Company chief Kevin Galligan says firm may enter postal market, writes Emmet Oliver.
Kevin Galligan is standing in the middle of a room filled from floor to ceiling with small blue metal mail boxes. As he talks men scurry into the room to drop envelopes in the boxes before quickly disappearing into the street.
The setting is far from opulent, but reading the name tags on the front of the boxes you immediately get a sense that the room is mainly frequented by representatives of blue-chip Dublin.
This reporter noticed some of the following names on the front of the boxes: McCann FitzGerald, A&L Goodbody, Director of Public Prosecutions, Attorney General's Office, Ulster Bank, AIB and Bank of Ireland.
While the workaday atmosphere of the room suggests this is simply a humble mail room, in many ways this room and others like it around the country could form the backbone of a new nationwide postal delivery network.
At least that is what Kevin Galligan is hoping. With the postal market facing full liberalisation within three years, DX is seriously weighing up taking on the An Post monopoly. Already letters weighing over 50g are open to competition.
As boss of DX Ireland Galligan presides over 220 such blue-boxed rooms, or as he likes to call them "document exchanges".
DX Ireland is an inter-company mail exchange business. Put simply companies pay an annual membership fee that allows them to mail other companies who are part of the network.
Galligan, who previously worked with the famous Windmill Lane group of companies, stressed throughout the interview that his business was not about mailing to personal customers. It is a member-based organisation, business-to-business, he explained.
The company, once called the Dublin Documents Bureau, was born out of industrial strife in An Post. In 1979 there was a prolonged dispute at the State postal service and companies, particularly law firms, needed some way to mail important correspondence to each other.
Nowadays the company is owned by UK-quoted company Hays. DX Ireland moves 40,000 items a night via the network of exchanges. In Dublin city centre the exchange is a large room, but in other smaller towns it is literally just a box.
Galligan explains that the membership fee can vary from €500 for small users to €100,000 for major corporate users. The exchange of mail between companies is the bread and butter business, but DX Ireland also provides parcel exchange and transports clinical samples for hospitals and clinics.
Transporting and delivering mail is labour-intensive and DX Ireland has 50 sub-contracted drivers hitting the roads every night for the company. It's no surprise to learn that the only company domestically with a larger network is An Post, although US groups like DHL and FedEx operate huge international mail-moving operations.
Galligan expects to make an announcement within months about DX's potential role in the postal market.
"We are currently undertaking a feasibility study to define the market opportunities; however, we reckon right now that 50 per cent of all mail by volume is reserved to An Post." Asked specifically about the timeline on a decision, he says: "We will be making some decisions before the summer."
He says while the company would like to do something, "the real question is how commercially viable is it"?
"We are like any normal company: we would need to know when we would get our investment back."
Is there a gap in the market or a market in the gap, he might reasonably ask? While reluctant to specifically criticise An Post, Galligan says a lot more could be done to bolster the postal market in the Republic.
"Despite what people might think, Ireland's rate of business to consumer mail is very low by international standards. This probably has something to do with the fact that there are no structured post codes in the country," he says.
He repeats again his desire not to "thrash" An Post, but acknowledges there is an appetite for something new.
"Our members certainly say they would like to see an alternative," he explains. The EU has decided that full liberalisation does not have to happen until 2009, but some countries, like the UK, have decided to bring this date forward. So far the Department of Communications has not taken this step, although the Minister Noel Dempsey recently warned if there was further stoppages at An Post he might also speed up the process of liberalisation.
The barriers to competition in the postal market are huge. An Post has 1,614 post offices and agencies scattered around the country and 9,164 staff. While a significant segment of this is needed to offer a universal service, it still illustrates the kind of investment needed by anyone entering the market. The main way to cut down on these costs would be to cherrypick the big corporate accounts.
Galligan denies his firm would do this, but he admits that DX would need to get "downstream access" to An Post's network if a viable business model is to be created.
Downstream access refers to private operators sorting mail themselves but using the local An Post network to have it delivered. In its purest form it could mean An Post staff delivering letters for private operators. It is the equivalent of the 'last mile' in the telecoms sector.
Currently DX is spread all around the country. Its promise to members is a simple one: "We pick up mail from 5pm and get it to the receiver pre-9am the next morning. We have lost no working days," says Galligan.
While he is buoyant about the postal market generally, others have predicted a relatively swift demise. Galligan does not buy the theory that e-mail and the internet will kill off snail mail in the long term. "We are not seeing it. Electronic substitution may be happening, but it is not hurting us, our volumes are increasing. I suppose its a bit like when PCs came out first, everyone talked about the paperless office. Well it never happened," he says.
While clearly ambitious about expanding the company's services, Galligan does not want to alienate his current crop of customers. "We are known for our premium service and I am conscious that anything we do must be done at the same level." He denies the suggestion that companies like DX simply seek to profit from An Post's poor industrial relations record.
"During any of the strikes we have never introduced products to simply capitalise on their situation," he says.
Galligan joined the company shortly after 9/11. It was not an auspicious time for business generally or for him and his family. His brother for example was in the Twin Towers when the planes struck and luckily was evacuated in time.
Back in Dublin Galligan was looking for a new challenge after several years working in Windmill Lane. DX was loss-making at that point, potentially facing closure. Galligan's first challenge was to squeeze cost out of the business. He consolidated some delivery routes and got the company to concentrate on the most beneficial activities, cutting out non-core business tasks.
He admits there are few linkages between Windmill Lane and DX, but this probably helped him.
"I came in with no preconceptions about the way you must do things. In the end of the day what we do is not that complicated. We move mail and parcels from point A to point B."
If DX presses ahead with plans to enter the postal market its current crop of blue-chip clients could be a key asset. One of the clients he does not retain is An Post itself. Galligan remembers sending them a speculative letter once asking if they would like to become members. He never received a reply.
Factfile
Name: Kevin Galligan.
Age: 39.
Marital status: Married with one daughter.
Title: Managing director, DX Ireland.
Career: Joined DX Ireland as managing director in 2001. Responsible for strategic and financial planning and its execution. Leads team of 100 people. Achieved turnover of €€6.5 million and operating profit of €1.45 million in 2004/2005.
Previous employment: Worked at Windmill Lane Productions from 1991 to 2001, including period as general manager of its internet and technology division, leading a team of 30 people. Also worked as director of sales and marketing and business development manager.
Education: Secondary education at Castleknock College in Dublin. MBS from Michael Smurfit School of Business and BSc in management from TCD and the College of Marketing DIT.
Hobbies: Rugby, hillwalking.
Why is he in the news: DX is considering entering the postal market to take on An Post.
