Aussie! Aussie! Aussie! Why? Why not?
Want to shop locally for IT services but don't want to compromise on quality? Here's how the local services industry is finding ways to outdo global giants.
Contents  Profitability plus Improving on multinationals Niche skills on tap The local touch In defence of multinationals Executive summary | ||||
Since the beginnings of the IT industry, however, it has seemed almost natural to send our services dollars offshore. The likes of IBM, HP, EDS, and CSC were not only the largest services organisations, they have also possessed the deepest pockets and for years the richest skills, so it wasn't without good reason.
Certainly in the 1990s, few could match their ability to conduct massive outsourcing projects for the likes of the South Australian state government or the Commonwealth Bank. And the lingering profile of those projects arguably still makes it all but inconceivable for the services behemoths to be left off at least the preliminary shortlists when enterprise-grade services contracts are under consideration. Today, however, whether your motives are economic or patriotic, the landscape has changed. Australia's services companies have grown to become just as sophisticated and capable as their offshore rivals.
Even better news is that, according to Rolf Jester, Asia-Pacific vice-president at research firm Gartner, they also represent no more risk than their multinational rivals because they offer their local customers choice, enthusiasm, and often a better cultural match than a giant multinational can deliver.
"Just because [multinational services companies] have 100,000 people around the world doing the same thing does not mean they are applying the learnings well," Jester says. "In most cases they do a fair job but you could equally point to instances where they stuff up."
"But some of the locals like KAZ [Computer Services] are pretty slick on the repeatables and in the end the locals are perhaps more culturally attuned to the needs of local businesses.
"Local companies are also very flexible, and even a modest-sized customer of KAZ or Volante will get time from the MD to talk about their needs."
Local decisions can sometimes even offer services multinationals struggle to match.
| "We see that a lot of organisations that traditionally outsource to a multinational go through the first phase of the contract and then move away from the one-size-fits-all approach." |
KAZ CEO Mike Foster believes that with applications increasingly becoming network-centric, there is a competitive advantage. "KAZ customers can be absolutely certain that, by partnering with KAZ, they will be accessing the technical expertise that is right at the heart of technology developments shaping Australia's ICT environment," he boasts.
"And I would put our balance sheets up against some of the multinationals any day." Perhaps a big call from a so-called modest-sized services company, but with a customer list including the Department of Defence, ANZ Bank, and AMP, one must be inclined to believe him.
Contents Introduction Profitability plus Improving on multinationals Niche skills on tap The local touch In defence of multinationals Executive summary | ||||
Impressively deep reservoirs of black ink are also important to Michael Browne, CEO of local services firm Datacom.
"We have grown 250 percent in five years and are consistently profitable. That says a lot about how we are as good as any other company from anywhere else," he says proudly, adding that much of that success comes from customers finding that while multinationals are good at some services, quality is not high across the board. When that happens, Datacom swoops.
"We see that a lot of organisations that traditionally outsource to a multinational go through the first phase of the contract and then move away from the one-size-fits-all approach," he says.
"We find we are very successful at picking up pieces of work when they re-negotiate their contracts." Browne believes Datacom and other Australian companies succeed at this point because, having grown up in competition with multinationals, they have learned to compete at the same level. "A lot of work in Australia goes to tender and local companies have to compete as aggressively as multinationals to win it," he says. "And we don't compete on price; we compete and win on delivery capability."
"There are no soft options. Government and corporates benchmark globally, so we have to match global benchmarks to succeed."
One element of those benchmarks is the ability to demonstrate quality. Datacom proved its quality by being the first local firm to attain the COPC 2000 call centre standard and is now working towards ITIL (IT Infrastructure Library) certification.
"There is a lot of maturity here," he says. "We run pretty major systems for big companies, we design our own IT systems to deliver predictable outcomes and I am happy to stand up and compare to any global player on the quality of our systems."
Rightsizing
Processes can even be of higher quality than that of the multinationals, because they can be more appropriate for local companies, says Derek Rippingale, joint managing director of 200-strong services company Professional Advantage, which specialises in working with midmarket customers.
| "We wonder how right-sized a multinational's methodologies are for a local midmarket company." Derek Rippingdale, Professional Advantage |
"If you are not in the target market for a services company, that best practice can become overhead and you need to ask if you are really in the market for that level of approach or not."
"I'm not saying multinationals are bad, I'm saying they serve a purpose. It comes down to matchmaking."
"Within every strength there is a weakness and we wonder how right-sized a multinational's methodologies are for a local midmarket company."
Contents Introduction Profitability plus Improving on multinationals Niche skills on tap The local touch In defence of multinationals Executive summary | ||||
Other local companies manage to make their local services compelling by not only pitching at the right level for local companies but actually designing them to exceed the services offered by multinationals.
Simon Durkin, sales director of Melbourne-based Interactive, a provider of support for third-party hardware including proprietary platforms built by offshore companies, says his company strives to beat offshore competitors with a more comprehensive service, delivered more consistently.
"We have every spare part for every machine we support in Sydney and Melbourne," he says. 'We guarantee 100 percent availability in our contracts," so that whatever component a customer needs, Interactive delivers and installs it within hours.
To enable this service the company operates warehouses full of components, and also operates computer rooms full of equipment waiting for its customers to use in the event of a disaster, and sells either dedicated replacement units or shared subscriptions.
Durkin believes the company's double-digit year-on-year growth is testimony to the fact that it offers better support services for IBM and HP hardware than those vendors' own services organisations.
"We say to customers: 'come in and touch the tin'," he says. "We are often competing with the people who made the machines, but customers can see the investment we have made, because sometimes even when they are under warranty they cannot get a fan from the OEM." Interactive is also transparent in its dealings with customers, telling them up-front how many others share access to its systems.
Investments in customer service also help outdo the global players. "Each customer gets a dedicated engineer," Durkin says. "Our large competitors might send a different engineer to each support call. Our customers get someone they know and who knows their business."
Relationships develop to the extent that Durkin says Interactive's engineers often become a trusted source of casual IT advice. "You can only do that through having good relationships in place," he says.
Professional Advantage's Rippingdale has similar views. "As a smaller company you have to live with your actions," he says. "You can't sign a deal and then walk away from it."
Professional Advantage makes a large investment in training and retaining staff. "They don't stay with us because we have a halo," he says. "They stay with us because of the experience. We expose them to different things; give them different roles on each project."
"What is good for the staff is good for the customer because they get someone who can be responsive."
Contents Introduction Profitability plus Improving on multinationals Niche skills on tap The local touch In defence of multinationals Executive summary | ||||
Another way local service providers succeed is by having talent ready to go, taking advantage of the fact that while giant offshore companies may have expertise, it is not always available on tap.
Craig Errey is the managing director of PTG, a company specialising in user interface design. He says his area of the industry is problematic. "The entire discipline of the UI design or interaction design suffers from a big problem in that there is a magic black box of activities that happens between requirement and design," he says.
PTG has developed its own methodologies to address this gap and finds they are greatly appreciated not only by local customers but also by multinational services companies who may possess the same skills but cannot always deploy them in a hurry.
"Companies like IBM have used us locally," he says. "It is good that they have capability, but big companies can have the capability offshore and it can be more expensive."
"I won't cast doubt on their capabilities," he adds, "But local businesses need to ask if multinationals' specialists are as accessible as those from a local company."
Errey also wonders if bigger really means better. "It is true that the large companies have lots of resources, but whoever you use, if you go through the right design process the success could be the same," he says.
That success could also come from using multi-sourcing strategies, the practice of picking specialists to perform individual services and one Errey is keen to point out remains available even when working with an organisation of PTG's size. "We can get the UI requirements right for a project, and then send the actual development work offshore," he says. "One of the problems that causes things to go wrong offshore is that the programmers can't fill in the gaps in a specification." By keeping some work local Errey believes the final results are of a higher quality.
Strategy wins in the end
While working with local firms makes sense for the many reasons outlined above, Gartner's Jester warns that shopping locally for the sake of it is not a sound strategy.
"You need to go back to basics and think through your sourcing strategy," he says. "To do that, you need a deep understanding of a business strategy so you can determine what you want to do as a business, what are the core processes that and then go about deciding how to source them."
"You can do that by creating an inventory of your capabilities, projecting what they will become and then defining how you make decisions in your organisation.
"A federal government department and a hospital will have different priorities, value systems, criteria and business drivers," all of which help identify potential service providers. "Then it comes down to cultural fit," Jester says. "It comes down to comfort and cultural values and their strategies: who do they hire, why do they hire them, what size are they compared to us and is it a match for your business."
Contents Introduction Profitability plus Improving on multinationals Niche skills on tap The local touch In defence of multinationals Executive summary | ||||
Lynda Cowley once trusted multinational service providers.
"In a previous job we used a multinational accounting firm to conduct our audits," she says. "When we decided to install a new general ledger using Great Plains software, we had confidence they were a high-calibre organisation of international standing, with such a good reputation they would deliver." Her trust turned out to be misplaced.
Despite the firm's global scale, Cowley says the firm's "...expertise rested with one person" in Australia. This "expert" was not permanently resident in Australia and had little experience customising the software for local conditions.
Worse still, the expert returned home to their native Canada before the project had been completed, leaving chaos in his wake.
"Another team took over and it ended up with 'he said this, she said that,'" Cowley laments. "We saw inadequate planning and poor examination of our needs. You could go on and on listing the problems." The light at the end of the tunnel came from the fact that the structure of the project called for Australian services provider Professional Advantage to maintain the new application once it had been installed and customised.
Professional Advantage had demonstrated plentiful local skills and eventually Cowley handed the entire project to the local services company.
Four years later, Cowley is now financial controller for YourHealth Group, a group of four medical practices specialising in preventative medicine. When she took on the role, the company required a new general ledger and she quickly turned to Professional Advantage for all of the necessary services.
"I saw no particular risk or downside because I knew Professional Advantage's background," she says.
"Some of PA's staff still worked there, four years after I last worked with the company," and their longevity gave her confidence. "I think it is important to deal with a company that understands the local environment. They need to understand our tax, our laws, and local accounting standards so they know what to customise.
"Because the team I worked with had been around for a while they had enough time to see the package does comply and learn how to customise it.
"I believe you have to do something badly to learn who can do things well," she concludes. "This time I knew to shop locally."
Contents Introduction Profitability plus Improving on multinationals Niche skills on tap The local touch In defence of multinationals Executive summary | ||||
"In our mind this company has never really changed from being an Australian company to being a multinational."
So says David D'Aprano, national solutions and services director at Dimension Data, the company that started life as local services outfit Com Tech.
Is the claim credible?
D'Aprano believes it is because while Dimension Data is a global company, the local outfits' decision-making processes are still entirely local and it relies only on skills it has within Australia.
"One of the problems we see with global companies is that a lot of their capability is not local," he says. "We made a decision that our support, for example, would be local, because our biggest customers wanted to talk to Australians who understood the environment so that if they had an issue that fell between time zones they would not be shunted to a call centre in Paris because the guys in the USA had all gone home."
This structure also allows the company to add expertise and services to meet local needs. "If we decide we have a requirement for a service in Australia, we will look at whether the group has built the service anywhere else in the world. If there's a methodology we will use it to bring that service to Australia."
If the group has no expertise, the company's local board can make an independent decision to develop the service locally.
"You must be able to adapt your business to the local clientele," D'Aprano says. "We are a fully funded sub and we make out own P&L decisions. That to me is the crunch."
Cios shift to IT services in 2005: Gartner
Australian CIOs will be shifting their focus in 2005 from reducing company costs to improving business processes, according to analyst Bob Hayward from analyst firm Gartner Group.
Speaking at an Australian Information Industry Association (AIIA) business briefing, Hayward said that Gartner's research indicates CIOs are "leading a transformation from enablement to contribution."
Over the past three years, the primary agenda for most CIOs has been on cost reduction. However, Hayward says Gartner surveys indicate a shift toward finding "high-quality IT services in line with business cost expectations, increasing the quality and use of intelligence in processes, products and services, and improving, integrating and innovating business processes."
Hayward explains that rather than concentrating on cost reductions, Gartner surveys are showing that the primary priority for CIOs this year will be "delivering projects that enable business growth, followed by linking business and IT strategies".
Gartner's research goes on to say that IT services will continue to dominate in 2005, with an estimated AU$17.7 billion expected to be spent in Australia in 2005 -- a 9.4 percent increase on 2004. The telecommunications segment, Hayward says, will enjoy a predicted growth of 12.9 percent in 2005, with spending increased to an estimated AU$13.9 billion.
Contents Introduction Profitability plus Improving on multinationals Niche skills on tap The local touch In defence of multinationals Executive summary | ||||
- The patriotic urge to buy services locally does not compromise quality.
- Australian IT services firms are financially stable and willing to use different engagement models to mitigate risk.
- Multinationals investment in process does not guarantee local quality.
- Local firms services capacity can even exceed the capability of multinationals.
- Global best practises like ITIL make local companies the equal of global services providers.
- Australian services companies may be a better cultural fit for Australian businesses.
- Local services companies compete by designing their offerings to outflank or exceed multinationals.
- Global firms may have deep expertise, but local niche players with comparable skills will often be available sooner and cheaper.
- Working with local companies does not preclude multi-sourcing strategies.
- Multinational firms can offer independence and mindset comparable to purely local players.
This article was first published in Technology & Business magazine.
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