FRIDAY INTERVIEW:Jim Costello, chief executive, SouthWestern

AS HE TAKES a seat, the accent is faintly discernible. A proud Kilkenny man, Jim Costello laughs when I suggest he has taken on the west Cork tones of his adopted home in Clonakilty, the headquarters of SouthWestern, the outsourcing company he has headed up for eight years.

“My wife would be pleased to hear that. She’s a proud Cork native,” he smiles.

Like many of his generation, Costello (48) spent most of his working life abroad before returning to Ireland in 2003. Having worked in construction in New York in his early 20s, he returned to Ireland to finish his accountancy studies before heading off for London. A career with US multinational Unisys followed.

Costello rose through the ranks to become finance director for the IT multinational, which brought him to the US, London, France and the Netherlands. “I had spent most of my working life abroad and the next stage in terms of my career path was to move to London. At that point I was ready to move back to Ireland. SouthWestern was just beginning to move into the area of business outsourcing and I saw an opportunity.”

Like Costello’s own life trajectory, SouthWestern has had an interesting history. The roots of the business stretch back more than 50 years, when it was part of SWS, the Cork-based co-operative founded in 1957.

The company began providing accounting and administration services to its farmer members, its first foray into the field of business processing. Throughout the ensuing decades as SWS moved into areas such as renewable energy, it was also quietly expanding its business processing division, administering the national animal movement and registration system on behalf of the Department of Agriculture, a contract it still holds.

In 2006, SWS was bought by Ion Equity for €110 million, with the private equity group assuming about the same amount in debt. Three years later Ion sold SWS’s wind business to Bord Gáis for €550 million, pumping some of the proceeds back into the outsourcing business – a €45 million investment in SouthWestern was made by Ion in December 2009.

According to Costello, Ion’s commitment to SWS’s business outsourcing business is proof of the growth potential of the business.

Having employed 35 people when Costello joined in 2003, SouthWestern now has a workforce of 450 in Ireland and a further 150 in its base in Lodz in Poland. Last week, it announced the creation of 150 new jobs over the next three years, making it one of the biggest employers in the southwest.

SouthWestern’s main activity is providing business outsourcing to private companies and public sector bodies. This can range from administering accounts and payroll to dealing with customer queries. “We provide back-office administration to about 40 per cent of the top 20 companies in Ireland,” he says.

Clients include Kerry Group, Independent News Media, Vodafone, O2 and Car Trawler. Topaz, which is owned by Ion equity, is also a customer.

Turnover in 2009 was €22 million, rising to €25 million in 2010. Earnings before interest, tax, depreciation and amortisation (Ebitda) for 2009 was €1.9 million. While Costello admits that, like all businesses, margins have come under pressure as the company has been forced to give discounts to some customers, this has been offset by the level of new business wins. He is optimistic about further growth. The company has plans to open an office in the UK, and extend its reach in Poland.

“What we’re seeing is that companies are looking for ways to become more lean, to reduce costs. Outsourcing allows them to do this, while allowing companies to concentrate on their core business. It’s becoming a long-term solution for companies.”

Costello is keen to dispel the image of outsourcing as a low-cost, low-paid business associated with emerging economies, instead stressing the strong RD and technological credentials of companies such as SouthWestern

“People automatically think of places like India or China when they think of outsourcing, but there are 20,000 people employed in the outsourcing industry in Ireland. Companies need high-end back-end services. For example, we have a contract with Car Trawler providing them with support in eight languages.”

Investment in IT and technological infrastructure is one of SouthWestern’s key selling-points, both in terms of efficiencies and implications for labour costs. “Because of our investment in specific technologies – we spend hundreds of millions of euro on IT – we can provide services to companies that involve a lot less people, making us more competitive.”

Is this not a central paradox of the outsourcing model in terms of its contribution to the economy? Many argue that many of the “new” jobs created by firms such as SouthWestern are in fact displaced from other parts of the economy, essentially resulting in a net decrease in jobs. For example, it emerged that some of the 167 Irish job cuts announced last month as a result of Vodafone outsourcing its call centre and debt-collection services, are going to SouthWestern.

“Our announcement last week of 150 new SouthWestern jobs does not include those Vodafone jobs,” Costello says. “The 150 new jobs are being generated due to new contracts we have won in the UK market and represent net additional jobs to Ireland.”

Indeed, he believes winning outsourcing contracts with international companies offers a key opportunity for growth both for SouthWestern and Ireland more generally. “The second-largest market in the world in our business is the UK. It’s an €8 billion market which employs three million people. It is the same size as the financial services industry. All local authority contracts are up for tender in the UK. Our experience working with the public sector here means we can compete for these contracts, which will in turn bring jobs into Ireland.”

Currently, roughly 15 per cent of SouthWestern’s turnover is international, which it intends to increase in the coming years. Nonetheless, in the long-term Costello believes that public sector reform in Ireland, if implemented, could hold huge potential for the outsourcing industry as well as savings for the public purse.

“Take means testing for example. Instead of having separate means test applications for education, the HSE, social welfare, why don’t we have one means-testing organisation for the country which could provide and administer that information to all the different partners? This could provide huge savings for the exchequer.”

A similar streamlining approach to the motor tax system could be adopted, he suggests, with six or seven regional centres around the country administering the system rather than the current system which is spread over 34 local authorities.

Regional enterprise is something Costello strongly supports. SouthWestern is located in West Cork Technology Park on the edges of Clonakilty. “At the end of the day, our broadband provision, which was provided when the technology park was first built, means that we can offer the exact same services to our customers as they would get anywhere in Dublin.”

Costello is evidently extremely proud of the company’s importance as a local employer.

“We offer local young people a very strong career path. It’s an excellent place to work. Besides,” he adds with a smile, “people may think of India and China when they think of call centres, but Clonakilty is undoubtedly the most beautiful outsourcing location in the world.”

ON THE RECORD

Name:Jim Costello

Age:48

Position:Chief executive, SouthWestern

Lives:Kinsale

Family:Married to Judy. Has three children Oliver (12) Victoria (11) and James (9), born in France, Britain and the US respectively.

Something that might surprise you: He was declared bankrupt at the age of 22 in New York after his carpentry business collapsed.

Something that won't surprise you:As a Kilkenny native he is a hurling fan, and played hurling in every country he has lived in throughout his career.