Select Committee on Science and Technology Written Evidence

Memorandum 18

Submission from LogicaCMG


  1.  LogicaCMG supplies IT facilities and services to the space industry and also to the communities that use satellites. We believe that our involvement at both ends of the space business is mutually strengthening, and that this business model provides lessons for the economy as a whole. The relevance of those results to the five issues identified in the call for evidence is summarised in paragraph 18.


  2.  LogicaCMG is a major international force in IT services. It employs 30,000 people across 36 countries. LogicaCMG's focus is on enabling its customers to build and maintain leadership positions using LogicaCMG's deep industry knowledge and its track record for successful delivery. The company provides business consulting, systems integration and IT and business process outsourcing across diverse markets including telecoms, financial services, energy and utilities, industry, distribution and transport and the public sector. Headquartered in Europe, LogicaCMG is listed on both the London Stock Exchange and Euronext (Amsterdam) (LSE:LOG; Euronext:LOG). The UK business unit dedicated to the space marketplace is the largest UK space software group, and supports about 350 LogicaCMG staff.

  3.  LogicaCMG's mission statement is "to help leading organisations worldwide achieve their business objectives through the innovative delivery of information technology and business process solutions". The leading organisations that LogicaCMG helps are in both the downstream (near to the end users and consumers) and upstream (infrastructure and manufacturing) parts of the economy. We recognise that this terminology is not precise in that "one person's upstream is another person's downstream", but the virtuous circle argument applies wherever the upstream and downstream occur in a value chain.

  4.  Our experience is that by being involved in one end of a sector, we are better positioned to help organisations at the other end to achieve their business objectives. Having assisted in preparing the evidence to be submitted to the select committee by UKspace and Intellect, we will focus in our evidence on upstream/downstream synergy which we believe is an important consideration in justifying public sector investment in the upstream aspects of space, and has not been addressed in great detail in the other evidence of which we are aware.


  5.  The following examples illustrate this synergy for our space business.

Mobile telecoms

  6.  We selected a commercially optimum mix of GSM and Inmarsat services to link the remote telemetry units of the 150,000 km British national gas pipeline network. Now we are helping Inmarsat to define, develop and deploy its next generation of mobile satellite telecom services. In five years time we will help user organisations to integrate Inmarsat's new services into their networks where commercially justified.

Fixed line telecoms

  7.  We provided a commercially optimum mix of terrestrial and satellite (VSAT) links to connect the Indian National Reserve Bank with 400 banks throughout the sub-continent. Based on our knowledge of the changing marketplace and the technical solutions addressing it, we are now helping Avanti to define, develop and deploy a next generation satellite service (called Hylas). In five years time we will help organisations to select hybrid telecoms services that are commercially optimum in the light of Hylas and other new services available then.

Defence telecoms

  8.  Ten years ago, based on our knowledge of the commercial telecommunications marketplace and of defence systems, we helped Astrium and UK MoD to define the communications requirements of its next generation telecommunications satellite, Skynet 5, and then helped define the commercial arrangement that would apply (PFI) to that programme. Now we are developing and deploying major elements of the service delivery infrastructure of Skynet 5. In five years time we will be helping UK MoD to deploy new services enabled by a balanced mix of military and commercial, satellite and terrestrial links.


  9.  LogicaCMG has been supplying fleet management, routing and other positioning systems to commercial and public sector organisations for more than 20 years, using a mix of terrestrial and satellite technologies. Now we are helping to define, develop and deploy both EGNOS and Galileo, Europe's two new satellite positioning systems.[32]* In five years' time we will be helping mobile telecom operators and other organisations in the business of Location Based Services to integrate EGNOS and Galileo into their service portfolios.

Space science

  10.  We define and develop the information management systems that enable X-Ray astronomers to achieve their research objectives using Europe's giant XMM-Newton space telescope. We developed the software that guided the highly successful Huygens probe to Saturn's moon Titan in January 2005. Our ability to understand scientific objectives underpins our team of space scientists and computer scientists who are defining and designing Europe's next Mars probe, ExoMars. In five years time we will be helping scientists to define and develop IT systems to maximise the scientific payback of ExoMars.

Remote sensing

  11.  LogicaCMG is the world leader in helping nations and organisations deal with the consequences of global warming through carbon trading, energy trading, etc.[33] We are also Europe's leading information security organisation having undertaken for example over 60% of UK government system security evaluations. Now we are defining the data security architecture for Europe's new environmental satellite programme, Global Monitoring for Environment & Security (GMES). In five to 10 years' time we will be helping public and private sector organisations across Europe to integrate information from GMES into their environmental management systems.

  12.  Ten years ago we provided Eumetsat with the computer facilities to turn raw satellite images into the meteorological information required by Europe's Met Offices. Three years ago we helped the UK Met Office to manage the information technology aspects of the move to their new Exeter HQ. Now in Japan we have developed a state of the art facility to correct the images from that country's new generation of weather satellites, MTSAT, and disseminate them to users. In five years' time we will help Eumetsat and the Met Office to develop Europe's next generation of weather forecasting data systems.

Quantifying the benefits

  13.  We can quantify the benefits of LogicaCMG's upstream work using the methodology and terminology in the recent study of "the impact of space derived services and data" for EADS Astrium by Oxford Economic Forecasts (OEF). LogicaCMG's direct UK upstream space revenues currently amount to about £30 million per annum, which equates to about 350 employees at the LogicaCMG average annual revenue per capita of £86k.[34] OEF estimates that indirect and induced effects for the space sector are 3.1 times the direct benefit[35], thus implying that another ~1,100 jobs are supported by this LogicaCMG upstream activity. Using OEF's figures, these direct, indirect and induced effects contribute just over £100 million to UK GDP.

  14.  Another factor that is quantifiable is the GDP contribution of R&D. The upstream space activities undertaken by LogicaCMG are largely R&D in nature. A conservative estimate is that 75% of the ~£30 million annual revenue falls into the R&D category, ie £22 million. Most of this R&D is externally funded (albeit mostly under fixed price conditions so that LogicaCMG bears the commercial risks). OEF estimates that for the aerospace sector R&D investment generates a social return of about 70%[36], so this £22 million leads to a spillover increase of £15 million in UK GDP in the long run. Thus, in total LogicaCMG's upstream space business contributes about £115 million per annum to UK GDP.

  15.  OEF concludes[37] that "on top of [its direct, multiplier impacts and R&D spillover impacts] the application of space derived services and data further contributes to the UK economy by facilitating the provision of a wide range of services to business and consumers, and by enabling the UK's infrastructure to be used more efficiently." OEF however then goes on to state that "It is not possible to quantify the value of all the additional benefits."

  16.  The benefits illustrated by LogicaCMG's upstream-downstream synergy fall into this "catalytic" category of benefits as OEF calls them, which OEF considers unquantifiable, and we have therefore not attempted to do so. What we can say is that the LogicaCMG downstream business that incorporates some element of space services substantially exceeds the £30 million upstream business.


  17.  It is good for organisations that use satellites that LogicaCMG understands the trends in satellite services. It is also good for organisations that design and operate satellites that LogicaCMG understands the trends in the markets that will use their satellites and services. And finally, it is good for LogicaCMG that we are helping both suppliers and users of satellites because that virtuous circle ensures a sustainable business future for our company and our staff. We believe that this model of synergy between upstream and downstream sectors applies to the economy as a whole not just to one company in it—by having companies active throughout the full space value chain the economy is more resilient to changes in markets, technologies, consumer trends and the many other factors that can affect economic success.


  18.  Turning to the five specific issues in the Call for Evidence, the following summary draws from the examples above:

    (i)  Competitiveness. UK has historically invested in space R&D with a view to getting a return on that investment, unlike many other countries which have focused on expensive prestige space programmes. This focused funding strategy has been successful in underpinning the UK space industry's current healthy position. Although much of LogicaCMG's space business is for the commercial and defence markets (ie not R&D markets), government investment in space R&D programmes has been essential in underpinning the development of LogicaCMG's space business for more than 30 years. Further well-targeted government investment will continue to strengthen UK industry's global competitiveness.

    (ii)  Benefit of ESA. ESA and Eumetsat programmes have consistently provided technology, experience and the necessary focus that enhances LogicaCMG's global competitiveness. ESA is highly skilled at delivering technically complex and advanced systems, sometimes in the presence of heavy-handed political interference (particularly in the so-called optional programmes).

    (iii)  Innovation and Knowledge Transfer. ESA has acted as a very effective mechanism for turning UK Research Council funding into commercially exploitable outputs.

    (iv)  Benefits of Government Space Activities. Services delivered by, or involving, satellites are an increasingly routine element of daily life—in both commerce and government. Space provides an essential part of the knowledge infrastructure that Britain's knowledge economy will rely on in the 21st century, e.g. in the domains of broadcasting, telecommunications, navigation, security and global warming. Coordinating Government investment in space R&D across Departments has proved particularly difficult in the early phases of new programmes, ie when the benefits to the user Departments are not yet clearly identified.

    (v)  Space Research and Skills Base. The outreach power of space programmes in illustrating the hi-tech world is out of all proportion to their intrinsic cost. At LogicaCMG space activities represent a relatively small part of the company's overall business (1-2%) but a significant part (10-20%) of the company's publicity output, reflecting the highly positive image that national and international space programmes project to investors, clients, staff, and potential recruits.

October 2006

32   * A summary of our extensive roles in Galileo can be found at Back

33   See for example Back

34   LogicaCMG Annual review and summary financial statements 2005. Back

35   "The Case for Space-the Impact of Space Derived Services and Data"; OEF, Oxford, Final Report, June 2006, p 8. Back

36   ibid, p 25. Back

37   ibid, p 5. Back

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