The Irish IT consultancy firm is competing with some of the biggest in the business, writes GORDON SMITH
TEMPLE BAR seems an unlikely place to plot the growth of an indigenous technology services and consulting firm but until two years ago, that’s where it happened.
Even when Version 1 outgrew its original offices some years back, the company made a short trek across the Liffey to Jervis Street. Visitors are greeted by an unassuming first-floor office where rich wood panels and trappings of executive splendour are conspicuously absent. You suspect Version 1’s founder and MD Justin Keatinge enjoys telling the story of when one customer toured the premises and remarked “Well, I’m glad you’re not wasting my money.”
Keatinge says this is in keeping with the company’s philosophy of efficiency. “We don’t waste any resource. It’s not being frugal but not being wantonly wasteful.” On the other hand, there’s nothing modest about Version 1’s vision, which is to be the most successful Irish IT consultancy ever. Keatinge says it’s about “proving that you don’t need an American multinational to do your IT”.
The adage “no one ever got fired for buying IBM” hasn’t become an IT industry cliche for nothing and since Version 1 was formed in 1996 it has fought the perception that multinationals are a safe bet for outsourcing and technology services. The company has been doing so with some success, growing consistently over that time and winning business against the likes of IBM, HP and Accenture.
To further strengthen its case, Version 1 acquired the business and assets of PM Group’s IT services arm PM Centrix last month. The combined entity now has 220 customers and total staff numbers of 200.
Keatinge doesn’t disclose the value of the deal other than to say it was a six-figure sum. He says PM Centrix was a good fit because of its expertise in Microsoft SharePoint collaboration technology, which he believes will soon become widely used in Ireland. It also has attractive customer relationships with Eirgrid, the Arts Council, the Department of Social Protection, O2, Janssen Pharmaceutical and Musgraves. There were no redundancies from the deal, which was initiated by a cold call from Keatinge earlier this year.
Version 1’s growth has been entirely self-funded and largely under the radar. The company is majority owned by just three shareholders: Keatinge and co-founder John Mullen, along with director Tom O’Connor. Keatinge says most of the profit is retained, either for the proverbial rainy day or for deals. “Where we can find bolt-on acquisitions that make sense, great. But predominantly it’s an organic growth strategy,” he says.
Projected revenue for this year is €17.5 million and the target is €30 million within three years. To do that, a further 100 staff will be added across Version 1’s three offices in Dublin, Belfast and Cork, taking total employee numbers to more than 270 by 2012.
The company’s IT project work was affected by the downturn last year and according to the most recently filed accounts, gross profit declined from €5.25 million to €4.7 million between 2008 and 2009. Keatinge describes this as “a good performance” given the prevailing climate.
However, the managed services and outsourcing business continued to grow and now accounts for slightly over half of revenues, with that percentage increasing. “There’s a very compelling proposition on the managed services side. It will save you money, give you better service and bring innovation,” Keatinge argues.
He disputes the conventional wisdom that the multinational outsourcing model of winning contracts and moving much of the work to offshore locations like India is a cheaper option.
“You can deliver cost-competitively [from Ireland],” he argues. “We’re not looking to offshore. We’re looking to hire here, keep the jobs in Ireland and give a superior level of service than you’ll get from the multinationals because of the time differences and communication issues,” he says.
When Version 1 started out, 80 per cent of its business came from the public sector. It has since diversified into financial services, utilities, pharmaceutical, retail, education and health. “If the Government gives us a €1 million contract, half or two-thirds of that goes straight back to them in taxes . . . If you give that to someone else and the jobs are offshored, that money is gone from the economy straight away,” he says.
He also believes the Government should outsource more, although he realises the word is politically loaded.
“In all other sectors in the last two years there has been an acceleration towards outsourcing or managed services because of the benefits it can bring, but there hasn’t been in Government.”
