Outsourcing in good times and bad times

Despite the current downturn in the economy, local IT company Northgate has been expanding – quietly. Owen McQuade met up with Ed Brown, Managing Director of the company’s utilities and public sector division to discuss the future outlook for the sector.

Like most conversations these days we start with Ed Brown’s view of the current economic climate and how his company is faring in these turbulent times. He observes that in the economic downturn many companies may consider reducing costs by off-shoring much of their IT support, with more work moving overseas to places like India or even South America.

Although a number of internationally based competitors have downsized their operations in Northern Ireland, Brown is optimistic about the long-term future of the sector: “Although such moves by the competition might be good for indigenous companies like ourselves, the sector needs a critical mass and a strong cluster of IT service companies locally in order to maintain a leading-edge skills base.” He adds: “There is an additional threat if a number of large contracts go offshore, which will effectively export the ICT knowledge base out of Northern Ireland and threaten the sustainability of the sector in the longer term.”

On a similar theme he sees Northern Ireland still having an advantage in offering a ‘near-shoring’ opportunity to companies in Great Britain and Europe and even further afield in the US. The province, he says, “still has a near shoring opportunity, with a competitive costs base and a strong local talent pool.”

Exporting expertise

Brown believes strongly that Northern Ireland should be exporting its expertise and not just its people. Northgate is an example of this ethos. It has built up knowhow in applying IT in the education sector locally and has then gone on to export this expertise and experience to the education sector in Great Britain. The company also plans to use this expertise in the Republic of Ireland.

The company started providing IT equipment into schools in the province and developed its support for the sector into a managed IT service. These services were then exported to Great Britain and the company’s approach has shaped the Building Schools for the Future (BSF) programme. Brown explains: “Much of the thinking behind the BSF programme originated in Northern Ireland and was then exported to GB. We have exported around £60 million of IT services into the education sector across the water and are now looking to use this skills set in the Republic of Ireland.” Northgate’s ambition is to build its education IT services offerings into a £100 million business. A local success which has not always had the profile it deserves.

Brown believes that Northern Ireland has several advantages for exporting its IT skills: “There is an obvious cost advantage, although this was somewhat reduced during the recent boom years, and we have developed a product suite that is suitable for any English-speaking country.”

“Northern Ireland is a great place to build a business from and its size makes it useful in testing new services or products,” he adds.

IT apprenticeships

With the slowdown in the economy there is now little talk of skills shortages. However, Brown sees one glaring gap in the local skills market: “There is a need for an IT apprenticeship for 16 year olds, much like the modern apprenticeship seen in other technical areas.” He believes that this route would give many more young people an IT career path and would fit well with the Executive’s drive towards encouraging young people to study the STEM subjects. At present the main route into the IT sector is to go to university and then be trained for two or three years. By giving 16 year olds a practical apprenticeship, Brown says that they would be skilled up in many aspects of the IT sector more quickly. And by following a more practical apprenticeship route, supported by structured study, Northern Ireland could partly avoid the problem of young people graduating with a lot of student debt and with no job: “This would be better for the individual and for the company.”

One trend Brown has seen over the last couple of years has been the increasing importance of green agenda. He comments: “The public sector has taken to this with some enthusiasm as it dovetails with the sustainability policy agenda and the private sector sees it as a means of costs reduction.” Northgate has developed expertise in helping clients to reduce IT energy costs as “for some power is becoming the biggest [cost] line item.”

Multi-utility offering

Northgate has a pedigree in the utility sector as part of the company grew out of the IT function within Northern Ireland Electricity. The company now serves the electricity, gas and water sectors and is focusing on expanding its operations further in the water utility sector. Brown sees “great synergies in serving a number of utility providers and enthuses about the multi-utility model.”

Future outlook

Brown foresees a “shake-out in the Northern Ireland IT services market, particularly amongst the medium size players.” He sees Northgate faring well in this as it has a balanced portfolio of public and private sector clients, and also a good spread geographically.

As the economic climate worsens, Brown believes that IT companies must offer solutions that reduce costs and points out that this has always been the case regardless of the climate. “Companies have looked to outsource their IT services in good and bad times. Indeed outsourcing is better in bad times when costs are under pressure.”

He says that there is a real danger that by not spending on technology, the competiveness of any organisation will be eroded and indeed the competitiveness of the region as a whole may suffer.

Brown signs off on a positive note, saying: “You don’t see many glum faces around here. However, we are not complacent and will keep focused on doing what we do well.”

Profile: Ed Brown

Ed Brown joined Northgate Information Solutions in 2005. Formerly a partner at Deloitte, Ed has over twenty years’ experience in providing complex technology solutions to clients across the public and private sectors. As Managing Director for Utilities and Public Sector, Northgate, he is responsible for the targeting and delivery of both managed services and point solutions to Utilities/Public Sector Customers throughout the UK. Local customers include Viridian Group, the UK Consumer Council for Water, Account NI, Invest Northern Ireland, Department of Agriculture and Rural Development and the Northern Ireland Water Service. Ed continues to promote and develop the ICT industry both locally and internationally in his recently appointed role as Chair of Momentum, the Northern Ireland ICT Federation.

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