The all-Ireland operation of BT is becoming something of a training ground for the company’s top talent.

Chris Clark, who served as CEO until a couple of years ago left to take up a role as head of BT Enterprises and his successor Graham Sutherland also recently moved to London after just over a year at the helm of BT Ireland for a job as managing director of BT Business GB.

Sutherland’s successor, Colm O’Neill, joined BT in 2009 as managing director of business in Ireland, prior to which he worked for nine years at EMC, latterly as its country manager for Ireland.

I talked to him a few days after BT released third quarter results showing a 3% rise in underlying earnings to £1.5bn and a slower than forecast 2% drop in revenue to £4.9bn.

The statement had only a paragraph on the local operation, which mentioned the progress of the company’s fibre broadband roll-out in Northern Ireland and noted that “BT Ireland revenue, excluding foreign exchange movements, was broadly flat despite the challenging economic environment”.

“I think when you look at the kind of results our competitors are posting that’s a solid performance. Revenues are in and around flat, the profitability continues to grow,” O’Neill told Ulster Business.

“I think we’re executing well on a plan and we have a diverse business, which is helping us. People continue to consider us purely a telecoms company but when you see how the telecoms sector is struggling and we are substantially outperforming at a top and bottom line level, you start to see value in the diversity. A substantial part of our business is now technology services and that has gone really well in the past few years.”

The BT CEO further comments that to deliver a similar performance to GB in a more challenging context is a good outcome. The Republic of Ireland market is generally tough and BT has found that small businesses in Northern Ireland are being slow to invest until they are more confident of the future, he said. The best performing area of the business has been in the large corporate segment.

“We are finding that the larger corporates – whether people investing here or larger indigenous organisations – are investing in technology and we’re also finding that larger players are moving more to one supplier, aggregating things they would have bought from multiple companies and asking us to do it end to end. Our diversity means we can add value for customers,” said O’Neill.

“We’re rarely going to be the cheapest. Price isn’t our value proposition, our proposition is a good service, reliably delivered, and that segment of the marketplace is really focusing on value.”

He also believes that the Republic of Ireland – where BT is a challenger rather than the incumbent telecoms supplier – represents a substantial opportunity for the company.

BT currently has a sizable businesses across the border which has been growing for more than 12 months, but still has relatively low market share, perhaps because it is again focusing mainly on the mid to large size corporate sector.

Assisting with this is the fact that BT’s fibre-based transmission network in the Republic of Ireland is now operational with its first corporate customer on board.

FIBRE

In Northern Ireland, BT’s rollout of superfast fibre broadband has now reached around three-quarters coverage, with almost 600,000 premises passed and Derry-Londonderry becoming the first city in the UK to have all cabinets upgraded to fibre as part of BT’s support for the City of Culture campaign.

O’Neill notes that it has achieved more connections than originally budgeted for this year, with the target of connecting 40,000 homes by the end of December now raised to more than 50,000 due to greater than expected uptake.

“Fibre has been a big success story for us, and for our customers as well. It is a product they like and get value from. The raw speed piece isn’t a big issue, we’re finding the advantage is in a family home where multiple people can be online at the same time,” he said.

It has been pointed out a lot over the past year that the £48m project – into which BT contributed £30m and Government departments £18m – will give Northern Ireland a significant advantage and O’Neill agrees it is a massive selling point for the province, particularly where FDI is concerned.

“For us it has been a successful investment. We’ve put Northern Ireland ahead of the rest of the UK and we would argue we’ve put it ahead of the rest of the world by making this part of the world more connected than many of the major cities around the world,” he said.

“We’ve also managed to position ourselves as a vanguard for innovation in the overall BT group. We’re going to be at 90% fibre coverage by the end of this financial year. The prediction is that it will be 2017 before BT Group is at a similar point so we’re way ahead of GB.”

As he seeks to make the most of that advantage O’Neill says his goals in the top job at BT Ireland are fairly simple – to listen to customers to ensure they are getting good service and to keep costs under control.

“In the current market you can’t get out of position on your costs because your customers will find out straight away and punish you for it. So I want to make sure there is a laser focus on cost. It is probably a little boring for a new CEO but we have a good solid plan here that has been formulated under Chris (Clark) and it is something we as a leadership team have been continuing to drive through,” he explains.

“We’re very confident in what will drive our growth. That is fibre in Northern Ireland; we’re confident in our ability to drive ICT and telecoms aggregated services; and we’re confident the ROI marketplace represents a strong growth opportunity.”

What do you see as the major challenges facing you in your new job?

I want to begin by saying that I am very proud of the commitment shown by the NICS and of its achievements over the past decades when it has had to deliver services in some very difficult and troubled times. However, I fully appreciate that we need to be focused on the future and while some of the issues facing the 21st century Civil Service and Northern Ireland are different from those of the past, they are still incredibly challenging.

Those challenges reflect the increasingly complex and globalised economic, social, political, demographic environment within which we all find ourselves but also the need to meet to the legitimate expectations of our customers. The Executive’s Programme for Government (PfG), which I am confident will be consulted on shortly, will map out at a strategic level how the Executive believes these challenges need to be addressed. The major task for the Civil Service will be to do all it can to support the Executive and maximise our contribution to the goals and outcomes that it has identified and prioritised. However, the public sector cannot address all these challenges on its own, and they will require a societal response with real engagement from the private and voluntary sectors too.

I believe there is a need to increase the confidence that the Executive, elected representatives and key stakeholders have in the competence of the Civil Service and our ability not only to provide creative policy solutions to deep-seated social problems but also to deliver high quality public services. To do this will require that I, and other leaders in the Civil Service, further develop the NICS so that it becomes more efficient and confident; increasingly adaptable, responsive and professional; more innovative and less risk averse; fully and openly receptive to the views of others and always willing to engage in real dialogue; more willing to work collaboratively across government boundaries; and transparently committed to the delivery of customer focused and value for money services.

There will also be a challenge for myself and other senior policy advisers to ensure that the policy solutions we suggest to Ministers are based on evidence, on the experience of ourselves and others and are properly informed by those who really understand how best to deliver services. We now provide advice to Ministers in a competitive environment where they rightly seek advice from their special advisers and a range of other sources. I want to ensure that the advice they receive from Civil Servants provides real added value and that the skills and experience we have are fully utilised.

How has your previous experience prepared you for the top job in NICS?

Throughout my career I have worked extensively with elected representatives. Firstly with local councillors and in the latter years I have worked directly with DUP, Sinn Fein and Ulster Unionist Ministers in the devolved administration, as well as with a very wide range of MLAs from all parties on the various Assembly Committees. This experience and the establishment of constructive working relationships with individuals and the local parties will be invaluable in my role as Head of the Civil Service and Secretary to the Executive.

Over the last decade I have led several large service delivery organisations as Chief Executive of Roads Service and as Permanent Secretary in the Department of Agriculture and Rural Development and then Regional Development. With ‘delivery’ being seen as a key priority, for this political mandate, this experience will be important. I expect that my delivery experience will be helpful in identifying policy options suitable for Northern Ireland and that can be implemented and produce the desired outcomes.

What will be the major impact of public sector budget cuts over the next few years?

Over the four years of the Spending Review our Resource budget will decrease by just over 8% in real terms and Capital budgets will reduce by about 40%. In such times of austerity, the need to ensure that the NICS continues to become more efficient so resources can be directed to front line services, is paramount. This is not a new challenge for us, as over the past three years the NICS has delivered savings plans that have already resulted in almost £800m of savings in 2010-11.

Can more be done? Of course. There is always more that can be done and I expect all departments to make further savings so we can strive to maintain front line services with our reduced budgets. DFP’s Performance and Efficiency Delivery Unit can provide additional support to Departments in identifying potential efficiencies.

Saving Plans published by Departments for 2011-12 have a combined target of over £650m. These plans will require us to look closely at areas of opportunity such as: reducing waste and avoiding duplication; making greater use of modern technology and communication channels; improving asset management; smarter procurement practices; working more collaboratively across Government on cross-cutting issues; and being less risk averse and identifying more radical solutions.

You have said you are confident the ability and commitment of staff throughout the NICS will endure through challenging times. What would your message be to those who are planning strike action over pay cuts and pension changes?

Staff in the NICS have time and time again demonstrated their ability to manage through challenging times, delivering public services through the worst of the troubles, adapting to the changes brought about by devolution and we are now having to cope with the very difficult economic climate.

I fully appreciate that staff are having to grapple with some very unpalatable issues as a result of the current financial situation and that they have real concerns about pay restraint, reductions in the number of jobs and proposed changes to pension arrangements.

I know that pensions is a very topical and sensitive issue. This in many ways is an issue of national policy, with the Coalition Government accepting the conclusions of Lord Hutton’s Commission that there is now a strong case for changing all public sector pensions because people are living much longer than previous generations. There is an increased cost to the taxpayer due to this increased longevity. The Government has decided that there needs to be a fairer balance between what employees pay and what other taxpayers contribute towards public sector pensions. Increased pension contributions will certainly be difficult for staff but the intention remains to protect the lower paid and to provide an attractive and fair pension to all. We will of course consult with staff and the trade unions on further reform.

Despite all of these changes it is very important to say that the NICS remains, in my view, an excellent employer. In particular, we have managed the cuts to Departments’ staffing budgets through careful workforce planning and management and so have avoided the need for redundancies. I would therefore ask staff to reflect very carefully before deciding on strike action and, in particular, on whether the general disruption that will be caused to the public and the personal loss to themselves are actually likely to achieve anything positive.

The Civil Service has been criticised for increasing its wage bill and hiring staff at a time when there is supposed to be a pay and recruitment freeze. How do you respond to that criticism?

Let me explain why I believe that criticism is unfair.

On the issue of staff numbers, there has been a downward trend in the number of NICS posts over a number of years. Indeed over the last Budget period, which ran from April 2008 to March 2011, NICS Departments reduced by nearly 2,000 posts. The downward trend is expected to continue throughout the current Budget period up to March 2015, although one needs to be careful in comparing staff numbers before and after the devolution of justice as this added a significant number of functions and staff which previously were outside the NICS.

A freeze on promotion and recruitment was introduced early in 2010 to help us to manage staff surpluses in certain grades across the NICS. It allowed Departments to achieve the necessary reductions in staffing in line with their budgets and meant that we were able to manage our NICS workforce in ways that avoided redundancies.

Of course the embargo on recruitment and promotion was never absolute and recruitment to fill specialist posts has continued where it was absolutely necessary to meet business need. Moreover, because of our success in controlling costs, we have also been able recently to lift the embargo on recruitment for general service staff though we will continue our careful workforce planning and management to ensure that staffing numbers and costs are contained within agreed budgets and that Departments are resourced to meet their essential business priorities and to deliver key services to the public. Recruitment will be used to fill posts and to replace staff lost through natural wastage and turnover where we can’t redeploy staff internally.

We currently are recruiting a significant number of staff for a particular grade where we anticipate a shortage in the near future. I think this is actually good news for the local economy in that it is providing much needed job opportunities for people looking for work in a very difficult job market. But overall I expect the total number of NICS posts to keep falling.

With regard to pay, we have frozen our pay scales for the vast majority of staff for the last two years. This has given us greater flexibility to live within budgets and protect front line services.

Do you believe there is still a need to develop a closer relationship between the public sector and the business community?

Yes. There are already strong links between many departments and the business community. For example ministers and officials in DETI, DEL, DFP and DRD are in regular contact both with organisations which represent businesses (including CBI, IOD, Chamber of Commerce, Federation of Small Business etc) and with individual companies. All these organisations value the ease with which they can access ministers and senior officials. These close relationships will be further built upon and will help us to better understand the problems being faced by businesses at all levels and to develop creative policy options to help improve the local economy.

FACT FILE

Dr Malcolm McKibbin graduated from the University of Southampton in 1978 with an honours degree in Civil Engineering and subsequently gained a Doctor of Philosophy Degree and MBA at the University of Ulster. He was chief executive of the Roads Service and also held senior roles in DFP and DRD before becoming Permanent Secretary of the Department of Agriculture in 2007 and Permanent Secretary for the Department of Regional Development in 2010.

Louise Murphy meets Levi Roots, the man who went from cooking with his granny to becoming a multi-million pound businessman after impressing in the Dragons’ Den

Levi Roots is a formidable character. Dressed in a smart Ozwald Boateng suit he displays the charm which makes it easy to see how he was able to win over two of the ‘dragons’ on the BBC entrepreneur programme Dragon’s Den.

Back in 2007, Levi went on the show with the idea to market his family recipe barbecue sauce, named Reggae Reggae sauce. He used his love of music to show his passion for the product and to his delight, received financial backing and support.

Four years on and Reggae Reggae sauce has become a multi-million pound business. The number one selling Caribbean brand in Britain, stocked by all the major supermarkets and with spin-offs with companies such as Domino’s Pizza and Subway, is big news.

He’s in Northern Ireland as guest speaker at an event organised by SIGNAL, the Economic Development Initiative for North Down. After the event I ask Levi how he would begin to describe his journey in the past four years.

“There’s a saying in Greek mythology that goes something like: On your journey there will be people and obstacles in the way and it’s tiring, but the end of that journey is just the beginning. That’s exactly how I would describe the last four years,” he says with a grin.

“I always thought something special was going to happen to me. I prepared myself for it. I remember in 1986 when I was enjoying a stay at ‘Her Majesty’s pleasure’ and I purposely made the effort to change my name (Keith Graham) from who I was before when I got in a lot of trouble. I realised that your name actually determines who you are and so I wanted to find out, who I was.

“I chose the name Levi because I needed to find out who I was and I knew something special would come to me. I just had to stand at the bus stop long enough and the bus would arrive.”

That ‘bus’ came in the shape of hit BBC programme Dragon’s Den. Prior to the show he’d been selling his sauce to friends and then at the Notting Hill Carnival for years, yet he couldn’t secure financial support to undertake his plans fully.

“It was very disheartening as I could see the plan and I could see the vision, everything was in my head, I had created the dream and it was so vivid in my mind, that this Levi Roots, who I am now, could do some real serious damage in business. But no one else could see this at all. It wasn’t until I ended up on Dragon’s Den that Peter Jones saw that picture as well. He didn’t see just one bottle of Reggae Reggae sauce, he saw a whole range of products and he gave me the opportunity to tell him about my dreams that I’d had for years before. He also gave me the help needed to set up my business without having to sell out,” the entrepreneur explains.

“I think a lot of people thought that a black Rastafarian going into the market with a reggae reggae sauce meant it was going to be localised, that I was going to stereotype myself and that it would be difficult to sell to ‘middle England’ and the mainstream.

“But I refused to believe that, I just think that you have to be yourself. If you don’t believe it don’t expect anyone else to believe it and I think that’s why people believed me when I said I didn’t want to sell out, I didn’t want to sell my integrity , that being at the forefront of what I was about. I’m a Rasta man.”

As someone who has built up a multi-million pound business from a family recipe sauce, what advice would Levi give to any would-be food entrepreneurs?

“The one key piece of advice I could give would be the one that I was lacking and that was planning – always plan long term. I think with social media and today’s society we are always told we can have everything now. You turn on the TV and you see your favourite celebrities and rappers lording it in some hotel with all the money and girls and you see the footballers wives and young girls think they’ll just marry a footballer, bypass all the hard work and get what they want. Young boys are the same and I was no different. But then I realised that you’ve got to have a plan, a long term plan, it can’t be just short term because you live today but what about tomorrow? You’ve got to plan for that tomorrow,” he says.

“There are so many good products out there. Nowadays everyone is trying to be the next Levi Roots from Dragon’s Den but what a lot of people don’t understand is it’s not the product that is Levi Roots, it’s the man himself and there is only one of me. What I’m saying is that you have got to be the best you that you can be and make the business about yourself as opposed to just the product,” he adds.

“When you build a brand you’re talking about long term future so people will always be looking for the next big thing but you have to work on yourself first.”

Solving a problem with his own caravan’s water system has led Belfast businessman Jason Paul to invent a device that is attracting widespread interest in the UK and beyond

They say that necessity is the mother of invention and this certainly proved to be true in Jason Paul’s case.

Four years ago the Belfast man’s static caravan in Fermanagh flooded when, after a big freeze, pipes that had not been drained down for the winter burst.

The process of draining a caravan’s water system usually has to be done by a plumber who can charge anything from £50 to £120 for the job, normally involving dismantling part of a shower or sink to circumvent non-return valves. To avoid paying for this more than once, people tend to get it done at the end of the summer and leave the property until spring.

“I wanted to be able to drain down the caravan at the end of the season myself and not have to pay someone to do it, and also to be able to reintroduce water so I could use the van through the winter,” explains Jason, whose background is in IT and management training.

“The current method is totally antiquated. While the concept of getting air into water is not new, we’ve invented a way water can be drained out of the system in the natural flow of water.”

He developed a basic tap adaptor and hose attachment that allowed him to pump air into the water system and build up enough pressure to force any remaining water out of pipes. After seeing it worked he designed a more compact, efficient and aesthetically pleasing version with the help of a design company.

This quickly moved to having a prototype device made by a company in San Diego and developing a final product which has parts made in Taiwan, China, Germany, the UK and Bangor, Co. Down. It has taken nine months to go from initial idea to getting the product, now branded as Floe, onto the shelf.

The influential National Caravan Council also asked if a solution could be made for touring caravans and motorhomes and in July the company launched three new kits suitable for those with Truma and Whale water systems and a new retrofit kit for motorhomes. As well as preventing winter damage these kits can also be used to remove stale and stagnant water, without the need for flushing or adding sterilising agents, leaving fresh drinking water.

Jason got an enthusiastic response from Invest NI for the product and has utilised every programme open to him. He has made it through to the second phase of the agency’s export-orientated Propel programme and has signed up with UK distributor Miriad to take Floe to trade shows in England.

“Things have moved really fast,” he says. “We thought we would be selling in Northern Ireland but it went national within two weeks and we’re already selling to England, Scotland and Wales.”

The product – which retails from £24 – has received rave reviews from caravanning magazines, the National Caravan Council and the influential Caravan Club, the voice of 600,000 touring caravan and motor home enthusiasts.

With a further 300,000 static vans in the UK, Jason sees it as his initial market, but is also targeting Scandinavia, Europe, the US and Canada – all places that suffer from frozen pipe problems, particularly in sprinkler systems, holiday homes and cabins left vacant over the winter.

“Many insurers won’t pay out for pipe damage and a lot only pay out if a property is occupied at the time of flooding,” Jason notes.

While he acknowledges the product has a finite lifespan, he is also developing a similar ‘black box’ device that could be permanently built into caravans, motor homes and houses. The current Floe products work for anyone who has a house that doesn’t use cold water storage tanks but does have mains water throughout the house.

During the past year Jason has received advice from Patrick Hurst and Stanley McFarland of Bangor-based Whale Pumps, which has products compatible to Floe.

“They’ve been like a big brother company to us,” he says. “They don’t get much from it but they are excited another company in Northern Ireland is doing it. I’m from a training background so I am having to learn quickly about how to cost things, pricing, packaging, safety measures, distribution agreements. Whale Pumps have looked over our shoulders and we certainly appreciate their help.”

Currently Jason and his wife Pamela are driving the business forward. However, the first substantial order will probably mean he needs to set up a production facility, and his plan would be to base it in Northern Ireland, employing a production manager to oversee it and creating jobs.

That may be some way down the line, but judging by how quickly things have moved so far, it’s easy to imagine the orders flooding in.

More information can be found by calling 0844 251 2211 or by visiting www.keepfloeing.com

Former Minister Conor Murphy, pictured with NI Water's interim CEO Trevor Haslett, had a clear vision of where NI Water was going, according to Sean Hogan

John Simpson asks NI Water’s new Chairman Sean Hogan how he plans to restore the organistion’s reputation

Sean Hogan, the recently appointed Chairman of NI Water has a simple, slightly surprising, but laudable ambition: to return NI Water to the anonymity of a well-functioning organisation that no one notices!

His determination is to see NI Water working so that it justifies a degree of anonymity. Of course, he is reacting to the high profile, controversial events of the last two years and the careful process of rebuilding customer and taxpayer confidence.

The new Chairman has inherited an organisation where the former Minister had discharged most members of the former Board and its Chairman and then appointed an interim Board whilst a formal competition was completed to appoint a new Board.

Not sufficient to inherit an organisation which had not enjoyed a stable non-executive Board, in addition he takes the Chair whilst the search for a new Chief Executive has not yet been finalised. The controversy about the competence of NI Water in responding to the big pipe freeze of Christmas 2010 meant that the continuity and coherence of the top management group was questioned.

Just to add to the changed circumstances, Sean Hogan has taken up his post after a change of Minister. Instead of reporting to Sinn Fein’s Conor Murphy, the baton of Ministerial responsibility has passed to Ulster Unionist Danny Kennedy.

As a public utility, NI Water should attract little attention. Provided good clean water is supplied, leaks from pipes are minimised and sewage disposal meets legal standards, then the utility would tend to be taken for granted. That satisfactory state now has to be recreated.

The whole structure of how water services are organised, how they are paid for, how much capital is invested and where the capital is to be found, contains a matrix of political, economic and legal questions.

To be selected as Chairman, Sean acknowledges that he had to go through the formal process of making an application, being short-listed and interviewed, and then meeting the Minister. There was, as he puts it, ‘no tap on the shoulder’.

“I saw this job as a challenge. I knew that they had had a bad press, although I did feel that a lot of the bad press was unjustified. There was work to be done to change the public perception,” he said.

The change in the Minister may have implications for the direction of NI Water.

“The outgoing Minister had a particular vision of where the organisation was going. That was very much towards being part of the public service as opposed to being a water utility company. However, we are still a GoCo with a set of official financial structures that do hinder us a little. For example, we do not have end of year financial flexibility. It is difficult to plan capital spending ahead for three or four years. There can be a loss of economies of scale,” explained Hogan.

“If we want to benchmark against some of the best water companies in Great Britain then we need to have a level playing field. However, if the Minister wants us to continue with the present arrangements, then that is how we will deliver it,” he adds.

“The Minister has not yet finalised the future governance arrangements for the company whether as a GoCo, brought closer Government as a public sector organisation, or redesigned as a mutual company. The Executive now has the opportunity to reconsider the approach.”

The new Chairman must operate within whatever systems have Ministerial approval. However, without presuming on the Ministerial prerogative, there is a willingness to consider changes in the way NI Water is financed.

“I know that there is a notional figure in each household rates bill of something like £160 that is supposed to go towards water. This money goes through the Exchequer and comes out again as part of a subsidy to NI Water. If that money were able to go directly to NI Water that would be a defined source of revenue that might allow NI Water to go to the market to borrow funds, using this revenue to service the debt,” said Hogan.

Earmarking revenue to NI Water through the reallocation of domestic rates revenue would create a baseline which, year by year, could be broadened to generate more of the revenue needed to fund the services.

“Hypothecating a part of the domestic rates revenue to NI Water could be a good way to start. Customers would see more clearly what they are already paying,” the Chairman added.

NI Water needs a continuing large capital investment programme to make good on previous under provision, to enhance standards and meet the requirements of European Directives. That capital programme is subject to examination and approval by the Water Regulator and is constrained by the allocation available from the Department of Regional Development.

“Like all public sector organisations we have to live within our budget,” said Hogan. “There will be things that we would like to do, but we cannot. This may mean that the Regulator’s performance standards are too ambitious. Perhaps we should not be benchmarked against GB companies because we are not in the same position. They have had the best part of 20 years to improve whereas we are only at the start of that programme. We are delivering the highest quality of water ever provided in Northern Ireland. We simply do not operate in the same world (as English water companies).”

A recent report from the NI Audit Office confirms that the water service here is not funded adequately enough to reach parity with standards in England and Wales.

The memory of, and the lessons from, the big freeze and thaw last winter are high on the agenda of the new Chairman. NI Water took a lot of criticism, but within a very short period the necessary repairs were completed. What then of the preparations for another cold winter?

“Our communication with our customers needs to be that much better. We plan, this year, in the early autumn, to informally establish an implied contract with them. We will be telling them what we have done since the last freeze-thaw to try and ensure that the same thing does not happen again. In turn, customers will be asked to play their part by knowing where their stop-cocks are located. We cannot guarantee that pipes will not freeze again. We can guarantee that we will respond better,” said Hogan.

“If an identical situation happens this year, we will handle it very differently. Our Chief Executive will be charged with being up-front in organising the responses.”

There are still decisions to be made about the recruitment of a new Chief Executive. Sean Hogan awaits the outcome of discussions by the Minister on the future shape and organisation of NI Water. The choice of structure and its relationship with the Government Department will have an important influence on how the job of a new Chief Executive is defined and the setting of criteria for the appointment.

A new Board of non-executive Directors will be announced shortly. Interviews have taken place and the final decisions now rest with the Minister. The 75 applications were reduced to 25 people who were interviewed and 13 names have gone to the Minister.

Although there is a continuing debate about the merits of the decision to remove most of the former Directors, this is not an issue for the new Chairman.

“It is not in my bailiwick at all,” he said. “My job is to build the new team. The main work in appointing the new Board is completed. What is now delaying me is the waiting for final decisions affecting the appointment of a Chief Executive Officer.
Then it will be hugely important that we all work together as a team building positive relationships for the benefit of our customers.”

FACTFILE

Sean Hogan has enjoyed a career spanning the private and public sectors. He has recently retired as a non-executive Director of Translink and a Director of Sentinus. Currently he is Chairman (designate) of the Education and Skills Authority. Formerly, he served as a Director of Warrenpoint Harbour Authority.

Michael Crossey and Michael Black

Every ambitious software company is trying to find a niche in the world of internet-based cloud computing, something Belfast-based Aepona has achieved in the mobile cloud market. Symon Ross went to find out more from two of the company’s directors, Michael Black and Michael Crossey

Aepona may not be a household name in Northern Ireland but the company is currently making waves in the technology sector after finding a niche for itself in the mobile cloud computing sector.

Founded in Belfast in 1999, the company has been a pioneer in bringing mobile intelligence to cloud computing and has supplied telco-grade software products to more than 25 mobile operators and services providers around the world, helping process more than 1.2 billion network and payment transactions a month.

It is very much an international company, with CEO Al Snyder based in Colorado in the US and 260 staff in various locations around the world, including 75 in Belfast who have expertise in telecoms and networks, and over 100 in Sri Lanka who look after the internet element of the business.

While Aepona has grown steadily over the last decade it was in 2010 that business really took off. The company increased its revenues from $21m to $35m last year and it expects this upward trajectory to continue through 2011, with revenues forecast to hit $46m this year.

The growth came partly as the result of acquisitions – it bought Dublin-based Valista in 2009 – but principally because the company gained new clients outside of its traditional market of telecoms software by expanding into mobile cloud computing.

It is aiming to gain competitive advantage by being an early mover into the mobile software space and to tap into the growing opportunity for new mobile and web-based applications that revolutionise the way smartphone users work, shop, socialise and consume content.

Aepona isn’t developing applications itself, but instead provides a platform through which telecoms operators – such as Vodafone, AT&T and Telefonica – can more easily link up with application developers. Its platform means organisations can reach and bill any end user on any network without having to enter into multiple arrangements with network operators or rewrite their software for each network they wish to connect to.

FRAGMENTATION

Michael Crossey, vice president of marketing at Aepona, explains that the company’s technology overcomes longstanding issues of fragmentation and dependence on specific operator platforms within the industry.

“We have sold our technology to the operators for years – that has been our core customer base and we’ve done very well out of applications that are developed for that operator and that operator’s target customers. But when you are moving into this new paradigm, really sparked by the Apple iPhone, where anybody can develop and application, it can be targeted towards any market and there is a degree of independence from the operators, they need to be able to write an application once and have it run anywhere. That’s where mobile cloud computing comes in,” he said.

“We were preaching the message that the operators needed to open their networks since the company was founded, that was our mantra. They weren’t really listening because they were of a mind that ‘we develop applications, we sell them to our customers, it’s our customer, there is no third party involved and if there is we will cherry pick the third parties and bring them in to our network’,” he adds.

“Then, when Apple launched the iPhone and the app store, the mobile operators started to realise that if they didn’t do something quickly they could end up like the fixed line industry, becoming a utility type service that couldn’t extract value from the applications. What Apple are doing is selling the application direct to their customers, bypassing the networks and taking a 30% cut. Networks don’t get any money from that and in fact have to provide the data connection to allow them to do that,” adds Crossey.

“They have now started to see themselves as enablers rather than controllers. We had the technology that allowed them to be the enabler.”

Michael Black, chief financial officer of Aepona, says that having an intermediary in the cloud that enables an easy connection between developer and operator is potentially a huge leap forward for the industry.

“In some ways it is a bit like when SMS took off. SMS took off when it became cross platform. If you get it all to work together, so that from the consumer point of view it just looks like one overall homogenous network, that’s when things really start to take off,” he said.

“The opportunity could be really big in terms of revenue share. If you think about the app world in general, Apple have now passed a billion US in applications so this could be really big. Our vision is to build up a range of partners to jointly monetise this.”

PARTNERSHIP

The company has already signed a number of deals in the mobile cloud space, the most significant to date being a multi-million dollar contract with Virginia-based Neustar, which will use Aepona’s software as part of an intelligent cloud service in the mobile marketing and digital entertainment space.

Michael Black says that where its historic telco business still represented 70% of its business in 2010, the company expects the balance to switch, with a similar percentage of business coming from mobile cloud contracts in the next couple of years.

“We historically would have had quite a traditional business model towards mobile carriers – that was the way they bought technology. What we’re actually doing in the mobile cloud space is renting out our technology. We will rent it to Neustar but then Neustar actually get a revenue share for revenues coming across the platform,” he said.

“So, we are monetising the opportunities in mobile cloud jointly. We are contributing our technology and they are contributing their market access and their go-to-market investment,” he adds. “The vision for the company is that if we build up a range of these cloud relationships we’ll see a regular recurring revenue stream through the platform rentals and the revenue share.”

Crossey further explains that Aepona is focused on using the cloud to make available mobile network assets, such as customer intelligence. Mobile networks, he says, know where customers are and have a lot of information about them that sits in the network. This can be used by application companies, brands and retailers to present them with relevant offers.

One of the key enablers to this market is what is known as carrier billing – the ability to charge mobile subscribers for other services such as digital goods, applications and web subscriptions through their mobile bill.

“The operators are opening up to the fact that this is a key asset that their competitors don’t have – Google doesn’t have it, Amazon doesn’t have it, Apple doesn’t have it. They all rely on an established payment mechanism to charge for their services like a credit card, or PayPal, whereas my daughter has a mobile phone. She can download songs and have that charged to her mobile phone bill. It opens up a very easy, low friction channel for payment,” said Crossey.

“It has been shown that as people go through the buying process on the internet the fewer number of clicks they have to do, the more the conversion rates multiply. The easier it is, the more people spend and the broader the market gets,” he adds.

FUTURE GOALS

A sign of how highly Aepona’s prospects are rated in the tech community was its ability to raise $10m to fund investment in the business last year from venture capitalists including BlackBerry Partners and SAP Ventures at a time when overall VC investment had fallen away dramatically.

In the end, it invested in the sales and marketing of its new mobile cloud products from earnings because it started to generate profits 18 months ago, meaning the $10m is still sitting in the bank waiting to be used. CFO Black doesn’t rule out using it for further acquisitions if they find someone that could add capability to its platform.

“The venture market has come through a bit of a shake up, which we think has left a number of companies out there that have reached a certain size, but haven’t been able to catapult themselves on because they haven’t been able to raise the capital necessary to do that. Right now we have a couple of ideas on our roadmap that we think we could fulfil through acquisition, and we’ll always look at things opportunistically if they fit our overall plan,” he said.

However, Aepona is also reinvesting in the business, with plans to increase its workforce, ramp up spending on R&D and spend more time working out what its platform is going to be used for by end users so it can identify opportunities and act as a matchmaker between developers and operators.

It is operating in a competitive sector – the company with the solution closest to what Aepona does is Larry Ellison’s software giant Oracle – but Black is confident about its future prospects in what could be a market worth several billion dollars.

“We’re investing a lot this year in building an even bigger sales team and also stepping up another gear in terms of R&D,” he said. “Our objective and our board’s objective is to build the business for the longer term – that’s the only way you can run a niche business.”

Nelson Gray

Scottish investor Nelson Gray virtually wrote the book on angel investment syndication. He gave Ulster Business his perspective on how Northern Ireland could follow the lead of Scotland’s flourishing business angel community.

The Government produced a report last year which showed that Scotland accounted for 29% of the £64m in visible business angel investment deals which took place in the UK.

Relative to the size of the country’s population that is a massive amount, and provided further proof Scotland is leading the way when it comes to angel investment.

LINC Scotland, the equivalent to Northern Ireland’s increasingly successful Halo network, was established way back in 1992. Its members invested around £21m of their own money in 104 transactions last year.

Nelson Gray, who has invested in 21 companies personally and is presently an FSA registered fund manager with Braveheart Investment Group plc, the AIM-listed business angel investment group, believes that Northern Ireland is on the right road to emulating Scotland’s success, with Halo investors already doing deals together.

But he says further formalisation of these investment syndicates, as well as co-investment fund support from Government and leeway to develop the ecosystem free of rigid metrics, will be needed to increase effective business angel support.

“The business angel networks like Northern Ireland has at the moment, they are supported in various ways by government funding. That process is currently done on the basis of a target where you will come up with X number of deals and invest Y amount of money. Therefore there is a competition to keep all the deals within your network. What we’ve been able to do is get past that, so LINC doesn’t really care who does the deals as long as deals are being done,” Gray told Ulster Business.

“It is a slightly different approach. You are concentrating on building the infrastructure and a local operating investment community, rather than being hung up about the number of deals or the amount of money going in.”

He notes that because Scotland’s almost 20 groups – such as Braveheart and Archangel – have now developed into professional companies with standard processes and legals and are so well known, entrepreneurs now usually go to them directly rather than through LINC.

“I get the impression that because the idea of creating groups is relatively new it has created some tension between the parties in Ireland because people are trying to claim credit for the same deal being done. The trick to making this work is to realise that business angel investing is not a competition sport, it is a collaborative activity,” he explained.

“What you have to do is create an environment and community that will share deals. Here, if a group can do the whole deal, it will do the deal. But when it comes to the second round of funding it will often need the help of the other groups. So we’ve moved to the syndication of syndicates and that needs to be encouraged because there are relatively few venture capitalists to pick up the investments later on. We are seeing angel groups around the world having to fund companies for three to five years and very few groups can do that by themselves.”

The benefits of the groups are, for the business angel, less burden in terms of monitoring all of their investments and the spreading of risk, while entrepreneurs get access to people with different areas of expertise.

Gray has recently been advising Dublin’s HBAN angel network, which has set up four groups within the last 18 months, a faster rate of development than in the early days of Scotland’s angel infrastructure. Similar models for angel investment are operating in the US, Canada, Australia and New Zealand.

Someone has to be tasked with putting investor groups together if Northern Ireland is to develop in this way, thinks Gray.

He also believes co-investment funds could play a big part in developing the market here, but only if they bring more private sector expertise into the sector.

As manager of Scotland’s first co-investment fund in 1999, Gray was required by Scottish Enterprise to find as many co-investment partners as possible in order to stimulate the market. He hopes the manager of Invest NI’s new Co-Investment fund will have a similar remit, and should be measured on the amount of private sector funds they bring in as well as the amount of money going out.

“I hope the managers of the new co-investment fund in Northern Ireland have the resources, the funding, talent and instruction to go out and do that, so they have to get out there and make the deals happen and not wait for business angels to bring deals to them,” he said.

“In an ideal situation they have almost got to make themselves redundant by the end of the fund.”

Ryan Williams and Bro McFerran

Businesses of all sizes are being encouraged to throw their support behind Derry-Londonderry as it prepares to become City of Culture 2013.

As it launched its official invitation for corporate support, Culture Company 2013 said the sponsorship strategy had been devised with all forms of business in mind – from global corporations to SMEs.

Bro McFerran, Chairman of the Corporate Leadership Team put together to help deliver business support for City of Culture, told Ulster Business that local firms could help move the City forward and play a big part in delivering a legacy that lasts beyond 2013.

“Our initial findings are that there is a lot of enthusiasm for it and certainly the bigger players are coming in. But one of the things I’m keen to do is get the SMEs fired up about the opportunities and to make sure they engage with it as well,” he said.

“We don’t expect small businesses to get into this pro bono. Nor would they be doing it for intangible benefits. There is a lot of business that is going to be engaged around City of Culture and there could be opportunities for franchising, for promoting their products, and more,” he said.

“We anticipate there are going to be hundreds of jobs created because of this. There’s going to be tens of millions flowing into the economy. There are fabulous opportunities for smaller businesses to get in on this and also create momentum with it, so this energises the whole city and gives them traction for the future.”

The city has ambitious plans to bring in additional revenue of over £100m, lever some 1,300 additional jobs, attract over 500,000 additional visitors, and reach over 145million people globally with some of the events relating to City of Culture 2013.

Whether a company is looking for a short-term partnership for lead-up events in 2012, 2013 celebrations or a longer partnership over the legacy period of 2011-2015, the organisers believe the business case for any corporate involvement is strong.

The sponsorship strategy, devised by Corporate Engagement Champion Ryan Williams, with intrinsic support from the 2013 Corporate Leadership Team, offers opportunities for Lead Partner, Themed Lead/Champion (of a particular sector) or association with an event, community, venue or participant sponsor.

In addition there will be merchandising and licensing opportunities available across the programme. The City has already agreed its first commercial City of Culture partnership with BT who have committed to a five year, multi-million pound investment and sponsorship support.

“In terms of the legacy we will have one of the best digitally connected cities in Europe, which leaves the potential to attract in a lot of revenue. This is very much not a one time thing,” said Mr McFerran.

“We don’t want the cleaners to be coming in and sweeping up the bottles and cigarette butts and saying well, that was a good party. It has to be more than that.”

Mr McFerran said it made sense for his own company, technology firm Allstate NI, to get involved with an initiative that should help regenerate Derry because of its strong links with the region. Allstate has around 750 employees in the Northwest, around 250 specifically in Derry.

The Allstate NI managing director also notes that City of Culture is also expected to attract lots of media attention, with the BBC, Channel 4, RTE and Sky Arts among the media organisations that have committed to giving events significant air time.

Mr McFerran said the Corporate Engagement Team were drawing on the experience of Liverpool, which was UK City of Culture, and Glasgow, which was European City of Culture, to help understand the opportunities to generate revenue from Derry’s City of Culture title.

“We’re not too proud to learn from them. We see it as our job to make everyone aware of what the opportunities are, what they would get in return for putting their hard earned money in to promote City of Culture,” he explains.

“What this should do is give Derry confidence is itself, it should put Derry on the map from a cultural and tourist point of view. It should attract inward investors to the area and give SME businesses a fillip as well. We’ll need to do as much as we can to have subsequent events that make sure the spirit of the City of culture lives on, to keep the momentum going.”

For more information on how your business can get involved in supporting the City of Culture 2013 email the Corporate Engagement Team at sponsors@cityofculture2013.com

Mark Fahy, AIM, Marcus Stuttard, Head of AIM and Neasa Quigley, Partner, Carson McDowell.

More of Northern Ireland’s high growth companies should consider the benefits of flotation as the next step in their evolution, according to the Head of the London Stock Exchange’s Alternative Investment Market (AIM).

Speaking to Ulster Business while in Belfast to take part in a round table event for venture capitalists hosted by law firm Carson McDowell, Marcus Stuttard said the access to equity capital provided by AIM could play a big part in the growth of locally-based companies, and the wider economy.

“This is the right time to be promoting capital raising on the public markets as a good form of finance. We know there is an opportunity and that there should be more companies on market,” he said.

AIM, the LSE’s international market for smaller growing companies, was launched 15 years ago and since then has helped over 3,200 companies raise more than £73bn through initial listings and further fundraising. There are almost 1,200 companies listed on AIM with a market value of almost £80bn. However, only three are Northern Irish companies – First Derivatives, Assetco Plc and Andor Technology.

Stuttard puts that down to a combination of easy access to debt in the past, the cost associated with flotation, a lack of understanding on the advantages, and business people not wanting to give away ownership of their companies.

“There is work we need to do in terms of educating company founders and entrepreneurs. There have historically been some control issues, but I think equity has become an increasingly attractive form of finance. Debt finance in the past might have been put before equity but for a lot of companies it is not an option any more,” he explained.

The AIM chief said there are good emerging companies in Northern Ireland, particularly around the technology and clean-tech sectors, for which raising capital on the public markets would provide credibility for further growth.

“We often find companies are able to secure major contracts once they are on the market they simply weren’t able to secure before. It demonstrates that a company has got scale and has been through the regulatory procedures. But critically once they are on market they are committed to making information available and are transparent and open. That gives employees, clients and banks confidence,” he said.

While Stuttard agrees that equity finance is not right for all businesses, he believes a vibrant public market like AIM enhances the overall funding chain by giving VCs and business angels confidence to invest, safe in the knowledge there is an exit market. He also thinks fewer firms would be sold off in trade sales before reaching their true potential or value if they were AIM listed and could access equity finance to get scale, develop technology or employ more people.

Last year a study by Grant Thornton, commissioned by the London Stock Exchange, found that companies on the AIM growth market contributed £21bn to UK GDP in 2009 both directly and indirectly. AIM companies directly contribute £12bn to GDP and employed 250,000 people. A further £9bn of GDP and 320,000 jobs are supported indirectly through supply chain and multiplier effects.

“Even while conditions for IPOs globally have been subdued over the last two years, one of the things that has shone through about AIM is that the companies on market have been able to raise further rounds of finance. In incredibly tough market conditions in 2009, £5.5bn was raised, 90% of which was through further issues. Last year £7bn was raised. Bearing in mind that this is a small companies market, that level of funding is really incredible,” said Stuttard.

He thinks the figures illustrate the strength of AIM’s market and the community supporting it – including brokers, accountancy firms, law firms and analysts – and notes there are good advisers in Northern Ireland such as Carson McDowell that can help local firms access the capital markets.

“We spend a lot of time talking to institutions and investors generally, and there actually hasn’t been a point at which investors have turned around and said ‘we haven’t got the money’. It is there, but it is about confidence. I think companies do need to demonstrate that they have a good management team, that they have a good business, and if they can get that story across money is definitely available,” he added.

“We are now starting to see a move back to investors wanting to support new businesses and IPOS. In the last six months of last year we saw an increase in the amount of money going into IPOs compared to further issues. The fact that money has been available through the last three years shows not just that investors have got money, but that they have confidence in the AIM regulatory model.”

CBI director Nigel Smyth (right) and vice-chairman Ian Coulter

A leading business organisation has stressed that commitments to the economy made in the Executive’s draft Budget need to be reflected in plans being put forward by Government departments.

CBI director Nigel Smyth and vice chairman Ian Coulter told Ulster Business in an interview that the delivery of a four year Budget would help build business confidence.

But the pair cautioned that the lack of structural reform and re-engineering of government departments represented a “missed opportunity”.

“The big issue for us is the economy. There is a commitment to it at the highest level in the Executive statement, but we’re concerned that this isn’t always reflected in some of the detail,” said Smyth.

“We’re also concerned about the proposed budget for Invest NI. It is crucial that the agency and its economic and job creation work is supported.”

The CBI believes providing an additional £5m-£8m to Invest NI in each of the next two years would make a “significant impact” on jobs and investment and would effectively double the amount of funding Invest NI has available and not already committed to specific projects.

“The most effective way the Northern Ireland economy is going to grow over the next number of years, the most effective way we are going to create jobs, is through exports,” said Coulter. “If you distil it down, Invest NI is the region’s sales force. If its resources are constrained, that has to be a concern.”

The business organisation also calls for caution over Department of Employment & Learning’s proposals to cut the over-25s apprenticeship programme and to reduce funding for 300 post-graduate, PhD places.

“We do believe adult apprenticeships should be maintained. Its important to think ahead. In four or five years time, when the economy is recovering, a good supply of quality people will be vital,” said Smyth.

“And the same goes for high-level graduates. We should be trying to maintain a high level of graduates, particularly in the STEM area.”

Coulter adds: “One of the key things people who are going to invest here do is find somebody who is already here, contact them, and ask about the reality when it comes to recruiting the right people for the job. Ask anyone in the tech sector at the moment, and they’ll tell you that it is difficult.”

Another issue for the CBI is the management of Northern Ireland’s public sector pay bill.

While the organisation welcomes the pay freeze for civil servants paid more than £21,000 for two years, it notes that they only represent 12% of public sector workers and that the “freeze” still includes an agreed incremental pay rise and a 1% increase in pension contributions.

The CBI thinks that with average public sector pay levels now around 30% higher than the private sector, a major review of public sector pay should be undertaken.

Both men agree that more planning and strategic thinking needs to go into the reform of Government in Northern Ireland.

“There is very little evidence within the departments that there has been a strategic look at how to restructure, redesign and re-engineer,” said Smyth. “And there is little evidence of any serious work towards outsourcing to the private sector.”

“All of the departments say they want to avoid job losses, and that is understandable, but this should be about avoiding cuts to services, not about job losses, most of which will come about through natural wastage,” he added.

The CBI also reckons that revenue raising measures in the Budget don’t go far enough.

In particular, it believes that Housing Executive rents will need to be increased in a phased manner; that greater efforts are required to rationalise, sell-off or secure sales and leaseback arrangements on the government estate; and that if water and sewerage charges continue to be deferred there will have to be a modest real rise in the domestic regional rate.

But there is a strong feeling that the lines of communication between politicians and the business community are better than ever.

“Engagement between politicians and business is definitely improving. Businesses have got to collectively build on this,” concludes Ian Coulter.