Switzerland is home to big names such as Nestle, the world’s largest food manufacturer, multinational pharmaceutical company Novartis, watchmaker Rolex and chocolate maker Lindt & Sprungli. All of these companies have a global reach, and therefore prefer to work with an outsourcing partner who can operate on a similar scale.
Perhaps the most lucrative area of the Swiss economy is the financial services sector. Alongside major insurance providers such as Zurich Financial Services and Swiss Re, there are approximately 400 banks in Switzerland, including the ‘Big Two’ Credit Suisse and UBS.
This space is therefore very attractive to IT services companies, but remains tough to penetrate. According to Julia Reichhart, senior consultant at Pierre Audoin Consultants (PAC) GmbH, if you’re not present in Switzerland, you can’t be successful with a large Swiss bank.
Andy Feitknecht, head of Technology Solutions for Accenture in Switzerland, told Global Computing Services that, although the global banks have their own IT departments, they have been very keen on outsourcing.
The big banks need to team with external companies who can provide leading-edge technology, said Feitknecht. UBS, for example has around 1,000 IT employees in Switzerland, but Accenture still does a lot of business with them.
UBS also does a lot of business with Perot Systems. The bank is Perot’s largest single customer, with approximately 15% of the company’s total revenue derived from its UBS contract. The deal is due to end on January 1, 2007, however, forcing Perot to search for alternative sources of revenue.
The latest figures from PAC estimate the size of the Swiss market at CHF 4.8bn ($3.7bn) in 2005, up 2.7% on the previous year, while IDC forecasts that the sector will grow at an annual rate of 4.2% over the next three years. Both agree that IBM Global Services is the biggest vendor in Switzerland, and that the top 10 list also includes T-Systems, HP, EDS, Accenture, CSC and Siemens Business Services.
The only local player big enough to merit a place in the top 10 is Swisscom IT Services. The Berne-based company, wholly owned by Swiss telecoms carrier Swisscom, reported total revenue in 2005 of CHF 736m ($570m), but only one-third of sales came from business outside of its parent company.
Michael Shipton, CEO of SIS, is confident that the company can compete with its better-known rivals on a domestic level. There is a good, strong, sustainable position open for a local player, he told Global Computing Services.
With offices in 14 locations across the country, SIS is close to all its customers’ local offices. The company’s market knowledge is also an advantage. Shipton said that SIS has built up contacts and relationships with customers over time, and as a result the people who take decisions are in tune with what is going on in the market. This, Shipton continued, means that SIS can take a longer-term perspective on the business.
Switzerland is still a very relationship-based society, agreed Accenture’s Andy Feitknecht. While Accenture has been present in Switzerland since 1988, the company has also made acquisitions to boost its local presence, most notably purchasing UBS subsidiary Systor AG in February 2003.
Currently, Accenture’s Swiss operations are mainly focused on financial services, and Feitknecht said the company specializes in large, complex deals. Systems integration is about one-third of our business, he added, and we are also growing strongly in application management. The company does not disclose revenue figures for its Swiss operation, but Feitknecht said Accenture employed around 740 staff in the region.
Outsourcing in the Swiss banking sector is a more complex issue that in other countries due to the unique Swiss banking laws, which strictly limit any information shared with third parties. This has obvious implications for outsourcing deals; for example, Julia Reichhart at PAC said that Swiss law prevents customer data from financial services clients cannot leave Switzerland.
With this in mind, it is unsurprising that players in the Swiss IT market have been slow to pick up on the trend towards offshore and nearshore delivery models. However, Andy Feitknecht told us that, once the big Swiss companies start to increase their use of offshore, it will drive acceptance in the rest of the sector. Feitknecht also said that UBS was already moving in that direction, building up its own IT centers in India.
Switzerland is not currently a member of the European Union, although the country’s government is thought to favor joining the alliance at some point in the future. However, Michael Shipton at Swisscom IT Services said that operating outside of the EU was not a problem, as Switzerland had many bilateral economic agreements with the Brussels-based organization.
Both sides benefit from the situation as it is at present, said Shipton. When services become more tradable across the EU, then Switzerland is economically fully integrated, and will be able to adapt and be part of that process.
