eWorld - Software
‘Logica’lly speaking
Continental Europe is open to IT spending, avers this software player..
Craig Boundy
K Bharat Kumar
It isn’t just the Queen’s English from Craig Boundy that sounds like music to your ears. His comments on outsourcing opportunities in Continental Europe could well have his Indian competitors in IT cocking their ears in optimism for that part of the world. (Typically, Indian players have been far more successful in penetrating the UK than they have the rest of Europe.) Listening to him gives you an idea of what is happening in Europe in the context of IT spends . Read on:
Boundy, Chief Executive, Global Operations at Logica, a UK-based IT outsourcing services provider, met with eWorld recently. Logica‘s CEO, Andy Green, had articulated a new strategy in early 2008. Boundy gives us an update on what has transpired since.
Logica has about 3,000 people in its Bangalore centre and Chennai houses its newest centre with 900 people. It also has another centre in Mumbai. The company aims to have about 8,000 people across all its ‘nearshore and offshore’ centres by end of 2009. Boundy says he is well on track for this, with a 50 per cent growth taking that count to about 5,000 by December 2008.
CIO priorities
Boundy feels that most decision-makers in Europe are obviously looking to cut costs and improve efficiencies, but that they are also looking to innovate with IT so as to create new revenue lines, improve certain metrics such as time-to-market or getting stock on shelf for a retailer or managing risk for banks.
Everyone’s still spending, he declares emphatically. “Financial services players may be nervous for now and acting slower, but telecom is a growing sector for us, as is Public Sector (Government).”
But aren’t there opposing pulls in force in the public sector? After all, a government can increase spends to kick-start the economy but it would have to protect jobs and hence might not offshore so easily?
That is where, he says, his blended delivery model comes into play. “We are a big onshore employer as well. Our onshore teams call on our local capabilities wherever we have offshore delivery presence.”
He also says that Logica is different from the typical Indian IT player. “We are not pure-offshore players.”
But what about the global delivery model that Indian IT biggies talk about?
“I don’t think anyone has the same level of proximity or intimacy with clients as we do. We manage our relationships intensely. But, do competitors have strong customer relationships in the way they work with them, as we do?” He thinks not.
He says if he were a pure offshore player, then he would have difficulty getting his people into Europe because immigration and work permit laws are getting tightened ‘everyday’. “All governments are slowly but surely changing the way the law works to make it difficult for people from outside to enter and work in the European union.” He clarifies that this does not hold for short-period contracts but for those with a six-nine month range or longer.
This seems interesting, in the context of Indian IT biggies who have seen European contribution to total revenues reducing a bit, while seeing a rise in that from US. So, clearly IT spend is not a contracting pie? No, says Boundy. “A large part of our revenues comes from Western Europe — 95 per cent. So what we see is inconsistent with what you say.”
The company also saw a unique switch last year. “For the first time in Logica’s history, we had more of our offshore work done for clients from Continental Europe than for those from the UK.”
He says that this has proved that Logica’s new strategy has worked. So what is this strategy? According to him, “Invest more and more in our relationship management, sales capability and account management. This is complementary with driving more delivery work offshore. Under our OneLogica theme, you sell more, get better relationships, deliver more globally and use the one-company ethos. We aim to remove costs from overheads of our business and reinvest it in the business.”
But with the economic environment being what it is, why would clients look at offshoring and add one more piece of uncertainty? “We don’t represent uncertainty” he jokes with a poker-face. His point is that his brand is strong in Europe. “Europeans buy from us — but not in the same way they would buy from a pure-offshore player — that may represent risk.”
He explains that Logica has a consultative approach. “If I am speaking to an airports authority, I tell him how I see his business evolving, what he should be doing and how I can help him do that. Better still, I work a bit on it and even show him a demo.” Imagine, he says, comparing that with a proposal he could take to him with the yearly costs for a programmer who could be at the site within 60 days. “How do you talk to a CEO of a client company about that? May be five levels down to an IT manager, but not to a CEO!”
So what kinds of clients does he see in the market nowadays? Those that have stopped spending, those that spend lesser than they did, or those spending more now…?
“All kinds. But we are certainly seeing a lot of people asking us how they can accelerate their plans.” He talks of a typical retail player whose future loans (or refinancing) depend on the way he manages his stock cover. “The retailer obviously sees the benefit of a $5-million IT spend that can give him $30 million returns!” Boundy adds that he is a realist, though. “Some clients are slowing down spend — some of those risks tend to balance out if you have clients across industries, as we do across manufacturing, BFSI, Public Sector and Telecom.”
Still lot to go after
But are deal sizes shrinking? For, first time outsourcers would start small. He does not see any specific trend there. Logica has won more deals worth 20 million pounds or higher, than it did last year. “And in the time we won these deals, the economic crisis was with us through this time.”
In other words, even though the economy is in bad shape, there is still a lot of business to go after. “There is a lot more growth potential in this very large marketplace. So, even if the economy continues to face horrendous problems, we still have a lot of steam left,” he says.
M&A?
Logica does not seem keen on acquisitions right now. But isn’t now a good time for cherry-picking? Says Boundy, “This is the time to concentrate and get on with the delivery strategy. That is what we are sticking on to now.” So, is that why Logica exited a couple of German subsidiaries, one of which was in the training business? While Boundy does not elaborate, he says, “Being clear on what you execute is key. Ensure you stick to that and ensure that there are no distractions in the way.
Cost savings – not only from offshoring
Logica has done better than it expected to on the cost savings front. It generated savings of 25 million pounds in 2008. It expects to generate a total of 75 million pounds (which is more than the estimated 50 million pounds) through 2009 and 110 million pounds (80 million pounds) through 2010.
Not all of this is through increasing headcount in offshore centres while decreasing it onshore. “We rationalised our property occupancy, decreased overheads and started to buy more effectively.” “We closed some buildings and opened some. We closed our headquarters in London but opened new ones in the