Sourcing Superstars: Francois Enaud, Steria

(Steria is one of Europe's largest IT service providers and, since its 2007 acquisition of British firm Xansa, an increasingly prominent regional player in the BPO sector. We spoke with Steria's Group Chairman and CEO, Francois Enaud, about his take on the current state of outsourcing, his ambitions for Steria over the next few years, and how he plans to steer his company through the current financial turmoil.)    

SSON: What have been the biggest changes you’ve seen during your time in the outsourcing sector?

Francois Enaud: For me it’s very clear that outsourcing has gone from a global approach to a more selective one. Previously clients were looking for a global outsourcing partner, now they definitely consider that it’s not the right model because it’s more risky and less flexible. They proceed now with a selective model which means that for each aspect of IT or each different outsourcable domain of process, they select the right partner for that piece. This isn’t universal and is adapted to each client, but it’s much smarter outsourcing.

SSON: Have you noticed a shift in the balance of power between buyer and provider in recent times - and if so what form has this shift taken?

FE: I would say yes, definitely; but at the end of the day it’s still a good balance, of course! However, the balance is not based on the same things any more. There has definitely been a shift, and in a sense clients now are – particularly with regards to the selective model – much more demanding regarding engagement and the SLAs, particularly demanding on flexibility and agility. In fact, they no longer consider outsourcing as an obstacle to the evolution of their IT. That’s why, in the contract and the way they manage a provider, they are very strict and demanding on this kind of relationship. Very precisely, the way they contract and the way they formalise their engagement with their provider, is really based on service level agreements, demanding quality from a technical point of view, and quality from an end-user point of view.

SSON: What do you see as being the biggest challenges to the sector’s growth today and how are you positioning Steria to overcome these challenges?

FE: For me the biggest challenge is being able to provide more and more customized services. It’s not just IT any more, it’s providing for the worldwide business needs of our clients, and consequently we have to provide very highly customized services. At the same time we have to provide a very high level of industrialisation of the delivery. The biggest challenge we’ve faced is ensuring the capability to provide these two different dimensions together. That’s a great challenge.

SSON: What do you think will be the impact of the current financial crisis on the outsourcing industry?

FE: Personally I consider – as we have already experienced in the last crisis – that there will be more opportunities than threats, in the sense that outsourcing is a very easy opportunity for clients to reduce their cap-ex, and a very good way to reduce their recurring spending. It’s a double gain. The only problem for outsourcing is the transition from one point to another: how to move from a situation to the next one represents a risk, and when you’re in a crisis clients are much more risk-averse. But if you present a transition process which looks less risky for the client, the final destination is so attractive in terms of cap-ex reduction and operating-cost reduction that clients can be convinced.

SSON: The great majority of Steria’s revenues come from within Europe; are you looking to develop a more global revenue stream to go along with your increasingly global delivery footprint?

FE: Obviously we have now reached significant visibility and market-share in Europe, in Europe’s largest markets like France, Germany and the UK. It’s time for us to consider further geographic expansion to sustain our growth ambition.. But we don’t intend to become global. What we will continue to do is be very selective in our expansion. Currently we are considering two potential expansions from a geographical point of view. First is part of Asia, around the south-east around Singapore, Hong Kong, a region of Asia which is very innovative and fast-growing and investing a lot in IT; and because we’ve had a presence there for ten years, we have now a good network of partners and a good portfolio of clients, so we have a solid basis on which to consider an expansion of what we do there.

The second area of expansion would be, quite soon, the Indian domestic market - which is not usually considered as a market, rather an offshore destination, but I can’t imagine India with such a large, fast-growing economy not investing massively in ICT to modernize its infrastructure. We’re not looking at anywhere else at the moment – certainly not the USA, North America or Latin: for Steria there’s no specific advantage to being there, compared with our position in Asia.

SSON: Where are you winning the bulk of your business in terms of industry sector, function et cetera, and how has that changed – if at all – in the last couple of years?

FE: It’s no accident that we’ve shaped the profile of Steria to be on what we consider to be the right market. We’ve been selective in our market to focus on the service industry. We’ve developed a strong portfolio of products adapted for markets like public services, utilities, financial services; and I consider that it’s a good focus because these sectors are the most IT-intensive and spending on IT is higher than in other sectors and the balance between public and private is a good one. We’ll go on with the same focus because it’s an advantage to be acknowledged, to have critical mass on the market; one of the keys with this sector is to be visible, to stand out from the competition with specific offerings and references. That’s why I prefer to stay focused – even if we extend the geographies. 

SSON: What is your view of the great growth in the Indian service provision sector? And do you expect a similar impact from the ongoing development of the Chinese services export industry?

FE: China and India are totally different countries. Regarding IT, we cannot compare them equally for two reasons. Firstly, India is for the time being much more an offshore market than a domestic market, even if as I said before I think this will change. China is first of all a market in itself, and very late regarding offshore work – even if in some cases labor costs are lower in parts of China than in India. In fact if you take the overall cost – the overall picture – China is far less competitive an offshore destination than India, and it will take time for China to fill that gap.

Regarding China as a market: I consider this a huge market. That’s why we have decided to get into the region of Hong Kong and not to go too widely into China, because it’s what I would call oversized for Steria. To have a chance of success we need to be very pragmatic. To get back to India: India is the most powerful offshore location in the world and has a huge advantage; even if you can find cheaper labor elsewhere, it doesn’t mean that these other places will be competitive.

SSON: More personally, what are your ambitions for Steria over the next few years?

FE: My ambition is linked to what I said a moment ago; I want to make Steria a point of reference for selected topics in selected markets, versus any possible ambition to make Steria a global generalist. My ambition is to go further with selectivity and to make Steria famous for some topics; to make Steria a multi-leading player on various selected areas. This is combined with something which is absolutely key to our strategy: to keep our unique corporate governance, whereby our employees have a say in our strategy. This specific governance is, I would say, the foundation of our historical values: Steria has a human touch and I would like to maintain this. My ambition is to ensure Steria continues to be a very attractive company from an employee point of view.

SSON: What is the best professional advice you’ve ever been given – and did you take it?

FE: The best advice: don’t run after volume. When you’re considering company growth, pay more attention to how you increase your "muscles" rather than how you can be bigger. Because the major risk in any growth strategy – and particularly when managing external growth through acquisition – is to be excited by the volume and forgetting how you can swell your profile and get more "muscles" through expansion and acquisition. I took this advice and have been very selective in our acquisitions. Because in our market, ,size is not enough. It’s probably the same in any industry, but it’s particularly true in ours.

SSON: What are the most important professional lessons you’ve learned during your career?

FE: The most important lesson I’ve learnt is that people are more important than anything else. You can have the best tools, the best processes, the best infrastructure; if your people are not aligned you will never deliver what you want. For me that’s the biggest lesson, and I believe that’s where Steria has a great advantage.

SSON: Finally, what advice would you give to a company just beginning an outsourcing journey?

FE: Don’t underestimate the investment in the transformation. Don’t underestimate the necessity to prepare the transformation very properly. If you don’t invest enough in the transformation internally, first - and ask your partner to help with that; if you outsource an existing situation, if you outsource a mess you will have a mess on the other side – and it will be even more complex to manage.