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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
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Center for Information andCommunication Technologies
Technical University of Denmark
Issue
Developments in the internationalisation of the engineering consultancy business- Outflow/inflow- Outsourcing/insourcing
The case of Ramboll
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Center for Information andCommunication Technologies
Technical University of Denmark
Overview
Modes of internationalisation
The sector
Drivers and barriers
Ramboll – developments and strategy
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Center for Information andCommunication Technologies
Technical University of Denmark
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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Center for Information andCommunication Technologies
Technical University of Denmark
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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Center for Information andCommunication Technologies
Technical University of Denmark
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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Center for Information andCommunication Technologies
Technical University of Denmark
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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Center for Information andCommunication Technologies
Technical University of Denmark
Contract types (UNCTAD)
Management assistance Engineering Engineering and procurementEngineering, procurement and constructionEngineering, procurement, construction and installation
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Center for Information andCommunication Technologies
Technical University of Denmark
Product life cycle (UNCTAD)
IdentificationPre-feasibility studyAppraisalFeasibility studyBasic designDetailed designSupervision and commissioningConstruction and procurement managementOperationMaintenanceRehabilitationDecommissioningRemoval
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Center for Information andCommunication Technologies
Technical University of Denmark
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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Center for Information andCommunication Technologies
Technical University of Denmark
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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Center for Information andCommunication Technologies
Technical University of Denmark
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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Center for Information andCommunication Technologies
Technical University of Denmark
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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Center for Information andCommunication Technologies
Technical University of Denmark
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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Center for Information andCommunication Technologies
Technical University of Denmark
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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Center for Information andCommunication Technologies
Technical University of Denmark
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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Center for Information andCommunication Technologies
Technical University of Denmark
Drivers and barriers for offshoring
Drivers- Cheaper labour power- ICTs
Barriers- Transaction/agency costs- Standardisation/ICTs and possibilities for inshoring
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Center for Information andCommunication Technologies
Technical University of Denmark
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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Center for Information andCommunication Technologies
Technical University of Denmark
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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Center for Information andCommunication Technologies
Technical University of Denmark
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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Center for Information andCommunication Technologies
Technical University of Denmark
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’