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Interview: Keith Neilson, Craneware

‘We need more immigration to help the Scots economy’

Keith NeilsonIt all began over a Thanksgiving dinner in New Jersey when Keith Neilson, an Edinburgh physics graduate studying for his MBA, got chatting to health care consultant Nora McNeil.

Over the turkey trimmings and blessing of the harvest, he explained how he and his best pal from home hoped to start a business and were looking for ideas in the software sector. When conversation turned to the size of hospital budgets in America, the opportunity became clear.

Ms McNeil was involved in handling data used by hospitals for billing patients. It was manually input and Mr Neilson knew he could come up with a solution. In October 1999, a year after that dinner engagement, he and his old school friend Gordon Craig had written and launched a software product, and with Ms McNeil on board as a 20% shareholder, Craneware made its first foray into the multi-billion dollar US health care market.

To say the business has flourished is not quite giving the Tanfield-based company sufficient credit for the grip it has taken on a key sector. US hospitals have a $1 trillion turnover and health care accounts for almost 18% of GDP, against 6% in the UK.

“I was blown away by the size of the US health care market,” says Mr Neilson, now chief executive of a company whose rapid growth led to a flotation on the London Stock Exchange in 2007. Nora McNeil sold her stake and retired four years earlier and the company, with its newly-institutionalised shareholders, continued to prosper. It now has a 25% share in the provision of software management systems and its products are in hospitals in every US state.

The company has four offices in America which still accounts for virtually all of its income, but Mr Neilson says there is no plan to relocate the business from Scotland. Unless something changed that would impact adversely on its operations.

“It’s a question I get asked regularly,” he says. “We have a high quality staff here. Yes, we have looked at it on occasions and we do need good connections with the US and the ability to attract talent. If one of those was to fall then we would have to look at it again. But it would be sad for us to leave Scotland. It is part of the DNA of the company.”

He notes, with an ironic laugh, that Craneware opened an office in Atlanta on the same day that direct flights between the city and Scotland were withdrawn. The serious point is that direct flights matter significantly.

So does the Scottish government’s attitude towards business.

The firm employs 220 staff, of which 95 are in Edinburgh. It has completed a couple of significant transactions, the acquisition of Kestros for £1.25 million which has taken into the UK NHS trust market, and a distribution deal with technology veteran David Sibbald’s Aridhia, which expands its activity in analytics.

“We could always do with more skilled people and we are always recruiting,” says Mr Neilson, who says the widely known shortage of computer science workers is an issue for all companies in the sector. He believes the country has to encourage immigration to help meet a gap estimated by ScotlandIS at between 3,000 and 6,000.

“If we are serious about being an export nation we have to make it attractive for people to work in Scotland. We have to open up to more immigration. If the shortage goes on too long then people will move elsewhere.

“We were described as the biggest small nation in the world, or something like that. We have to live up to it,” he says.

He is not too impressed with the recently-revived discussions about the need for a “digital” minister. “You don’t need a digital minister. Every business is digital these days. All we need is a business minister.”

Aside from that, he warns of the dangers posed by those who resent the notion of making money and threaten to impose higher taxes on them. “If we squeeze the pips of the top people at our growing companies then we will lose them.

“The way we pay for people who cannot afford to help themselves is by having an entrepreneurial community. The two are seen by some people as incompatible. They are not.”

Now 46, he retains a huge enthusiasm for what he is doing and for Scotland. Despite his concerns about skills shortages, he says its talents continue to impress him. The fact that he could tie up an important distribution deal with David Sibbald, who works just up the road, is a case in point.

“There are 12 companies in the US that have a larger footprint than us in our market. That’s all. And we are still sticking pins on the board.”

 

 

 

 

 

 

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