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by Vault Consulting Editors | February 04, 2009

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UK-based IT industry 'zine The Register reports that contractors working on Capgemini's landmark Aspire project have been asked -- nay told -- to take a 15 percent pay cut or leave. Capgemini is justifying the move by claiming that "The current economic climate means that the market rates for contract resources has dropped due to the reduced demand for contractors." Or, in plain English, "we can find cheaper workers."

The move has caused considerable outrage among the affected contractors, with one quoted in the Register accusing Capgemini of "taking advantage of the recession." That would certainly appear to be a reasonable argument: the deal (which is a strategic partnership for transformation and delivery of IT systems for the UK government's tax office), began as a ten-year arrangement in 2004, at which point it was one of the largest IT outsourcing deals in the world. In the process of signing an extension in 2007, meanwhile, it emerged that Capgemini's profits for the lifetime of the deal (now due to end in 2007), would be over £1.1 billion -- around $2.2 billion then, and still a bundle of cash when converted into dollars today (almost $1.6 billion), despite the pound's recent slide. So one would have thought there would be plenty of money to go around. Not so, it would appear.

Of course, Capgemini's action makes sense from a bottom-line business perspective (although their metrics for measuring employee satisfaction are likely to drop through the floor), but in these times of heightened scrutiny of corporate behavior, two important ethical questions arise:

First, can we assume that the firm is going to pass those savings onto its client? The bailout-happy UK government can certainly use all the cash it can get at the moment.

And second, can we assume that as soon as contractor rates recover, Capgemini will force all existing employees to take a pay raise? Or will they wait until "market forces" force their hand?

Reasons to be cheerful

At least one entity -- other than the Republican party -- has reason to be cheerful over the tax-related downfall of one of President Obama's picks for his cabinet. Nancy Killefer, until recently the choice to become the nation's first ever Chief Performance Officer, is an executive at McKinsey & Co., and will presumably now be free to continue in her role with the firm.

And the government's loss would appear to be the consulting industry's gain -- in reporting on her initial appointment, the AP included a segment on Killefer's address to Harvard Business School students in 2004. In it, the AP report says "she told the students that consultants need to focus on operational people below the CEO and get to know them as people. 'Sit on your hands if you have to, but consulting is 75 percent listening,' she said." Seems like sound advice for anyone in the business -- or government, for that matter.

--Posted by Phil Stott

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Filed Under: Consulting

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