Promoted

Small Rock, big ambition

Two years ago, Gibraltar’s First Minister Fabian Picardo told the New Statesman he believe the country’s infrastructure for e-gaming would make a good foundation to make an IT outsourcing hub. Anne Duncan of Lumiu, which advises companies on outsourcing locations, considers the possibility.

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In the past companies centralized and outsourced business services essentially to reduce costs through labour arbitrage with large scale transactional work performed in low cost, remote locations in places like India. Today, automation and cloud services are fulfilling much of this need, and it is reflected in a 40% drop in big outsourcing deals to those low cost destinations.

Today’s hot locations tend to be near or onshore in Europe, and must be attractive to the highly skilled workers that employers chase today. Well-educated, multilingual people with skills and experience in engineering, IT, customer service and financial services are attracted to city centres, good climates and places where clusters of companies in complementary sectors are thriving, offering employment experiences and cosmopolitan social interaction. World class ICT, buildings and other infrastructure are also essential, combined with a legal, tax and economic environment that eases doing services business. In sum, if the enabling environment exists or can be built, smaller and niche investment opportunities to locate business services and IT outsourcing exist today that were not possible 10 years ago.

What should a minister focus on for Gibraltar to emerge as a leader in shared services and IT outsourcing?

Gibraltar has a real opportunity to leverage its global recognition, and existing assets to become a hub for business and IT services as never before. Key Enablers include the territory’s small size, Mediterranean gateway location, special legal status, regulatory framework and tax incentives, all with a British and European Union accent. Leveraging existing companies in the industries cited above, and a globally recognized brand that is the envy of cities with hundreds of times its population, Gibraltar starts with many more pluses than minuses.

Tailored Offerings, One-Stop, and Targeting for the Business Services and IT Outsourcing Sector

On the plus side, Gibraltar already has the key ingredients necessary to serve as a hub for business services, building them on the back of existing financial Services, shipping and e-gaming companies. Part of Britain and also European, as an offshore location Gibraltar has comparably attractive tax and legal advantages for companies and individuals and its small size and location can ease complexities of set-up and doing business in services for Europe.

With help and leadership of a knowledgeable Shared Services, IT Outsuring (ITO) or Business Process Outsourcing (BPO) expert, it would be relatively easy to repackage or convert many of Gibraltar’s existing new investor offerings so as to promote them specifically to targeted business services and IT investors as competitors in Poland, Portugal and Spain have done. Want to set up scalable IT development or customer services operations quickly? Try the one-stop Gibraltar solution: Meet the minister and colleagues over coffee in the morning, building visit and decision in the afternoon, kick-off meeting using first names that same night. Thus far only theoretical, but tempting, and we have seen investors impressed and swayed by the personal touch of knowledgeable one-stop investment contacts and local officials who are accessible, engaged and committed to help a business get on its feet and quickly grow and thrive.

Whether real or perceived Gibraltar will need to focus on mitigating three potential minuses associated with talent, infrastructure and incentives and its own brand.

Talent:

The first criterion on every site selection project list is the ability to access requisite. Gibraltar will have to overcome a problem of labour pool size with a small population of 30,000, more akin to that of Monaco, than to Madrid. However the issue might be more one of perception since the same things that draw tourists to the Rock are what attract today’s most sought-after IT workers. Technology and business services workers are young, educated and seeking high quality lifestyles living and working in city centres, where they enjoy cafes, leisure and cultural pursuits, social activities and opportunities to build a career in the same sector. So where competitors have a strategy focused on higher education, Gibraltar should play to its strengths and focus on delivering “higher attraction”, creating policies that support worker migration, promoting itself as a destination for skilled, educated workers trained abroad, building a reputation as an in-fashion dynamic place to work and play, even supporting policies for people working from home, an increasing trend.

Infrastructure and Incentives

Gibraltar must also ensure the world-class infrastructure (buildings, ICT, legal, regulatory, security) matching requirements for modern business services, filling gaps or changing policies and incentives packages where this is not the case. This may again be more a concern of perception than reality given the financial services and e-gaming industries’ requirements. Gibraltar’s business incentives already compare favourably with onshore (UK/Europe) as well as offshore locations such as Monaco, Jersey, Madeira Portugal and Minorca Spain, but also Europe facing, such as the Island of Mauritius. A quick comparison shows they all offer similar ‘incentives’, but each project is different and has specific needs that a one-stop approach with an individual investor could deliver. Gibraltar should benchmark and perhaps match tax changes in countries working to attract more business services such as those introduced in Portugal (allowing worldwide income to be taxed at lower rates) or in Poland (where special investment zones permit much lower corporate income taxes).

Polishing the Brand: Being known is one thing, building a hot brand is another. While Gibraltar is a globally recognized brand, it may need a brand refresh, particularly to attract modern business services. Gibraltar could drop off the site selection shortlist if a quick glace at its internet presence, gives one a feeling of nostalgia more so than of a modern forward looking technology hub. It is entirely feasible, but Gibraltar will need to execute a successful marketing and branding strategy built on new references, to compete with destinations such as Spain, Portugal, and Morocco, who have invested heavily over the past 10 years to build solid reputations in the sector.

This is just a start but suggests Gibraltar could be ideally placed to become a hot new hub for a wave of smaller business services and IT outsourcing projects. A strategic approach would involve repackaging offerings and refreshing the global brand, as well as aligning talent attraction, infrastructure and incentives to the current needs of investors in the sector. But given the new drivers of the sector, there is every reason to believe the Rock has what it takes to become an attractive location for new business and IT services.

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Anne Duncan is Managing Director of Lumiu, an award winning advisory services firm specialized in global business services including location strategies and selection. www.lumiu.com