Francois Enaud

Biz@India

May-June 2014

Right approach is the key

Francois Enaud, Chairman & CEO, Steria

Though Indian and French IT services businesses have been underperforming, there are few exceptions to the rule. Franco- British Steria is one such company which is flourishing between both the markets. Steria’s chairman and CEO Francois Enaud finds opportunities in a crisis and sees right approach as a key to improve relationship between the two nations.
 
• Let’s begin by looking at Indo- French business relationship, most specifically IT domain. It has not performed well which it should be. What do you think are the main reasons?
 
Yes, you are right. It is well quite behind some countries in terms of relationship with India and how to use potential of capabilities of Indian IT industry in France, comparing to other countries. To explain you how much we are behind or far from other countries, today Indian IT players have 20-30 per cent of their total revenue in Europe, which is a quite big portion when compared to a decade ago. Now when the other countries are coming in to have relationship with India like Germany, the percentage has already been divided. But you are right, in France, the percentage is very low. And it is marginal portion of 20 per cent of revenue. There are different reasons. First, I would say the structure of the industry in France. The IT industry in France is structured very differently to the other countries. It is much more fragmented. It has many local IT service providers and as long as we have these local IT service providers – small, medium and large who are competing together to get a piece of cake – we will have less opportunity for the global players and especially for the Indian players.

Second reason – the French market is less open for outsourcing. They are still a bit conservative. However, now the crisis – financial, economical – has opened their minds and they have realised that now there is no other option. There is more cost pressure. Many CIOs (chief information officer) have accepted the fact that he cannot deliver the targets which he has, without considering another model and hence many French IT companies are now based on outsourcing. So, things are now moving in the right direction.

Outsourcing in France is not efficient to go offshore because there is another obstacle. In particular, we have few global brands in France. We have good brands but all are not manufacturing here. That is why; these brands are more local or European and are doing business / operations in France. Most of the decision makers are not sufficiently comfortable to work or deal with other regions. This is another obstacle. Now the question is – how we can go over this obstacle. It is definitely by industrialising the capacity in all processes because more you automate, less you have to have human interface. That is what we do. First, we do outsourcing of our operations in order to extract IT operations. Then we automate, transform the operations the way we support and manage the operations, bringing more automation, industrialisation. So these kinds of processes, managing operations will open a wide way to bring opportunity and help in improving the relationship between India and France.

• How do you see the attempts of Indian players like TCS, Infosys to capture the French IT market?Are these players doing enough to capture the French market?

They are quite aggressive towards the French IT market. They consider French market very attractive because of the huge size – the European market caters to three major markets – France, Germany and the UK. So if they want to take significant share of the European market, they have to show the interest. So, I would say that Indian players are quite motivated to penetrate the French market and I am confident that they will find a way to get it. So far, I consider – there is need to concentrate on the language issue and the lack of proximity they have with the French market and the fact that they have to localise their approach / proposition if they have decided to acquire small share of capabilities. Small and medium companions are more concentrating in order to get the direct access to the clients. Direct access is not only by means of sale, but it is for intimacy with the client for knowledge and to understand so that they would be able to interact with the client (suppose, you are talking directly to client in India).

• What are Steria’s plans for India? What is your current presence in India?

Our plan for India is of course to consider India as a unique place. I don’t want to go anywhere for the time being. Some clients, for the time being, want to stay in the Schengen or European space in order to have no disputes, no complaints in employment. Therefore, as of now, our clients are concerned about near shore or offshore. But interestingly, in our model, we are completely harmonised for equipment, tools and methodologies for any delivery centre wherever it is – near shore, onshore or offshore. It means we have seamless way – we can move from near shore to onshore and from onshore to offshore. That we do particularly for infrastructure management. For example, we start our operations from France and move to Poland and from Poland to India. We have places near shore or onshore but offshore, we consider India a unique place and that is why the choice for us to remain focussed on India. We have first class infrastructure in India in three cities – Noida, Pune and Chennai. We have still more capacity to grow in these cities. We have definitely a fantastic organisation in this country. The operations here are fully aligned the way we conduct in Europe. We use the same methodologies. Our plan is to consider India as a first destination for operations in Europe in both IT and BPO. BPO is of course strong growth driver at present. Many clients are looking for real transformation not only in IT but in BPO also. And this implies some BPO proposition.

High rate of attrition has hit the BPO sector

In addition, we have also plans for India operations to grow in the domestic market. We have started working on strategies very specifically and selectively – first is the public safety and second is transport because these two areas have very strong capabilities for which we can bring solutions from Europe to India. These solutions have been localised for the Indian market and are implemented with our Indian capabilities. We consider it as very strong competitive advantage. We are right because we have already very good contracts particularly for police in India which is very promising. Our model is quite efficient for this purpose. Furthermore, we want to engage India in business development to meet our Indian operations and create value proposition for us and bringing innovative capabilities into the delivery. And this would clear our route to enhance our presence in the domestic market.

• Two more questions about India – first, currently what percentage of your global revenue come from India?

Our target for this year is to get 10 million euros of sales in terms of orders. Last year, we received five million euros of sales. And three years from now, we want to take it to 40 million euros of sales for the domestic market.

• But do you see three years from now, India can see double digit growth in turnover?

No. It will be too much because you need average size in Euro; however, it is different in rupees. The average size of contract in Europe is small if you do something. It is difficult to get even 10 per cent of the global revenue from the Indian market in terms of number of contracts.

• Moving on, a particular problem for the Indian market is with workforce. What is your workforce in India?

It is more than 5,000.

• Do you suffer from attrition?

Yes. We don’t say that we are suffering; however, it is a fact, mainly in the BPO sector. It has about 30 per cent attrition. We will have less attrition when we will have analytical BPO because it is more reliable and high level BPO and this would be more exciting and motivating for people. However, for the IT sector, attrition is far lower about 15 per cent, which is good. In Europe, the attrition is too low. That is a problem. In France, people cannot move anymore. It brings in employment issues. In our industry, we need at minimum 10 per cent attrition. Below 10 per cent, one would not be comfortable. We are targeting 20 per cent attrition in BPO but currently as I said, it is 15 per cent.

• Where do you stabilising your Indian operations?

Of course, we will go for headcount. Last year was not good for us because we did not grow in Europe. Last year, we went in the UK which is of course a link between India and Europe. This year, we will again grow in India to support new contracts in the UK. In Germany also, the business will grow as well. France is still a question mark. The situation is still complex in France. However, as I mentioned, if some initiatives will be taken, this can bring in opportunities to improve the relationship between India and France.

• Do you see difficulty in finding talent in India? Has skill become a challenge?

From my point of view, I would say – no. There is no issue to get the right talent. And my judgement is based only on the quality of delivery. Our quality of delivery from India is excellent. I have never received a single complaint from a single client. For the complex activity, I am seeking specific solutions in German bank for tax management (tax on security), which is complex to make the overall contract profitable. So we have moved the team to India and there is no damage on the quality. And I am very impressed by the output given by Indian in a short period of time. So, definitely we have right talent and the management system in India.

However, we have some challenges in terms of obtaining the right talent like recruiting the freshers. As they are raw, we have to put them under training. And diagnosis of our own testimonial is necessary to convince the client. So, we have developed a set of applications for internal purpose, which is for financing, accounting, procurement, HR management, etc. And if we have right talent and capabilities, we have no issue.