BAE Systems has terminated its HR BPO contract with Logica, and is now sticking with Xchanging which was set to be replaced for the work.

BAE has now retained Xchanging until the end of December 2013; Logica was supposed to replace Xchanging next year.

Analyst TechMarketView said that "apparently one or two heads within Logica have rolled as a result" following the fall out from BAE's decision.

John O'Brien, a TechMarketView analyst, said: "This is yet more disruption to Logica's day-to-day business after its takeover by Canada's CGI Group."

He said that the acquisition was a "very good 'get out of jail free' card for BAE, if it was thinking of ways to make a U-turn without the inevitable cancellation compensation".

TechMarketView had previously expressed "misgivings" about Logica’s award of the contract. It said that key details, such as the number of people being transferred, were never revealed. "We never really got a sense of how Logica was going to transform the service while driving better margins than Xchanging’s 5%", said O'Brien.

After being axed from the contract Xchanging had come back to BAE with new proposals in how to make the HR function work better, said TechMarketView. It had proposed introducing new HR self-service systems from Workday, which may now be in the pipeline.

In a leaked internal document, Workday rival Oracle expressed its intent on taking a bigger share of the increasingly hot HCM (human capital management) software market.