UK utility CIO queries total cost of deals

You can count on a Scot to tell it like it is and Jim McEwan, CIO of utility Scottish Power, didn't disappoint his Gartner Inc. conference audience.

The outsourcing conference last week was attended by up to 300 representatives of U.K. and European end-user organizations. A delegation of New Zealand software and services companies had a stand at a the conference under the banner Outsource2NewZealand.

It was the climax of a NZ$200,000-plus (US$125,000)) NZ Trade and Enterprise (NZTE) bid to help New Zealand companies grab a share of the billions U.K. and Europe will spend on offshore outsourcing this year.

McEwan told the audience he no more believes in big outsourcing deals than he does in solving life's troubles by "putting them in a big polythene bag and throwing it in a canal".

That doesn't mean, however, that he doesn't do any outsourcing, and he says putting work the way of a New Zealand company is not out of the realm of possibility. Remoteness from the U.K. is not the issue, so much as the total cost of managing the outsourcing relationship.

Scottish Power doesn't do application development so has experience of farming out programming on a project basis, including to Indian company Wipro. The utility's willingness to deal with companies even further afield can be demonstrated by its purchase of billing software from a Melbourne company, McEwan says.

If New Zealand companies are to break into the U.K. and European outsourcing market, they need to be easy to do business with. Gartner's Ian Marriott says that is going to require staff on the ground in the U.K.. While some of the companies backing Outsource2NewZealand have U.K. offices, they have another, less formal, potential sales force in the form of the large community of expats working in the U.K. IT industry, estimated by ITANZ to number as many as 4,000.

Last week's first foray into the market included lunches organized by the Kiwi Expat Association (KEA). London-based IT consultant Richard Keyze, who planned to attend one of the sessions, has managed outsourcing contracts with Indian companies on behalf of Merrill Lynch and British Telecom. He says New Zealand, which he left 18 years ago, will have to go after niche markets.

"New Zealand has a very good reputation in the U.K. on an individual basis, which it will need to develop on a corporate basis. Building long-term relationships with clients will be a key thing." Alistair Hughes, of Richmond-based software company Lost Wax, also intended hearing the Outsource2NewZealand pitch, and could see himself willingly passing the message on to contacts in the industry.

"I come from New Zealand so I'm well aware of its capabilities," says Hughes, adding that Kiwis have made up as many as 10 percent of Lost Wax's employees in the past.

Indian companies, too, have deep links with the U.K.. One of the best known is Tata Consultancy Services (TCS), which has had an office in the U.K. since the 1970s. TCS debunks the notion of Indian companies trading on the cheapness of their labor. Keith Sharp, who was manning the TCS stand at the Gartner conference, says the company has development centers in Europe, the U.S., China and Australia and sells its services on the basis of being flexible and global.

The company is part of a consortium, led by Fujitsu, to be awarded work as part of the U.K. government's makeover of the National Health Service's IT systems, which will see it pocket more than $US100 million.

"Offshore outsourcing is no longer a cost-cutting game per se," Sharp says.

He was surprised to see a New Zealand presence at the conference. The absence of a similar national representation by India indicates the maturity of its market, he says.

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