff who will augment the 2,300 employed by Northgate.

The Sx3 acquisition is a further step in Northgate's strategy of becoming a leading IT services and software provider in the public sector and HR markets. In January 2004, it paid £150 million to acquire HR software and payroll services specialist RebusHR and, most recently, in February 2005, paid £13 million to buy local government software supplier MVM from Anglian Water Group.

5. SBS BIDS FOR £4.6bn DEFENCE DEAL

Siemens Business Services (SBS), the ailing IT services subsidiary of engineering giant Siemens, has resubmitted a €6.7 billion (£4.6 billion) bid for the Hercules contract to modernise Germany's armed forces IT systems.

SBS has re-bid as leader of an alliance with IBM, following the withdrawal of Deutsche Telekom IT subsidiary T-Systems from a consortium including SBS and IBM in February.

The new SBS and IBM consortium is the last remaining bidder for the 10-year deal, but it is not guaranteed to win a contract race that has been fraught with difficulties, including the collapse of negotiations between the German defence ministry and another consortium.

For SBS, however, the contract could be a key factor in whether it stays in the Siemens group or is sold off. Siemens CEO Klaus Kleinfeld has said he is open "to all options" regarding SBS and will no doubt take the outcome of the Hercules bid into consideration in any decision on SBS' future (MCN Direct 4-5).

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