Steria’s John Torrie discusses the state of the European IT services market.
Q. How is business shaping up in 2010 compared to last year?
A. We’ve seen more interest, but it remains to be seen whether that will result in contracts. There’s a reticence for companies to sign deals at the moment and we’re hoping confidence returns. So yes, there’s activity and interest, but I’m not convinced we’re at the bottom of this recession. We are noticeably slower at pulling out of this than France and Germany.
Lots of companies are still looking at ways of cutting costs. We are seeing companies using the current economic difficulties to exert major price pressure, just because they can.
We’re still seeing more interest in the back-office outsourcing and companies are looking to push more and more back office offshore. Once you get companies interested in offshore, then we find customers push the model faster than we do. It creates a certain pressure for us, because giving customers the benefit of lower costs means therefore we have to sell more to keep the top line going, but it’s a long term business and we are opening up more offshore and nearshore facilities. We have a big offshore platform in India and a joint venture in Morocco bringing us the French market. We also have 200 people in Poland running call centres and remote infrastructure management outsourcing.
We’ve never failed to impress a client that has been to India. We have a very good platform out there. The best argument there is for offshoring is to take people out to India and meet the workforce face to face.
Q. How is the outsourcing market in the rest of Europe?
A. I have two kinds of roles: looking after UK and India. However, in parallel, I have an industrialisation role for the group, taking offfshore and driving this through the rest of Europe.
The French market has a very interesting attitude to offshore. Native French businesses are reluctant to do ‘proper’ outsourcing and the Anglo-American outsourcing model is still viewed with suspicion. So we have challenges in France, but we are getting there. Germany is adopting the model quicker, but it’s not a concept they are universally comfortable with. Spain is so cheap anyway that they don’t outsource. But our philosophy is if you’re not comfortable with a red one, we’ll give you a blue one, so we can do onshore, nearshore or offshore.
Q. A recent KPMG report highlighted the potential problems of offshoring and data protection. Is there a problem ensuring UK data protection standards are maintained?
A. I find that hard to get my head round. If you are in India and you are generating a vast amount of corporate throughput through servers, the one thing you are passionate about is security. They fixate on accreditation and although that’s not to say something that couldn’t happen, it could in the UK too. The one country which has a massive vested interest in making sure nothing happens is India.
Q. How important is the public sector to your business?
A. We have an example of a joint shared services venture with the Department of Health where they have made 20% savings. In that instance it was a hugely successful model, but why isn’t the rest of government mandated to do the same?
The way forward for back-office systems in government should be shared services. There are a number of things not possible in shared services because of procurement rules and we should be challenging some of those procurement rules. We believe we should be able to work with other departments but opinion is split whether it can be used for any department or just for the Department of Health. And barristers in other parts of the public department have said it’s questionable. You’ve got a vehicle that works, but because of highly regulated procurement rules, the environment is very difficult.
Q. In what specific ways are these rules making it difficult?
A. Government often has deals with multiple suppliers and contracts ending at different times. But rather than re-negotiate now, they will wait until the contract ends in four years or whenever. But if you were running a commercial business, you would get all the parties together now to agree something. It will be very interesting when we get some level of stability in terms of the political scene to see how brave they will be.
Q. What’s the attitude towards offshoring?
A. There is a PR issue round offshore. There’s still an image of kids in sweatshops making Adidas trainers. When you go to India it’s not all about labour arbitrage. They have wage inflation running at double-digit growth in India.
The real asset they have and we are short of, is graduates coming out of university. If I could distill their enthusiasm, drive and ambition and bring it back to the UK we could revolutionise this country. They are highly motivated and smart. Our model is to use enthusiastic people to do things smarter and therefore cheaper, not because they get paid less in India.
When you’re pitching, people’s vision of India is based on travel programmes. It’s nothing like the business world out there and we need to educate people better about that.
Q. How is the cloud computing model affecting your business?
A. Watch this space for announcements in this area. We’re on an evolutionary path towards cloud. But when you talk to large commercial organisations, they are more interested in business intelligence than the platform. They want to know interesting things about their business rather than what platform it is running on. Without wishing to denigrate the cloud, the real issue is how to improve the efficiency of business. Most companies come to Steria with a business problem and ask how can I make it go away; the tools we use to do that are immaterial to them.
Q. What other trends are there in the market currently?
A. We’re finding more interest in the mobile computing space. We’re putting handhelds in the bunch of clients in the field. Mobile is a hot topic than it has been for a while because cellular networks have become more stable and there’s more data at the point of use.