The IT guys

With its DIY ethos, the compact SchlumbergerSema in-house legal team has been pivotal in the success of the international IT services company. Caroline Davies investigates

Mention Sema to a Lithuanian and you will receive a hearty acknowledgement, as the Panevezys-based business is an alcohol production company, specialising in light alcoholic beverages, technical products and yeast.

There is, however, another Sema (now known as SchlumbergerSema) that is probably not as well known among the Lithuanian beer-swilling population, but is more universally recognised. This other Sema is a worldwide IT services company with over 30,000 employees, providing specialist services to the UK Government as well as to financial institutions.

The UK in-house legal team within SchlumbergerSema is small by comparison – only six lawyers – but together they support all of the company’s business activities. The UK general counsel, who is also responsible for Ireland, is James Loughrey, who has two direct lines of reporting – one to managing director David Baillie and the other to Taik Lin, the New York general counsel of Schlumberger.

SchlumbergerSema was created in April 2001, when the (historically) French company Schlumberger (now listed on the New York Stock Exchange) acquired Sema UK. Schlum-bergerSema is one of the two business divisions of listed company Schlumberger, the other being Schlumberger Oilfield Services. Schlumberger was started in the early 1900s by two French brothers who began to provide technology services to the oil industry. It grew to a mammoth size and expanded into the US.

“In April 2001, Schlumberger took us over following a friendly takeover,” says Loughrey. “We were originally Sema UK plc. Sema was very much an Anglo-French operation, so there was an interesting cultural fit between the two companies. Sema was headquartered in London and in Paris, as well as having a significant presence in other parts of the world.”

The takeover, despite being friendly, was significant. Schlumberger acquired Sema for $5bn (£3.28bn). Clifford Chance acted for Sema and Freshfields Bruckhaus Deringer for Schlumberger. “We’d use Clifford Chance again on a big acquisition or disposal,” says Loughrey. “But now we also have Freshfields, as they’re Schlumberger’s lawyers.” It was also a very astute move for the oil services business, as it moved into high-tech system integration as well as developing its own software products.

“Schlumberger had prospered in the oil field sector,” Loughrey continues. “They supply software and also data collection and processing for oil wells, which is a core business for them. Some of their business was IT, but they wanted to diversify, to find a company that would fit with them but also would offer some expansion. We were an ideal target for them.”

Schlumberger has its own in-house lawyers based in locations all over the world. The New York team, headed by Lin, comprises 15-20. Following the takeover, the in-house capacity between the two divisions is fairly even – both SchlumbergerSema and Schlumberger Oilfield have around 40 lawyers worldwide.

SchlumbergerSema outsources very little of its legal work, which means that the inhouse team soaks up most of the daily legal requirements of the business; 5-10 per cent is outsourced, and this consists of litigation and some specialist functions that need attention.

The preferred law firm for Loughrey is Nabarro Nathanson. “All the big project work we do in-house,” he explains. “We outsource very little work, but when we do outsource it’s not totally ad hoc.” The company has instructed Nabarros on litigation matters in the past and has also used Scottish firm Tods Murray on a significant IT project involving Scottish law. Loughrey is slightly reticent about mentioning the firms he uses. “There may be two or three law firms that I would use, but I don’t formally appoint them as the retained firm. I have relationships with different firms,” he says.

DLA’s London office has also been retained in the past for litigation and some specialist advice on public sector law. “Two years ago there was a lot more work going to external firms,” he admits. “But I’ve now built a good in-house team.”

Hardly anything that the in-house team deals with is standard – most of the contracts are complex transactions that are negotiated individually. To complement this, the in-house team members are all IT industry trained or highly experienced commercial lawyers, with 4-10 years of post-qualification experience. Loughrey himself has spent nearly 16 years in the IT sector. A qualified solicitor and barrister, he spent seven years at Ferranti International, the defence electronics and computer systems company, and then moved on to Seimens to become the UK legal adviser for its information systems businesses.

What Loughrey and his team focus on are the core areas of the business, which are divided across varying sectors and regions. The key sectors are finance, telecoms, transport, utilities and the public sector.

“What we try and do with each of those five segments is to sell all our service and product offerings, so we’re selling consultancy, managed services, system integration and products,” says Loughrey. “It’s a wide service offering.”

The competition is not that clear cut. As well as the direct competitors such as Logica, IBM Global Services and Cap Gemini Ernst & Young, the company is up against the consultancy arms of the – perhaps now independent – major accountancy firms such as Accenture, KPMG and Ernst & Young. “Those groups used to be in consultancy only, selling high-level professional services,” says Loughrey.” Now what they’ve done is move into managed services. They’re offering the whole range of consultancy, system integration and managed services. They’re competitors as well. But what the managed services companies like us and IBM have done is to move into consultancy, so we’re all competing broad brush across the board.”

The in-house team has been busy over the last few months, fine-tuning various outsourcing deals for the business.

More recently, the team has had to deal with the legal issues involving a nine-year contract to provide IT services to the Vehicle Insp-ectorate, an executive agency for the Department for Transport, the first phase of which has been valued at £78m; the company has also undertaken a five-year agreement, worth £70m, for the supply of occupational health and welfare services to Consignia’s 220,000 employees, which represents the first contract in Consignia’s outsourcing scheme; it has also gained a worldwide leadership position in the microprocessor smart card industry, shipping 198 million smart cards in 2001, accounting for 29 per cent of the world’s total shipments.

Public sector in the UK – which represents all the big outsourcing managed service contracts – is the largest single customer for the company, although the rail and utilities sectors are as important. Telecoms, though, is suffering. “The problem at the moment is that all the telecoms people have slowed down their spending,” says Loughrey. “We’re no more badly affected than other IT companies, but we’ve all experienced a slowdown in that sector.” Despite this, activity in other sectors – namely the public sector and utilities – is unceasing.

“The thing to emphasise with public sector and managed services is that, in public sector, you’re taking over the management of the desktops and networks and software applications. So you come in as the service provider who takes over the help desk. And often they also want management change to their business, so it isn’t simply an outsourcing of technology and running the technology; it’s working very much in partnership with the customer and understanding their business and processes and helping them reach their business goals,” says Loughrey. “The public sector is very much an art; it’s not just about running an IT system, it’s very much business objective-driven.”

Loughrey and his team are very aware of the value they can add within the business, and constantly seek to develop their roles. They are a new breed of in-house lawyers who are seeking to do as much as possible in-house.
“We as legal advisers are part of the business,” Loughrey states. “There are lots of law firms that specialise in this area but the lawyers in-house can be as good. They can develop that level of expertise. We know the business, the commercial policy of the business and the business objectives. Risk management is important – knowing the risks that the company can take, those it can’t, and maintaining a balance.”

The technology that the team deals with on a daily basis is constantly changing and, to date, the team has done an excellent job of keeping up.
James Loughrey
UK general counsel

Organisation SchlumbergerSema
Sector Information Technology
Employees 30,000 worldwide
Legal capability 40 worldwide (60 in the UK)
UK general counsel James Loughrey
Reporting to Managing director David Baillie and New York general counsel Taik Lin
Main law firms Nabarro Nathanson