There aren't many IT industry figures that calmly drop into
the conversation that they have been dining with French president
Nikolas Sarkozy, but Francois Enaud, CEO of French outsourcing
giant Steria can make the claim. "I had a private lunch with
Sarkozy to talk about how we run Steria," he says. "We are
regularly in discussion with the French government about all sorts
of matters.
"The governance model that we have at Steria is unusual and of
interest to many, particularly now at a period when we are all
having to reconsider new forms of governance and new forms of
capitalism. Our governance structure has seen our employees hold a
significant portion of capital in their hands, balancing the power
between the internal shareholders and the external ones. Many
companies in France are looking to this as an example, and the top
levels of government are taking an interest in all such
examples.
"It can be difficult for very large organisations to change
their governance rules. It is not so easy to do when you have
achieved a certain size and you are a listed company. But even if
you are very large, it is not too late to change your governance
rules. If you want to go further and implement the Steria model, it
is certainly better to consider it earlier rather than later, and
preferably before being listed. But fair and balanced rules are
implementable for and by everybody."
New approaches
The Sarkozy administration is bringing in a number of changes to
the traditional French way of doing things, and Enaud is at the
forefront of some of these, most notably in his role as director of
the new Agency for Active Inclusion (ANSA). This was created by
Martin Hirsch for the purposes of social experimentation and
implementing the Active Solidarity Income (RSA).
"It is about coming up with a new way of providing and ensuring
a minimum level of income for every citizen of France," explains
Enaud. "What was happening was that in France people could benefit
from a minimum, but when you become employed you lost any minimum
wage benefit. In some cases, it was more advantageous for some
people to stay unemployed rather than accept certain jobs,
especially part-time jobs. The government has realised that this
situation was stupid. The goal after all is to reduce overall
unemployment.
"The main driver for any government should be about integrating
people into society, and when people are unemployed they are more
disconnected from real life. With the existing system, we have been
effectively encouraging people to stay unemployed. So we are now
socially experimenting. There will be a more complex way of taking
into account the revenue from a job and looking at what the total
income is. That total can come partly from the government and
partly from employers. The idea is to pilot this first then if it
works, look at making it a law."
This backdrop of political transformation is reinforced by
external forces of change. "This financial crisis is definitely
transformational," says Enaud. "Customers are trying to accelerate
their own transformations and increase their productivity.
Secondly, it is about considering new innovations and investments
to develop clear differentiators and success factors. The companies
which will succeed in this crisis are the ones that will manage in
parallel the transformation they need to make without cutting out
their innovation completely."
But the nature of the type of business being done has changed.
"If you go in to a client and say you are there to talk about a
10-year strategy, then it will be difficult," says Enaud. "We
certainly can prepare that with you, but I am not sure that you
will get very much interest. That is why the pure strategy
consultants are suffering. We can help clients not to forget that
long-term strategy, but to manage it and keep the same agenda for
the mid-term. You have to be more rigorous than ever."
UK examples of poor outsourcing
That, of course, is where outsourcing comes in. Enaud detects a
growing interest in the model on the continent, particularly in the
public sector. "There are high level ministries to promote business
and outsourcing," he says. "The UK also has plenty of bad examples
of poor outsourcing practice, particularly in the public
sector.
Enaud sees these as a good opportunity for others to learn.
"Many times I use examples of UK practice and look at what the
problems have been. The UK has many lessons to give to other
governments about outsourcing," he says. "The UK has been very
forward about using IT as a driver of total transformation. There
are big lessons to be learned from the experience of private-public
partnerships and how to share risk. The UK government is far more
open about favouring outsourcing and considering what the private
sector can bring to benefit the public.
"In the UK it has been quite natural for companies to accept the
idea of offshoring, but not so much in continental Europe. The
maturity of the IT services market is different in the UK. There is
a lot more outsourcing to third parties and companies are much more
open to considering a mix of resources. But with the downturn, it'
is likely that continental Europe will go as fast as, or even
faster than, the UK did.
"There have been some cultural issues as well. For language
reasons, it has been much more natural for UK clients rather than
French or German ones to offshore to India. Offshoring is not just
about India, of course. Morocco has been an alternative to India
for French-speaking companies. Everyone has to be considering
outsourcing as an option just now."
The Satyam effect
Surely the recent scandal surrounding Satyam will have a
negative impact on both India and the cause of offshoring? "You
must not make any connection between the very specific case which
is Satyam, which is absolutely a scandal, and the overall market,"
says Enaud. "That is just not fair for other companies. Now it is
true that it might be more of an advantage for us. We have 30% of
our overall headcount in India, so we can be a pure-play Indian
company in some cases, but without any downside."
But given the propensity for French workers to close down the
national ports at the drop of a hat, surely the perceived threat to
jobs from outsourcing will remain a major inhibitor on the
continent?
"What is the real goal of outsourcing? It is to reduce costs of
course, but it is also to improve the quality of the service that
you are offering. When you think of it that way, then you realise
that outsourcing and offshoring is not necessarily linked to job
cutting. Yes, it is certainly about transforming jobs and focusing
on what the proper mission for staff ought to be. Trade unions can
be resistant of course, but they are not so afraid of job cutting
itself as that is part of the overall economy. Outsourcing is about
the overall adjustment of companies productive costs. Outsourcing
is a strategy for internal transformation."
Outsourcing culture
Enaud argues that as outsourcing is a human-facing activity,
outsourcing suppliers need to focus on their own cultural and
people-centric aspects. "There is a very distinct Steria culture,"
he says. "You have to pay attention to the cultural aspects when
you are running a business or considering an acquisition. If you do
not pay attention to the cultural aspects, you are quite likely to
fail when it comes to execution of strategy. Any time we have
considered an acquisition, we have considered it strategically to
achieve a new dimension that was not achievable as well or as
quickly organically.
"We do a lot of due diligence to assess the culture and the
cultural roots of a company. When it came to Xansa [taken over by
Steria last year], we found we come from the same roots. We both
have a people-first culture with a common point of focus on the
internal shareholders. We both give our employees a key part of the
governance of the company. You have to know the foundation culture
of the company. The biggest problem that can result from a company
acquisition is that you dilute your culture and that becomes
detrimental to your identity. If you lose your identity, you lose
everything."
"We have a single brand. It is Steria everywhere. It is
important to increase brand awareness so we have a single brand
across all geographies. We immediately made the adjustment after
the Xansa takeover, both organisationally and at management level.
The management community is European from top down through middle
management. We have a genuine international reach."
Certainly the Steria-Xansa merger seems to have proceeded more
smoothly than, for example, the HP-EDS merger. "I wouldn't want to
give advice to HP and EDS, but my guess is that they will suffer a
lot," says Enaud. "That's not because the deal doesn't make sense,
but because they have completely underestimated the cultural gap
between the two firms. HP has a product culture, EDS has a service
culture - they are two completely different worlds. In the end, HP
will win and the EDS business will be partly destroyed."