Center for Information and Communication Technologies Technical University of Denmark 01-06-2015...

18-04-23Center for Information and

Communication TechnologiesTechnical University of Denmark

Internationalisation of Knowledge ServicesThe Case of Engineering Consultancy Services - Ramboll

Nordic Conference:

Innovation and value creation in the service economy

Oslo, 25-26 October 2005

Anders Henten

CICT, COM.DTU

2

Center for Information andCommunication Technologies

Technical University of Denmark

Introduction

PhD in service trade

Work for UNCTAD on tradability of services- Banking- Consultancy services- Telecommunications

Services, Internationalisation and Competences

E-Services

3



Issue

Developments in the internationalisation of the engineering consultancy business- Outflow/inflow- Outsourcing/insourcing

The case of Ramboll

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Overview

Modes of internationalisation

The sector

Drivers and barriers

Ramboll – developments and strategy

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Modes of internationalisation

Export

Foreign investment

Movement of producer

Movement of customer

Combinations (partnering, alliances, etc.)

Last two categories registered as trade/export

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Types of outsourcing (OECD)

Located in home economy

Located abroad

Non-affiliated firm Onshore outsourcing

Offshore outsourcing =

offshoring

Affiliated firm Captive onshore outsourcing

Captive offshore outsourcing

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Trends in internationalisation of services

Services = 70% of GDP

Service exports = 20% of total exports

Service FDI = >50% of total FDI

Trade developments (WTO):

2001 2002 2003 2004

Goods -4% 5% 17% 21%

Services 0% 7% 13% 16%

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What is engineering consultancy?

Traditionally, engineering design and planning’People business’ – 80% of costsBordering areas: - Architectural design, on one side- Construction and manufacturing, on the other

Increasingly multi-disciplinaryDivisions of labour differ from country to countryDivisions of labour is also different from project to projectDivisions of labour change over time

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Contract types (UNCTAD)

Management assistance Engineering Engineering and procurementEngineering, procurement and constructionEngineering, procurement, construction and installation

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Product life cycle (UNCTAD)

IdentificationPre-feasibility studyAppraisalFeasibility studyBasic designDetailed designSupervision and commissioningConstruction and procurement managementOperationMaintenanceRehabilitationDecommissioningRemoval

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Largest EC companies in the Nordic countries (STD, October 2004)

Jaakko Pöyrö Group (FIN) 4679 empl.

Ramboll Group (DEN) 4050

SWECO AB (SWE) 3609

COWI Group (DEN) 3501

Carl Bro Group (DEN) 2689

ÅF Group (SWE) 2499

Teleca (SWE) 2496

Semcon AB (SWE) 1504

Etteplan Oy (FIN) 876

Norconsult AS (NOR) 800

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Largest EC companies globally (STD, October 2004)

URS Corporation (USA) 26000 empl. No. 1

Altran Technologies (FRA) 17044 No. 2

QECOM (USA) 17000 No. 3

WS Atkins (ENG) 14000 No. 4

SNC-Lavalin Group (CAN) 12520 No. 5

Jaakko Pöyrö Group (FIN) 4697 No. 18

Ramboll Group (DEN) 4050 No. 24

SWECO AB (SWE) 3609 No. 28

COWI Group (DEN) 3501 No. 29

Carl Bro Group (DEN) 2689 No. 43

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Largest EC companies in global top-50 (STD, October 2004)

16 US-based

10 English

4 French

1 German

2 Australian

1 Japanese

No Chinese (China United Engineering is 52)

47 out of 50 are European or North American

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Danish EC companies

Danish EC companies are comparatively largeImportant reason: Same independent EC company model as in USA and UKEC services are often integrated in construction/manufacturing in Mid and Southern Europe, e.g. GermanyExample of integration in Norway: KvaernerIn Denmark: Small number of large EC companies, many small companies, and still fewer middle-sized companies

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International trade of Danish EC companies

Internationalisation increased in 1980s

Exports fluctuated under 20% of total turnover in 1980s and 1990sIn 2003: Exports: 1.4 bio. DKK out of total turnover of 7.3 bio. DKK (20%) (source FRI)

Figures from Statistics Denmark are quite different: Exports 11 bio. DKK out of 30 bio. DKK in 2004 (reason: much broader definition of EC)

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Foreign investments

Foreign investment – presently 5000 employees abroad and 9000 in Denmark

More limited foreign investments in EC companies in Denmark- Banedanmark (Atkins, UK))- Knudsen & Sørensen (SYCON, SWE)- Steensen & Varming (SYCON, SWE)- Carl Bro (Bure Equity, SWE, 50%)

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Drivers and barriers for export and foreign establishment

Drivers- Follow customers- Development assistance- EU public procurement rules- Size and global experience necessary- Advanced domestic demand- Standardisation- ICTs

Barriers- National regulations- Cultural differences- Structure of EC sector

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Drivers and barriers for offshoring

Drivers- Cheaper labour power- ICTs

Barriers- Transaction/agency costs- Standardisation/ICTs and possibilities for inshoring

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Ramboll – local presence

Globalisation instead of internationalisation

The Nordic region is the home market

3 zones- Nordic region- Baltic region, Russia and Ireland- Rest of the world

Local presence is necessary

Therefore, local establishment

‘Local partner – global knowledge’

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Ramboll - development

In contrast to the other larger Danish EC companies – focused on local presence in Denmark (20 local offices in Denmark - 15 today)

Ramboll was in 1980s and 1990s less international than COWI and Carl Bro

Started internationalising in beginning of 1980s- In the beginning, investments were spread out- In late 1990s, sold off a number of foreign affiliates- Merger with Scandiaconsult, ‘organic growth’

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Ramboll – strategy and achievements

Looking for a company with similar profile (local offices)Scandiaconsult was the answerGrew to twice the size in man powerLargest in Denmark, no. 4 in Norway, no. 4 in Finland, and no. 6 in Sweden (STD, October 2004)Today, 91 local offices in the Nordic region and 50 outsideDifficult to advise in foreign countries – but competences can be transferred internallyThe size of ‘local areas’ vary – difference between house building and oil/gasUse of potentials in offshoring (software) – but aware of the limitationsConscious of the need for flexibility regarding types of assignments – but core business is consultancy

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Conclusions

Engineering consultancy will increasingly internationalise

Dependency on local presence – but local areas vary

Foreign settlement is important – but movement of consultants (trade) is also possible

EC will remain a ‘people business’ – in spite of ICTs

Flexibility regarding divisions of labour is important – trend towards more integrated projects

ICTs important for offshoring and internationalisation – but can also lead to inshoring

European and North American companies dominate – hard to believe in ‘Asian threat’

Center for Information and Communication Technologies Technical University of Denmark 01-06-2015...

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