Founded as a spin-off of Grande Dixence and Société Générale pour l’Industrie (SGI) in 1968, ELCA today is Switzerland’s biggest IT service provider with more than 600 employees. CEO and principal shareholder Daniel Gorostodi looks back on more than 45 years of IT history in Switzerland, a far from straightforward story.More about Daniel Gorostidi
- Swiss made software: Up to the 1980s ELCA was a small provider with roughly fifteen employees. Was the market simply too small in those days?
Daniel Gorostidi: No, but ELCA had a very clear focus and our shareholders weren’t aiming for growth.
- What changed afterwards?
At the beginning of the nineties we had about twenty engineers, two years later we already had a hundred. In the main, this growth was due to our new client and shareholder, the Swiss National Railway Company (SBB). SBB set out two conditions: first of all we had to generate 50 percent of our assignments by way of third-party contracts and, secondly, we had to offer our services on the basis of a fixed price model. That’s how we learnt to manage our projects properly. However, SBB was a crucial but challenging customer for another reason, too. At the time they had already started to outsource a lot of their development to India, which put us under additional pressure.
- How did you stand up to the pressure?
We won the first project tender, but failed on the second. When the third tender came, we were offered at the same price but SBB was clearly favoring our Indian competitor, so I called SBB to better understand why. I have to admit, in the end, SBB’s line of argument made sense. We were offering at the same price but for us it would have meant a struggle, while the Indians still had considerable leeway. Although I was finally able to convice SBB of our offer, they had given me enough food for thought and I knew I had to act.
- So you immediately got on the plane?
No, in fact I didn’t. It actually took four long years to convince the shareholders of my idea for an offshore development model. In the end I didn’t fly to India, but to Vietnam instead. In 1996 we hired four engineers in Saigon and brought them to Switzerland. I put them up in my house for six months. This gave me the chance to learn something about the Vietnamese mentality. After a year I sent them back to Saigon after which we began our collaboration. At this stage you were still an employee.
- How did the management buyout come about?
At the close of the nineties ELCA had a staff of about 150. We where getting too big for some share- and stakeholders which is why they wanted to opt out. So I decided to acquire their share of the business.
- Since you’ve been head of ELCA, the company has grown to include more than 600 employees. What was the driving force behind this?
Now that we were our own bosses we could act quicker than before. But we also profited from the difficult situation on the market. During this period many large enterprises began reducing their supplier structure to a limited number of strategic partners, and, luckily, in most cases ELCA was one of them.
- Apart from Vietnam, ELCA is also present in Spain and France through its affiliated company SecuTix. How did this expansion abroad occur?
There are three ways to expand abroad: you either start from scratch, or, secondly, you expand on behalf of and together with a client, or, thirdly, you gain access to a new market by way of acquisition. For a Swiss company this third option is usually very difficult since our limited home market doesn’t really provide the means to fill the war chest you need for such a venture. This is also why it’s so difficult to gain a foothold abroad in the service industry. What you need is product, moreover, is a product with a clear potential for differentiation.
- Does “Swiss-made” come in useful here?
No, not really. Actually it tends to have on opposite effect. “Swiss-made” implicitly suggests that the competitors in the host country are not at our level of quality. So the catchphrase has a touch of arrogance to it, which doesn’t go down well abroad.
- Still, ELCA advertises with the Swissness brand?
I primarily associate Swissness with the people working for us. The quality of our engineering has a lot to do with the proximity to the EPFL in Lausanne and other universities. Switzerland has excellent educational institutions and opportunities to offer. This is the horse we should bet on. A further USP is the fact that we have a proven capability of integrating a host of different nationalities and cultures. At present we have people from thirty-two different countries working for the ELCA group. The situation in France and Germany is quite different. When I go there I usually only meet French and German people in the workforce. I myself I am originally from the French Basque region, but this diversity is a quality I have come to appreciate in Switzerland.
- So the key to Swissness is multi-nationality?
Yes, that just about hits the nail on the head. We not only have to keep this up, we have to make even better use of it. But, of course, this doesn’t mean that we should neglect traditional Swiss virtues such as precision, punctuality and reliability.
- In this sense Vietnam is a perfect match for Swissness?
For us Vietnam is an extension of the workbench, so to speak. We collaborate closely with our colleagues in Ho Chi Min City, but this does not mean that our software is not Swiss-made. Knowhow is not a question of codes. Programming is actually only a very minor part of the solution we deliver and, in terms of strategy, not even a very important one. The key to our service solutions lies in the project management, and ranges from requirement specification to the definition of the IT architecture and the structure of the data model, not to forget quality control.
- Software development has changed enormously over the years, hasn’t it?
Yes, with the result that code writing plays an ever-smaller part in the process of value creation. In the seventies, embedded software meant: few functions, high performance. With the switch to information systems, the issue of functionality became more and more complex, while the non-functional part has increasingly lost in significance. The introduction of the web led to yet another paradigm shift. Facebook and Google are real-time systems that are concurrently being used by millions of end consumers. This not only means that they feature a high degree of functional complexity, they are also very demanding on the non-functional side. In other words, one has to think very carefully about the set-up of the IT architecture and of what it needs to ensure a continuous operation. In our line of business this means a shift of know-how: apart from business analysis and data modeling, aspects like configuration and performance management are becoming ever more important.
- Why is it so difficult to achieve international success with a software product when operating from Switzerland?
We don’t have the eco-system it requires. In Silicon Valley you have hundreds of new start-ups each year, but only very few make it. But this doesn’t mean that the know-how vanishes. No, it is retained in the people’s heads and can be recalled at any time in a different context. In Switzerland you have to see to everything yourself, which means learning the hard way. We experienced this when we built up SecuTix. If I’d had the chance to rely on people who’d worked for companies like Facebook, Google, or Amazon, things would have been different. However, over the years the situation has improved decidedly. SecuTix has become a successful enterprise, and with UEFA we were able to win a new and very significant client in 2013.
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