BAE terminates HR BPO deal with Logica

We have now had confirmation that BAE Systems has terminated its recently let HR BPO contract with Logica (see Logica scores BAE Systems HR BPO deal). Instead, current supplier Xchanging has been given a further year to provide the ‘full service’ right through till the end of December 2013. BAE’s HR function was supposed to transition from Xchanging over to Logica during 2013, but now the contract has been terminated that won’t be happening. Apparently ‘one or two heads’ within Logica have rolled as a result.

This is another sorry story to add to Logica’s recent takeover by Canadian services giant CGI Group (see Logica RIP), and yet more disruption to its day-to-day business (see Hidden implications of the loss of UK HQ’d companies).

The acquisition is also a very good 'get out of jail free' card for BAE if it were thinking of ways to change without the inevitable cancelation compensation. As TechMarketView subscribers know, we have had our misgivings about Logica’s award of the contract from day one (see here). Key details such as number of people being transferred were never revealed, and we never really got a sense how Logica was going to transform the service while driving better margins than Xchanging’s 5%.

Xchanging is clearly keen to make a play on the fact that it has managed to turn the tables on a key rival. We know that Xchanging took the initial decision by BAE not to renew hard, but came back fighting. For instance, Xchanging has since been talking to BAE about introducing new HR self-service systems from SaaS human capital management (HCM) pure play Workday Inc, which competes against the likes of ADP, SAP and Oracle. Workday is in fact today’s big IPO on the NYSE (see here). We also understand BAE has been happy with Xchanging’s SLAs in recent months.

We will be meeting with Xchanging’s CEO Ken Lever next week, so will provide more for subscribers on this surprising turn around then.