Managed Services Presentation August 2008

1. Managed Services PresentationAugust 2008 Octavia Life Ltd

2. Background Market Customers Competitors Appendix

3. Objectives of This Project • The client was a small private equity company with investments in the outsourced training market • They wanted to understand whether there was potential for them to enter the outsourced managed services market – i.e. the temporary provision of staff to major public and private organisations • The brief was originally to spend 5-10 days interviewing the main HR and Recruitment Managers from large organisations to see how they were buying in their temporary staffing requirements • However, I found it difficult to reach a lot of these contacts and was not getting good results • So, I changed approach from bottom up to top down and focused on the market size and opportunity including giving an assessment of the likely competitive threat and barriers to entry • This presentation is the end result of my work

4. Main Temporary staffing recruitment models Source: Reed Business Management Website, Interviews

5. There is some customer uncertainty as to the exact definition of managed services How would you define Managed Services? 2006 Survey Question Asked to HR Directors and Managers by REC. This is their first answer, n=104 • 2006 survey taken by REC (Recruitment and Employers Confederation) showed • Differences in market understanding as to what clients believe is managed services • Clients and the managed agent service provider can have different definitions: • “Every agency has its own spin on what they call these services. Then there is also the issue about what the clients call the issue. We once received a tender from a client in which they used a certain term to describe what they wanted which is different from what we use and what the market uses” - Reed Managed Services • There is also the potential for ‘hybrid’ or combinations of services to be provided • “Managed services can include vendor neutral and also managed services plus they can use hybrid solutions. Hybrid solutions can allow us to tailor RPO (Recruitment Process Outsourcing) solutions and allows us to make bids because they are very complex and diverse and geographic split” – Reed Managed Services A 3rd party working in partnership with you taking control of the Recruitment process from end to end A preferred 3rd party contracted to meet all your recruitment needs itself More usually called Master Vendor A 3rd party contracted to meet your Recruitment needs using other suppliers as necessary More usually called Preferred Supplier A 3rd party contracted to manage a panel of recruitment agencies for you that does not supply staff itself More usually called Vendor Neutral % Agreeing with Definition Source: REC Managed Services Report, Interviews

6. Background Market Customers Competitors Appendix

7. The REC estimates that there is a potential market of 3,800 organisations in the UK for managed services Managed Services Potential Market Size • Public Sector (Local and Central Government) • Penetration may be higher in Local Government because it is being driven by need for cost savings from the centre • “The managed services market is moving forward strongly being driven in the public sector by the Gershwin Report which calls for cost savings. Basically there is Central Government pressure on Local Authorities to reduce their spending in procurement and other areas” – Recruitment Consultant Magazine • Central Government departments also aiming reduce costs • “The system of using managed service providers has been around for a number of years. I used to work at the Financial Services Authority and in 2001 they went down this route.” Head of Recruitment, KPMG • Private Sector requirements vary according to sector • Lower Value End: Supermarkets and Logistics with seasonal and lower skill level staffing requirements • “The market will vary according to cost and which sector you are in. For the sectors such as logistics which need low skilled on-site staff, Adecco can probably provide all the staff and so you would not be bothered about vendor neutrality, you just want the lowest cost” – Recruitment Consultant Magazine • Higher Value End: Financial Services, IT etc with higher expertise level and quality of staff required • “The higher the skill level, the more the focus is on the best person for the job and vendor neutrality is much more important” – Recruitment Consultant Magazine Number of Organisations > 500 Employees Public Sector 500 Private Sector 3,300 Source: REC Managed Services Report, Interviews

8. REC estimates 760 organisations used managed services in 2006, spending £1.5bn Managed Services 2006 Estimated Market Size • In the REC’s 2006 survey of 1,040 HR Directors and Managers, 30% of respondents (in all sectors) claimed they were using Managed Services • However, REC takes 20% to be the number which ‘fully fits with the preferred meaning’ of managed services • Therefore in 2006 • Volume market size of 760 organisations • Average 2006 contract size of £2m pa (REC estimate) • Although some contracts can be as big as £20m • Therefore total market size = £1.5bn • Total recruitment market spend is £25bn, therefore managed services in 2006 comprised 6% of the market by value Number of Organisations > 500 Employees Non-customers 3,040 760 Customers Source: REC Managed Services Report, Interviews

9. 40% of managed services contracts are vendor neutral although there is a trend towards more neutrality Percentage of contracts which are vendor neutral • According to the Business Development Manager of Reed, 40% of the contracts require vendor neutrality • “Some clients will stipulate vendor neutrality and some won’t. 40% of the time, clients want vendor neutrality and so we will not be involved in the supply chain” – Reed • In the REC survey of 1,040 employers, 47% of respondents expected managed service providers to come from outside recruitment and staffing, • The trend in the industry appears to be towards more vendor neutrality: • “In this market, no one model particularly dominates and there is no consensus about which way to go. However, there is a trend towards vendor neutral staffing with the aim being to have technical systems in place in order to cut costs.“ – Recruitment Consultant Magazine • “It is important for us to have a varied network of suppliers. We want a diverse workforce and we do not want Carlisle going to their own suppliers. We want the breadth and we make sure we get a good spread from other suppliers” – Head of Recruitment, KPMG UK • Industry players do recognise achieving this in practice could be difficult: • “There is no real vendor neutrality because when Manpower wins a contract they bring in Brook Street as part of the supply chain. All of our companies are branded Reed whereas Adecco Corp and Blue Arrow have different brands so it is difficult for the client to realise that a supplier might be part of the managed service provider” - Reed Percent Non-Vendor Neutral 60% 40% Vendor Neutral Source: REC Managed Services Report, Interviews

10. The managed services market is expected to grow by 5% per annum in volume terms • The REC expects the managed services market to grow by 5% per annum based on the intention of HR Directors and Managers to buy these services as expressed in the REC survey • “More and more clients are moving to managed services especially because of the direct cost savings” - Reed • Growth is also expected in the SME segment • “I think the managed services market will continue to grow. At the moment it is concentrated with the larger organisations but there is probably going to be more of a move towards the SME market.” – Recruitment Consultant magazine • There is concern that potential economic difficulties could impact upon recruitment and hence the move towards managed services • However, industry players believe that this will provide a boost to managed services because employers will start to rely on temporary staff rather than permanent ones • “In the credit crunch there may not be as much recruitment. However, it means there will not be as much permanent staffing so companies will turn to temporary staff. At any case, we are very, very busy right now” - Reed Source: REC Managed Services Report, Interviews

11. Some of the future trends will lead to reduced agency margins and domination by larger agencies • A key driver in the future will be the extent to which agencies will allow margins to fall. This explains why they are aggressive in developing managed service solutions • This allows them to keep the margin which would be given to vendor independent providers • “The market will go in the direction of the recruiters’ wishes. It depends how far they are willing to go before they say the margins are too thin. At the moment, they might make 20% margins by working directly with customers • However if the customers then say you are going to use a managed service provider, the share will fall to 15% because the managed service provider will probably want 5%. However the share for the recruiter could actually fall to 12% because the managed service provider might say we will cut 2% off costs for you, in order to win the contract. So the recruiter is getting 18% minus the costs from the managed service provider. Their margins are being shaved” – Recruitment Consultant magazine • They can also ensure their other divisions will be a key part of service delivery • “We will do all types of work with the different models. However, we don’t tend to act as a partner supplier. We have enough contracts and the infrastructure to deliver managed services. Reed is massive here and has the expertise” - Reed • The REC report also suggests the following further trends in the industry: • Employers expect to see managed Services could be extended to permanent staff and other activities such as training. • Many fewer agencies, as the sector polarises further between large and small under the pressure of the new supplier relationships • More specialisation by some, especially smaller, agencies, to meet employers needs; eg around specific skills types Source: REC Managed Services Report, Interviews

12. Background Market Customers Competitors Appendix

13. 80% of the companies interviewed use some form of managed services provider. Reed was the main provider Number of interviewed customers using managed service providers Number of Companies Interviewed, n=10 No Other Yes Reed • Octavia Life interviewed 10 major companies from the UK, 3 of which were financial services providers • 80% of these companies use a managed service provider • Some of them outsource solely secretarial and office staffing as this makes up the majority of their requirements • Reed was the main provider mentioned by 3 of the 8 customers of managed service providers • Of the 2 non-customers, one uses Carlisle Managed Solutions for outsourced permanent staffing • They have considered switching in the past and may do so again in the near term • Financial service providers such as KPMG and Ernst & Young do not conduct all temping with a managed service provider • “We would not be interested in having a single solution for all temporary or contract staff because we have an established recruitment structure” - Head of Recruitment, KPMG Source: Interviews

14. Customer use of managed services 1 Source: Interviews

15. Customer use of managed services 2 Source: Interviews

16. Customer use of managed services 3 Source: Interviews

17. Customers expect simpler administration and lower costs from moving to managed services • The REC survey of 104 major employers discovered customers perceived benefits especially in: • simpler administration • improved HR productivity • reduced costs • These were borne out in customer and marketplace interviewing: Simpler Administration • “It just helps us if one firm is doing all the leg work rather than having so many companies do it. It is like having a one-stop shop. • “The best thing about Carlisle is that they are flexible and we can flex up and down the staff very quickly if times are good. Sometimes we need more people through the door and they can arrange this at the drop of a hat. If we had to do this with our recruitment team, it would take longer as we would need to interview etc” – KPMG Improved productivity by HR • “One of the big advantages for customers Is that there is only one system for HR departments to learn. With a Preferred Supplier List arrangement, there can be anything from 2 to hundreds of agencies. Each will have their own billing system so the customer benefits from a consolidated timesheet, billing and management info” - Reed Most Important Benefits from Managed Services 2006 Survey Question Asked to HR Directors and Managers By REC. n=104 Percentage Agreeing Source: REC Managed Services Report, Interviews

18. Although processes can differ by customer and industry, the main process for sourcing staff is as follows Temporary Staff acquisition process HR/Finance Department signs off if needed Department makes request for temp staff Senior Department Manager signs off Managed Service Provider finds staff Temporary staff starts work using MSP systems (e.g. billing) Interviews done by either MSP or customer or both Uses network of partners Source: Interviews

19. Background Market Customers Competitors Appendix

20. Competitors are split into vendor neutral or agency based players • Customers stated there were few companies which could offer a managed service solution • “There are other managed service providers but there are not masses. I would say the other main ones are Alexander Mann, Adecco, Capital Consulting would be the main ones which are similar to Carlisle although Adecco is more of an agency with managed services than anything else” – KPMG • “We went with Reed. However there were not many companies in the tender who we felt could cover this kind of work for us. I was not involved with the tender so do not know all of the details” – Panasonic • These were split into those which were vendor neutral and those which were part of agencies • “There are two main models in the marketplace for managed services: • Entirely vendor neutral companies who come from the technical space and do not have their own staff • Staffing companies which have established Recruitment Process Outsourcing divisions. They claim to be neutral by having a points system to prove to their customers that they are choosing staff based on their criteria • The three main players in the vendor neutral market are De Poel who are quite big, Comensura part of a larger group, Matrix. All of the large staffing companies have their own managed service divisions such as Adecco, Manpower etc” – Recruitment Consultant Magazine • The large agencies are also able to provide the complete solution and can tailor it according to client needs, therefore being a direct threat to the vendor neutral players • “Reed can offer an end to end solution. We will do all types of work with the different models.” - Reed Source: Interviews

21. Barriers to entry into the market are very high Source: Interviews

22. Background Market Customers Competitors Appendix

23. Customer Interview Transcripts 1 • Rexam • PA to Group HR Director • We have a Group Office UK HR Manager who sources the temporary staff at lower levels. We then have Roger Bennett who works at a senior level looking for those staff. • There is also each of our sectors. We have the HR Director for the European sector based in Luton who reports into Roger • Each of these will have their own strategy to arrange recruitment. There is no strategy or single service provider for the whole company • BBC Wales • Recruitment Manager • The BBC in the UK or at least England and Wales, has an agreement for temporary staff with Reed. This is our managed agency and they have a preferred suppliers list to work from • Any vacancy under 13 weeks is classified as temporary. It does become a bit more complicated because we use a lot of freelancers • The application needs to be approved by someone in finance and HR departments Source: Interviews

24. Customer Interview Transcripts 2 • 3M • We use Vault Europe which is our managed service provider. Please contact Ian Stillgoe who manages the contract for us • Friends Provident • HR Services Consultant • We use several agencies on several sites. These are dealt with by the line managers themselves. They have their own contacts and they can use who they want to for temporary staffing • This is the current policy although it might change in the future. We did consider briefly going to a single source for all temporary staffing nationwide but we shelved it in the past. • The main reason for this were concerns that our outsourcing company for permanent staff, CMS Carlisle Management Solutions would be overloaded if we gave this work to them • We have started with CMS for all permanent recruiting a year ago. It is working reasonably smoothly although of course there were teething troubles • For more information and whether we might move to a temporary contract, you will need to speak with Fiona Circuit who is based in our Dorking office. She is away on holiday until 11th August 2008 and she oversees the contract Source: Interviews

25. Customer Interview Transcripts 3 • Oracle • HR Manager • Recruitment Team Rep answered questions 3 onwards • For all office staff we have a long-term contract with Office Angels. This is a managed service contract for all types of temporary staff covering the whole country • We have been with them a long time so are obviously happy with them • We have been with Office Angels for 10 years and their representative sits within our offices as an implant. The manager of whichever unit would contact them directly and Office Angels would have to get people from their own pool so to speak, they would not be allowed to use other agencies • They are able to provide staff across levels and responsibilities for office staff • Sony UK Ltd • Recruitment Manager • We use Reed for all temporary and contract work. This includes all functions and is a managed service for all interim staff • Please speak with Julie Nash who is the onsite co-ordinator from Reed who is on holiday, back Thur 31/7 Source: Interviews

26. Customer Interview Transcripts 4 • Panasonic UK • Recruitment Manager • For purely temporary staff we use a sole supplier. When we went out to tender we made sure we asked for a company which could provide us for all areas including all over the country • We have a big site in Northampton and wanted to make sure the companies could cover this area • We went with Reed. However there were not many companies in the tender who we felt could cover this kind of work for us. I was not involved with the tender so do not know all of the details • We have an implant from Reed who is here one day a week. All we do is set up the staff and the Reed person when they are here • Interviewing depends upon the manager’s requirements. If they need, Reed can do the interviewing and then send the staff in. Whereas, if they want to do the interviewing themselves, Reed will organise that for them • We are ok with Reed using their own divisions and are not interested in having a neutral provider • Esso UK/Exxon Mobil Chemicals • Mrs. Brown, HR Department • For all non-manual labour work we have a contract with Manpower. They cover all functions and we tell them what we are looking for and there is a template of the kind of skills we need etc. They then go out and get the staff for us Source: Interviews

27. Customer Interview Transcripts 5 • KPMG UK • Head of UK Recruitment – Part 1 • We have a managed solution provider in Carlisle Managed Solution and they have an in situ staff based in our office in Dorset Rise • We have had them on board for 4 years now and have just signed a contract extension for another 3 years • Carlisle covers secretarial and administrative staff for us. We don’t use temps at other levels. We will use contractors and this is someone who sells their services to KPMG. This is done by department and they will sort this out themselves • However, if the department is looking for someone under 6 months short term and they will be part of the KPMG team, then we in the recruitment team will be involved. We would go to an agency or data mine our systems, or ask for referrals from other people in the department etc. However we do not do this very frequently and prefer to work with full time KPMG staff • Someone in the department needing a temp will complete a form. This will then be authorised by someone more senior in the same department. This is to check there really is a need for someone, e.g. if a worker is on holiday, then someone else might be able to fill in without requesting a temp • An electronic form is filled in and sent direct to Carlisle Managed Services. They would then do all the interviewing and bring in the staff • We would not be interested in having a single solution for all temporary or contract staff because we have an established recruitment structure • There are other managed service providers but there are not masses. I would say the other main ones are Alexander Mann, Adecco, Capital Consulting would be the main ones which are similar to Carlisle although Adecco is more of an agency with managed services than anything else Source: Interviews

28. Customer Interview Transcripts 6 • KPMG UK • Head of UK Recruitment – Part 2 • The best thing about Carlisle is that they are flexible and we can flex up and down the staff very quickly if times are good. Sometimes we need more people through the door and they can arrange this at the drop of a hat. If we had to do this with our recruitment team, it would take longer as we would need to interview etc • At any one time, we have 100 to 150 temps working with us • The system of using managed service providers has been around for a number of years. I used to work at the FSA and in 2001 they went down this route. The large scale companies have been doing this for the last 8 to 10 years. All of KPMG’s competitors have gone down this route • It just helps us if one firm is doing all the leg work rather than having so many companies do it. It is like having a one-stop shop • It is important for us to have a varied network of suppliers. We want a diverse workforce and we do not want Carlisle going to their own suppliers. We want the breadth and we make sure we get a good spread from other suppliers • We even renegotiated specific requirements with Carlisle to ensure they source staff from various third party agencies and organisations which get people back into the workforce. Also from local colleges. We connect Carlisle with the remit from corporate social responsibility • We renegotiated our contract with Carlisle without looking at other companies because we have been very happy with them and we just need a tweak of the service • Everyone is aware about the new legislation and Carlisle is aware of this situation that once the staff reach a certain time period then their rights etc can change Source: Interviews

29. Customer Interview Transcripts 7 • Ernst & Young UK (via e-mail) • Recruitment Manager • The majority of our temps here are at the secretarial level and this recruitment is all outsourced to a managed provider. • The rest of the temps we do ourselves through agencies and direct sources but this is a small number compared to the admin side. Source: Interviews

30. Trade Press Interview Transcripts 1 • The Recruitment Consultant, Trade Journal • Editor • The managed services market is moving forward strongly being driven in the public sector by the Gershwin Report which calls for cost savings. Basically there is Central Government pressure on Local Authorities to reduce their spending in procurement and other areas • Matrix, a part of Van Hamilton Bradshaw has recently won a 10 London Borough contract where staff are centrally sourced from common IT platforms. They also have a tiered staffing model • In the private sector, this market is driven by supermarkets and logistics firms and the large plc’s who wish to cap their temporary staffing costs • The supermarket and logistics sector has always relied on a lot of temporary and seasonal workers so this is more of a mature market for managed services • Where there is a higher skill level there are more opportunities • There are two main models in the marketplace for managed services: • Entirely vendor neutral companies who come from the technical space and do not have their own staff • Staffing companies which have established Recruitment Process Outsourcing divisions. They claim to be neutral by having a points system to prove to their customers that they are choosing staff based on their criteria • In this market, no one model particularly dominates and there is no consensus about which way to go. However, there is a trend towards vendor neutral staffing with the aim being to have technical systems in place in order to cut costs. • The market will go in the direction of the recruiters’ wishes. It depends how far they are willing to go before they say the margins are too thin. At the moment, they might make 20% margins by working directly with customers Source: Interviews

31. Trade Press Interview Transcripts 2 • The Recruitment Consultant, Trade Journal • Editor • However if the customers then say you are going to use a managed service provider, the share will fall to 15% because the managed service provider will probably want 5%. However the share for the recruiter could actually fall to 12% because the managed service provider might say we will cut 2% off costs for you, in order to win the contract. So the recruiter is getting 18% minus the costs from the managed service provider. Their margins are being shaved • The market will vary according to cost and which sector you are in. For the sectors such as logistics which need low skilled on-site staff, Adecco can probably provide all the staff and so you would not be bothered about vendor neutrality, you just want the lowest cost • However, the higher the skill level, the more the focus is on the best person for the job and vendor neutrality is much more important • The recruitment market is so fragmented and there are thousands of companies out there. Plus there are skills shortages and in the last few years a favourable economic climate. In the future staff availability issues might ease but at the moment, customers do not want to put all of their eggs in one basket • The three main players in the vendor neutral market are: • De Poel who are quite big • Comensura part of a larger group • Matrix • All of the large staffing companies have their own managed service divisions such as Adecco, Manpower etc Source: Interviews

32. Trade Press Interview Transcripts 3 • The Recruitment Consultant, Trade Journal • Editor • The market is competitive and is cost driven. Now the market is not saturated and could take in more entries. However it needs a high level of investment especially in technology. It is not like traditional recruitment which had low barriers to entry. This area has high barriers to entry and I would think you would need millions to develop strong online software applications and then roll them out to clients. Plus there is the need to develop the relationships with the clients and candidates plus do the relevant marketing etc • I think the managed services market will continue to grow. At the moment it is concentrated with the larger organisations but there is probably going to be more of a move towards the SME market. • This is a technology driven market and with things like broadband penetration already there it should be a good market. • However we are facing an odd economic situation. So it could be a good market however it depends upon how serious the situation gets because recruitment is the first thing that is cut and frozen in difficult economic times Source: Interviews

33. Competitor Interview Transcripts 1 • Reed Managed Services • Business Development Manager • Every agency has its own spin on what they call these services. Then there is also the issue about what the clients call the issue. We once received a tender from a client in which they used a certain term to describe what they wanted which is different from what we use and what the market uses • Managed services can include vendor neutral and also managed services plus they can use hybrid solutions. Hybrid solutions can allow us to tailor RPO solutions and allows us to make bids because they are very complex and diverse and geographic split • This is how the food chain works. Where there are fewer categories of staff required and fewer locations there is a higher probability that one single agency can fill 80% of the requirements and more. This would then be the Master vendor model. • This company would be the lead supplier in major categories and areas and the master vendor does not generally charge a separate management fee. They make their fee through the volume of orders • The managed agent model would mean that the one agent can fulfil less than 80% of the staffing but they can do at least 40 to 50%. There are more appropriate multiple skill categories and locations and also wider skills. The one agency is likely to be placed in each category to be the lead supplier • The managed agency is likely to be the single point of contact. As part of the due diligence process, they would have to do the gap analysis for each location and work out where they and the other companies involved would fit. E.g. if there are 20 locations and 10 different skill categories e.g. accountancy based staff. So they would be the lead in this category then appoint tiered suppliers if they can’t supply the staff. • However for HR roles, they might not be good and someone else would be the lead supplier or panel suppliers or they might be second tier or not on tier Source: Interviews

34. Competitor Interview Transcripts 2 • Reed Managed Services • Business Development Manager • With managed agents you do try and do it beforehand to work out which agencies would do which tier work. However the client might not have all the information needed and so you have to estimate the best supply structure and fulfilment • Within vendor neutral, there are two parts: • Not allowed to form part of it • Can form part of the supply chain • There are also panel supplier basis and Tiers 1 to 3 or however many wanted • The advantage with managed service work is a single call-off point. The due diligence can identify the best placed companies to fit into Tier 1 etc. There is the chance for total consolidation. • There is also the online system and all orders can be done into a bespoke job catalogue and customers can contact the managed service provider through a single e-mail or with a phone call • The requisition form from the managed service provider consolidates all invoices regardless of who actually supplied the staff. • One of the big advantages for customers Is that there is only one system for HR departments to learn. With a Preferred Supplier List arrangement, there can be anything from 2 to hundreds of agencies. Each will have their own billing system so the customer benefits from a consolidated timesheet, billing and management info • Reed can offer an end to end solution. We can offer a total online or each part in a modular system. The customer might want paper billing or online timesheets. We have a robust model but you do have to be flexible and there will always be exceptions. Field sales reps and engineers for example might not find it practical to use the online job catalogue so they might need a requisition form Source: Interviews

35. Competitor Interview Transcripts 3 • Reed Managed Services • Business Development Manager • RPO tends to be geared towards the permanent end of the market although not as exclusively. This tends to be point to point requisitioning to onboarding, retraction, resource management, interviewing, assessment, design, delivery etc • Managed service can either be temporary or permanent and also applies to limited companies which provide services to the customers • The service nucleus is the back end and it is very complex. The requirements are complex but from the client perspective it should look simple. The client picks up the phone and e-mail but there is a lot of work on supplier partnership work and also implementation is essential. If you do not have the right skill sets or the implementation initially goes wrong this will cause problems on the day to day work • More and more clients are moving to managed services especially because of the direct cost savings. £20m spend instead of across x many working partners • Managed agent and vendor neutral means the management fee can be charged in a number of ways. Unless the agency directly fulfils the staff it means you have to co-ordinate orders, invoicing and all adds into the costs • We say that less than 100 temps on site at any one time would not be worth having a managed service offering. • Managed services is becoming more popular. I have been doing this job for 4.5 years and managed services is becoming more sophisticated with the back office systems and technology involved. • There are not hundreds of companies involved here. The systems you need to put into place and the infrastructure is quite expensive. It is a market best suited to the bigger players. The independent agencies will tend to be part of the supply chain. It is actually cost effective for them because they don’t need to deliver management information, billing and they are not having to chase the business, it is given to them • The majority of organisations with spend over £5 million on temporary staff would have investigated or be investigated managed services. Not all of them have managed services as yet Source: Interviews

36. Competitor Interview Transcripts 4 • Reed Managed Services • Business Development Manager • For permanent staff spend, the smallest element of this is agency fee whereas for temporary staff the £5 million would include labour costs and agency margin • Managed services is a fairly mature market and there is an incessant drive to make direct and indirect cost savings. There are new possibilities and we could either replace or complement other offerings • We will do all types of work with the different models. However, we don’t tend to act as a partner supplier. We have enough contracts and the infrastructure to deliver managed services. Reed is massive here and has the expertise • The main players are Reed, Manpower, Adecco, CMS and Alexander Mann • There is no real vendor neutrality because when Manpower wins a contract they bring in Brook Street as part of the supply chain. All of our companies are branded Reed whereas Adecco Corp and Blue Arrow have different brands so it is difficult for the client to realise that a supplier might be part of the managed service provider • Some clients will stipulate vendor neutrality and some won’t. 40% of the time, clients want vendor neutrality and so we will not be involved in the supply chain • I think more and more companies will be involved in the managed service route because organisations will use it as leverage. In the credit crunch there may not be as much recruitment. However, it means there will not be as much permanent staffing so companies will turn to temporary staff. At any case, we are very, very busy right now • There is legislation which affects everyone in the industry so it is a level playing field. The temporary workers directive, other legislation affecting age, disability discrimination etc. There is an increase in the working time and equal pay which have impacts on the contractual terms. From April 1 2009, workers will be entitled to 28 days off Source: Interviews

37. Competitor Interview Transcripts 5 • Reed Managed Services • Business Development Manager • Ideally in a project bid, it will be split 50% commercial and 50% on quality. We would never bid on a project based on cost. If that is all the client is interested in, a cheap as chips approach then they will not get the service they want delivered • The tender process is very long. On average it lasts 6 months to 9 months but I have just worked on a tender process which lasted 18 months. Luckily we won it though! • The contracts have a minimum term of 3 years • De Poel has a focus on logistics and the supply chain and is in niche areas. However they are expanding from here and we do compete with them • Matrix I don’t know anything about them Source: Interviews Source: Interviews