Republic still at the heart of company's operations

Galway plant has key role at high end of value chain, Nortel's Alan Kenny tells John Collins

Government strategists seeking to learn how they can deliver on the strategy of moving Ireland up the value chain so we can compete for knowledge intensive investments from multinationals could do worse than looking west.

There, in a prefabricated IDA factory in Galway city, they'll find the Irish operations of Canadian networking company Nortel. The company first came to Ireland back in 1973 as Northern Electrical, a manufacturer of telephone handsets which at the time was the first multinational company to set up shop in Galway.

Through a combination of expansion and acquisition, the company grew to 1,000 employees in the Republic by the late 1990s at sites in Galway, Shannon and Dublin. But in 2001, when the company announced its intention to outsource its manufacturing to third parties, there were fears that its presence in Ireland could all but disappear.

"What is important to Nortel about Ireland has evolved over the years," says Alan Kenny, a director of Nortel Ireland and head of human resources.

"Back in 1973, it was very much about establishing a beachhead in Europe, so it was important to be English-speaking and to understand North American culture.

"Over the years, that has evolved and a variety of things have become important. The corporate tax rates are attractive from a financial perspective.

"We're seen to have an entrepreneurial approach and a "can do" attitude and it has been recognised that we have delivered on our commitments. You are only as good as your last project."

Secondary factors that Kenny cites as important for our competitiveness include the availability of an educated workforce, IDA grants, the prevailing work ethic and the good industrial relations environment.

In tandem with the local reduction in numbers, globally Nortel has gone through a number of major upheavals which have left it a shadow of the company it was in the late 1990s. Nortel caught the internet wave as telecommunications companies invested heavily in building up their infrastructure, but it suffered more than most when that wave came crashing on shore.

From a high of 95,000 employees at the beginning of 2001, it is now a slimmed-down corporation of 30,000 staff, with cuts particularly heavy in late 2001, when it announced plans to halve the headcount.

Just as the telecoms sector began to recover, the company was hit by an accounting scandal last year. It fired its chief executive, Frank Dunn, along with chief financial officer Douglas Beattie and eight other senior financial managers, and was forced to restate earnings going back as far as 2001.

Revenues are not broken out for Ireland, but last year the company had worldwide revenues of $9.8 billion (€8 billion) compared to $10.2 billion the previous year and reported a net loss of $100 million against a $262 million profit 12 months previously.

That's a far cry from 2000, when revenues topped $27 billion, although it racked up a net loss of almost $3 billion that year.

Today, Nortel may not enjoy the high profile of being one of Galway's leading employers, but the Irish operation has managed to secure 300 jobs, primarily engaged in research and development and other high-value activities such as product management, financial services, global operations and support.

Barring the five per cent of employees involved in administration, the entire work force is now made up of graduates - mostly in technology and engineering disciplines.

It is the company's main software development centre worldwide and is also the EMEA technology centre for its business products.

Galway is also home to one of Nortel's customer partnering centres (CPC), where customers can preview new technologies and see how they can be adapted to their business.

"We call it the "deep dive", because technical people with our customers can see the product at an early stage and meet the engineers," says Kenny.

"It's hugely important because customers are coming in on a regular basis. They are then giving testimonials to Nortel people around Europe about the quality of the people and the demos they see here. In turn, the sales people realise the importance of the CPC in winning deals with customers."

The landmark event for the Galway facility was the establishment of a technology lab in the early 1980s, which enabled the company to build up expertise beyond manufacturing.

"Manufacturing was hugely important as it provided the genesis for the company in Ireland," says Kenny. "It's about your reputation and we had one for high-quality manufacturing, which made the likelihood of getting investment in other areas much higher. The investment has been incremental over the years - it hasn't just been about one big project. We try to put as many complementary activities in here, rather than being single product or activity focused."

The Galway operation's primary area of expertise is in the area of contact centres - call centres that handle communications not just over the phone but via the web, e-mail and even text message.

The work it has done in this area was recognised last year when the team won one of Nortel's Technology Awards of Excellence for work in simplifying the management of call centres. The labs at Galway are also responsible for about 30 new technology patents each year.

"We very much wanted to get a global mandate and we have done that with the contact centre," says Kenny. "But we didn't want just one aspect: We are involved in the design, support, sales and engineering of it."

It's an important area of business. Benchmark Research found that 90 per cent of US consumers form their opinion of a company based on their experience of its contact centre.

Nortel's strategy now evolves around what it calls engaged communications - using a variety of communications channels such as mobile, voice, e-mail and the web to provide pro-active customer service. The vision will be delivered in Contact Centre 6.0 the latest iteration of its software, which will ship from Galway at the end of the year.