Steria update

(By Anthony Miller – Wednesday, 18th March 2009 9:20am). There were a couple of points that caught my attention on the concall on Monday (and see Steria UK stuns with 11% margins). First, and at risk of hammering the point yet again, Steria now has almost 30% of group headcount in India, by far the highest proportion among European peers. The near-5,700 FTEs in India will grow by another 2,000 over the next couple of years bringing the total to 40% of group headcount by the end of 2010. OK, the India team is pretty much UK-focused at the moment, but as we have said many times before, Continental Europe is moving more towards to offshore service delivery, albeit ‘kicking and screaming’ along the way!

But with all the good news, especially in Steria UK, we must not forget its ‘albatross’, better known as NHS Shared Business Services (SBS), the joint venture set up in October 2004 between Xansa and the NHS to provide back-office BPO services (initially) F&A to NHS Trusts. I remember so well Xansa’s then CEO Alistair Cox (now CEO of recruitment firm Hays) announcing the deal with great fanfare and flourish, promising break-even by the end of 2007. We’re still not there. Steria CEO, Francois Enaut, now reckons the contract will break even this year (i.e. five years down the track) but I have to say I have heard it all before. To date, SBS has only around 20% share of NHS F&A processing – they needed to be way ahead of this proportion by now to make money. This was a bad deal on day one and I don’t see how it will ever recoup its losses. I reckon Steria should try and find a way to spin out SBS, but I wouldn’t be holding my breath. As many players have found (dare we mention Accenture, Fujitsu, BT), dealing with the NHS is rather like dancing with the devil – always changing the tune and always stepping on your toes.