The Friday Interview: Paul Nannetti, Capgemini

28 Jan 2005

Although his biography lists Dalkey as home, one suspects that Paul Nannetti (pictured) is seeing little of the Dublin Riviera these days. As head of Capgemini’s business in the Nordic region, home is Stockholm, Helsinki, Copenhagen or Oslo, wherever he happens be on any given day.

Nannetti has been with Capgemini for over a decade now. A chartered accountant by profession, he joined the company in 1994 as financial controller of its UK and Irish operations. Since then he has held key roles both in the UK (head of e-business; head of business process outsourcing) and in Europe (head of customer relationship management practice).

His present role in the Nordics is another key strategic position within the business. In the UK and Ireland and various other European countries, Capgemini plays second fiddle to 800-pound gorillas such as PricewaterhouseCoopers and Accenture. In the Nordics, it is different, Nannetti explains.

“The turnover is just more than €300m and we’ve got about 3,000 employees. We’re quite well established up here. We hold a leading position in most of the markets, certainly in Sweden.”

He feels the success of the company in the region has significantly to do with the fact that the French-owned group has been built up by acquisition but, rather than imposing its own unified ethos, it has allowed local units a lot of operational freedom. As a result, Swedes, for example, tend to put Capgemini in the same bracket as Swedish companies rather than internationally owned ones.

“We’re seen as a firm with local heritage but with strong international capabilities,” he notes, adding, however, that sustaining this dual identity requires a lot of graft.

“As our business and our clients’ business has become more global in recent years, we have to balance that very federalist heritage with the need to be able to manage our offerings and our delivery on a more global basis. So, we’ve introduced common processes around sales management, account management and so on while as far as possible allowing the local identities to continue to sustain.”

While he may still be on a learning curve in the Nordics, Nannetti’s experience of other markets has given him a good insight into the main trends that have been driving corporate Europe over the past decade. It is a period in which outsourcing, for example, has rapidly grown in popularity. This includes not only IT outsourcing, where the offshoring of IT jobs is becoming a very contentious issue but also business process outsourcing (BPO) where an organisation transfers the management of an internal process such as human resources or finance to a third party to handle.

Although IT outsourcing and BPO are distinct activities, they both depend on technology, and Nannetti often finds that projects, especially ‘big bang’ change management projects, will involve both elements.

“Some services businesses do BPO and nothing else. For example, they would run call centres on behalf of their clients, full stop. At Capgemini, our vision is to facilitate technology-enabled change, ie to use technology to drive change in organisations and sometimes by taking on the process as well we can make the change more effective. That’s not to say we don’t do some pure BPO projects but the more strategic vision is to provide a solution that integrates both processes and technology,” he says.

Outsourcing has not been universally popular of course. Like the US, the UK has warmly embraced the concept whereas continental Europe has been lukewarm. And then there is Ireland.

“The Irish market has been slow to embrace it, possibly because of the Celtic tiger, where the focus was more on top-line growth than on process efficiency and cost,” Nannetti muses. “For the time being, we don’t see a lot of excitement or enthusiasm in Ireland for outsourcing, although the recent Bank of Ireland deal with Hewlett-Packard did shake things up a little.”

Nannetti remains convinced that there is inherent value in outsourcing. In one deal recently signed with a large unnamed security firm, Capgemini is to take over the running the firm’s accounting and related processes through its BPO centres in Poland and China. Whereas they cost €11m a year to run previously, Capgemini will run them for €3.5m.

As the BPO market matures, some new business opportunities are being explored. One trend is the rise of industry-specific solutions. One example given by Nannetti is of drugs firms looking to BPO as a means of stripping some of the cost out of the hugely expensive product development and clinical trials process. He believes that other industries, too, can benefit from adopting the BPO model.

Despite its somewhat tarnished reputation, IT outsourcing too has a bright future, he argues.

“In continental Europe, we expect significant growth in general outsourcing over the next five years,” he says. “The outsource market is much less developed in continental Europe and indeed Ireland than either the UK or the US. That will unquestionably change and offshoring will clearly be an element of that. We are already seeing the Indian centres making an impact on Germany and the Netherlands. They haven’t had a big impact here in the Nordics yet but it’s only a matter of time. This is a wave that will affect us all.”

This ‘wave’ will inevitably mean that more European IT jobs will go to offshore locations. But Nannetti does not view this trend in apocalyptic terms; rather as a wake-up call to IT workers to check whether they have the skills that will be required in first-world markets. And if they don’t have the right skills, they should acquire them.

For IT firms, too, the offshoring trend is a mixed blessing. While they might fear low-cost competition from abroad, they can use the cheaply available skills to make themselves more efficient, he believes. Here he draws a parallel with the fashion business, where clothes tend to be produced in China, India and other low-cost countries for cost reasons but the key activities such as product development and marketing strategy are done back in the home country.

“[Offshoring] will make the IT industry more competitive because one of the inhibitors to doing IT projects is return on investment so the lower the project cost the more projects you will do,” he concludes.

By Brian Skelly

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