ITANZ executive director Jim O’Neill says joint-venture company Outsource2NewZealand (O2NZ), to be officially launched into London this week, is the kind of vehicle local companies need to bring overseas outsourcing work to the UK.
A joint venture will allow NZ companies to compensate for their small size and exploit similarities to the UK in culture and business practice, O’Neill says.
O2NZ is the current working title of the joint venture that has been in discussion for two years. Initially 22 companies were proposed as part of the potential body. This number has reduced to five: Synergy International, CGNZ, Optimation, Black Coffee Software and Catalyst IT. The last two have a smaller shareholding than the others.
After considering various potential structures, the parties decided on a limited liability company with an initial investment of $3 million. This was “a little rich” for some of the initial participants, says O2NZ spokesman Garth Hamilton, so direct participation was reduced to the five.
The others, however, remain as “partners” and stand to benefit from work gained in the UK if they have relevant talents or specialities, he says.
The shareholders have initially invested $1.95 million in setting up the London office, which is planned to have a staff of four. The Government Strategic Investment Fund has contributed a grant of $1.26 million.
Two sales staff will ideally be a New Zealander and a British person or one long-established in the country, so as to confer the advantage of a local network of contacts and current awareness of the New Zealand market, says Hamilton. The other staff will be an administrator and a pre-sales staffer.
Already, during setup, the joint venture won some work for Black Coffee from Wax Info, a company formed by Cambridge University staff.
An initial promotion in London involved All Blacks Sean Fitzpatrick and Craig Dowd pushing the message that New Zealand punches above its weight.
O2NZ will seek to gain work on the high-level research and architecture side of software development, rather than the bulk coding and maintenance market cornered by other outsourcing countries such as India, Hamilton says.
Market research over the past year found “100% interest and 0% awareness” of the NZ ICT industry in the UK, he says. “People said they weren’t even aware that New Zealand had an IT industry, in spite of the fact that many of them employed Kiwis in their own IT departments.”
One of the ways O2NZ aims to establish a foothold in the market is by convincing UK prospects that the cost of outsourcing is not measured solely by the hourly rate. Cost-benefit is increased by developing exactly what is needed and not doing more work than necessary. New Zealanders have enough knowledge of the needs of a similar country to ensure these economies happen, Hamilton says.
Work will be apportioned among the shareholding companies roughly in proportion to their investment, with recognition of particular strengths both inside and outside the five.
The joint-venture company has already established links with New Zealand universities, with the idea of establishing what Hamilton calls a “virtuous circle”, whereby New Zealand graduates will go on their “OE” assisted by the prospect of working for O2NZ. They will then bring beneficial experience back into the New Zealand ICT environment.
Besides sourcing the government funding, NZ Trade and Enterprise did a lot of groundwork for the establishment of O2NZ, including the commissioning of a Gartner Research report on NZ's capabilities and opportunities as an outsourcing destination, working with NZ ICT companies to develop the opportunities identified in the report and support for a Gartner Outsourcing conference held in London in April 2004, which made a useful base for an early pitch of New Zealand’s strengths to the UK market.
NZTE also provided a project manager for O2NZ in London
“NZTE's role has been to support the O2NZ initiative, but always from the starting point that any work it did must be industry led,” says spokesman Mike Booker.