Indian group fuels UK public waste row

The head of one of India’s biggest IT outsourcing companies has waded into the debate on UK public sector efficiency savings, complaining of an “old boys’ network” in government procurement.

In an interview with the Financial Times, Vineet Nayar, chief executive of HCL Technologies, hit out at the “stranglehold of a few companies” in Britain’s £17bn market for public sector technology.
EDITOR’S CHOICE
Watchdog chief’s pay to test politicians - Feb-14
National pay bargaining ‘does real damage’ - Feb-04
Whitehall ponders a commercial future - Dec-14
Civil servants face redundancy deal cuts - Dec-05
Pay for results, public sector told - Dec-01
Labour seeks £9bn Whitehall savings - Nov-29

His comments come at a sensitive time, with government “waste” emerging as a big issue in the general election campaign. Critics of the government have seized on apparent inefficiencies in IT spending.

As part of its promised efficiency savings, the Tories pledged to loosen the grip a small number of companies have on the market.

“Your contracts are bad, your competition is limited,” Mr Nayar said of the UK public sector. “All we are asking is for a level playing field.”

He said HCL, whose private sector customers include Rolls-Royce, KPMG and Vodafone, could run IT services on behalf of clients for about 20 per cent less than its western rivals. Most of its 60,000 employees are based in India.

He said many UK public sector bodies were unwilling to select or even shortlist HCL, in part because of their strong relationships with existing suppliers.

Some procurement experts lent significant support to his comments.

“The UK [public sector] IT industry is probably the most concentrated in history,” said Patrick Dunleavy, chair of the public policy group at the London School of Economics. While in recent years the government had sought to diversify its suppliers, it had been “woefully poor at getting the costs down”, he said.

Prof Dunleavy estimated that five companies, including HP Enterprise Services, IBM and BT Group, had a UK public sector market share of about 90 per cent.

Through Axon, its British subsidiary acquired in December 2008, HCL has several UK public sector clients, including Birmingham and Manchester city councils, Transport for London and the Metropolitan police.

The £441m purchase of Surrey-based Axon, the former FTSE 250 technology services company, was the Indian outsourcing sector’s biggest overseas takeover.

Operators in the industry have increased their presence in overseas markets to enable them to get closer to clients. Such companies have also sought to enhance their cost-cutting image by providing a wide range of services for clients.

In response to Mr Nayar’s comments, the Office of Government Commerce said public sector bodies were obliged to “adhere to strict legislation set out by governing entities such as the European Union and the World Trade Organisation”.

“In most cases, public contracts should be advertised in a transparent way that avoids discriminatory clauses,” it said, adding: “Members of the WTO government procurement agreement benefit from this legislation more directly. It is worth pointing out that at present India has not joined the WTO GPA.”

Jonathan Steel, chief executive of IT consultancy Bathwick Group, said of the UK public sector market: “Clearly, you’re going to have people who know ­people and they will be at an advantage in sales ­situations.

“Having said that, if there was any suspicion of old boys’ networks, that’s going to be blown away by the current financial ­crisis.”