Tuesday, 31 March 2009

Fujitsu’s new Global Business Group

(By Richard Holway 10.01pm 30th March 09)

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An interesting year for Richard Christou
It has been, to say the very least, an ‘interesting” year for Richard Christou. Before I get on to the announcements which take effect to Fujitsu’s Global Business Group on 1st April, let’s recap through the items you could have read on UKHotviews.

Christou had taken on the CEO position at ICL in 2000 in equally ‘troubled times’. One of his first acts was to accept that ICL was a wholly-owned division of Fujitsu and not ‘an IPO or MBO in waiting’. It was soon renamed Fujitsu Services and David Courtley joined from EDS to run it. I’d rather expected Christou (now Executive Chairman) to retire and was suitably surprised in 2007 when he told me over a lunch at Mosimanns that he’d been invited to take on responsibility for much of Fujitsu’s operations outside Japan. Indeed, in Oct 08 (see my post Richard Christou 22nd Oct 08) Christou was appointed Corporate First Senior Vice President with overall management responsibility for Fujitsu's global business. Even at that time, it was a mighty big job - 60,000 people and upwards of €18b revenues.

Then in Nov 08 (see “One head better than two” at Fujitsu Siemens 4th Nov 08) the job got even bigger with Fujitsu paying Euro450m for Siemens part in the Fujitsu Siemens JV. This acquisition becomes effective on 1st Apr 09 and adds c€6.6b to Richard’s responsibilities.

Then we received another surprise on 10th Dec 08 when it was announced that David Courtley had departed Fujitsu Services 10th Dec 08

The Solutions-led model – the Christou Vision
We had a long interview with Christou at that point (see “Think Fujitsu” – the Christou vision 11th Dec 08) which gave a pretty clear indication of how Christou would run the Global Business Group.

Basically (as I reported in November) Christou believes that in many markets and geographies, Fujitsu’s future lies in Solutions-led sales NOT Services-led sales. In my 40+ years in IT, I have seen the pendulum swing. In the late 1960s/70s I was deeply involved in Hoskyns (now Capgemini’s) turnkey sales operations. We sold solutions based around our own software packages and DEC VAXs; all packaged with our wrap-around support – from front end consultancy through to post implementation hardware and application maintenance. We did very well – as did its sister HP3000 division.

But since then, we have seen the evolution of the SIs –Accenture, CSC, Capgemini etc – where the Service-led model has dominated. Various degrees of the solutions-led model continued with HP and IBM – both companies, of course, with strong hardware operations.

The Christou vision now sees Fujitsu moving more to this Solution-led model. Christou argues strongly that this is the only approach that works in the all important developing markets of China, India etc as well as parts of Continental Europe. Here, the outsourcing model, which might be appropriate in the UK, is not the right approach.

The New Fujitsu Global Business Group
A few weeks ago, Christou briefed me on the new operating model to become effective from 1st April. Christou will introduce an operating model where the regions are responsible for “selling and delivering integrated product and service offerings” with Fujitsu Siemens being integrated vertically within those regions. On top of that there will be delivery units providing global functions (like marketing, business management etc.)

Running through the regions:

Fujitsu Australia and New Zealand – CEO Rod Vawdrey. cA$1.2b operation. Christou thinks that this is the ‘model region’ where the management of products and services is already well integrated.
Fujitsu ASEAN - CEO Laurence Wee. c$400m business serving Japanese multinationals in the region.
Fujitsu China (North) - CEO Masayuki Tomimuro
Futitsu China (South and Hong Kong) CEO Yau Kan
Futisu North America - CEO Farhat Ali. This will integrate three major Fujitsu companies in North America.
Fujitsu UK and Ireland - CEO Roger Gilbert. Many readers will know Roger. He now takes on an integrated Fujitsu and Fujitsu Siemens operation with revenues of c£1.75b. I was surprised about how much customer overlap there was between FS and FSC in the UK.
Fujitsu Nordics - CEO Bengt Engstrom. Pretty self-contained already and profitable! Lots of solutions selling particularly around SAP
Fujitsu Continental Europe - CEO Kai Flore Essentially the Fujitsu Siemens operations in Germany but now embracing Fujitsu’s operations in France, Benelux and Spain.
Fujitsu Telecommunications - CEO Andy Stevenson

…and the functions

Global Marketing – Philip Oliver
Global Client Management – tba
Global Delivery - Paul Tasker
Global Business Management - Akihasa Kamata

My view?
This could be a risky and, certainly some think, a controversial move. Many believe that the Service-led model leads to a high quality business with high margins and would look to Accenture as the ‘role model’ here. Many customers believe that product-led companies will always promote their own products regardless of what is in the best interests of the customer. Many believe that hardware is increasingly a low (or no) margin business. Indeed, we have already seen IBM jettison its own PC business. The only way with hardware is…out.

I’ve never believed that ’one-size-fits-all’. Even in Europe, what sells best in the UK (one of the most ‘services-led’ markets in the world) is different to Germany and quite, quite different to China. Christou argues that his new structure caters for that. That the structure provides a framework for his mantra “Think global, act local”. Philip Oliver (Fujitsu’s 'new' Global Marketing Director) told me last night “the combination of the transnational model we are establishing, which gives the flexibility to the regions to sell in the way most appropriate to their local market, is far more important than full blown solution selling. In the extremes, in China product sales are all and locals deliver the services except to multinationals, whereas in the UK very few products are sold without a service wrapper of some sort. We are definitely not talking about only selling massive SAP or bespoke style apps deals here, this really is horses for courses”.

Christou is now in charge of a €25b+ organisation with around 14 really significant direct reports. That’s a big personal undertaking.

And, of course, this is all being undertaken against a backdrop of the worst economic downturn in my lifetime; affecting many of Fujitsu’s markets particularly badly.

Christou sees his role model as IBM and HP – although both took decades to built a network of ISVs and, indeed, undertook a series of pretty significant acquisitions to get to where they are today. Maybe that’s what Christou now needs to consider – but where are the resources to do that going to come from in today’s troubled markets?

Footnote – Sorry that this is a rather longer note than we would normally publish but we know how many of our readers are really interested in this (not least our many Fujitsu subscribers) and know the personnel – Christou, Oliver and Gilbert – well. These longer, exclusive briefing notes will normally only be made available to our subscribers.

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