Thursday, 30 July 2009

Atos and Capgemini UK update

(By Anthony Miller – Thursday 30th July 2009 10:15am). There were some common themes that came out of my conversations with Atos UK CEO, Keith Wilman, And Capgemini CEO, Technology Services NW Europe, Christine Hodgson, after their 1H09 results (see UK star shines brightest at Atos and Capgemini - talking about the important things). Perhaps the most telling is that for both companies, the UK businesses were the stars of the show, Atos UK showing 6.4% organic growth and 8.2% margins, and Cap UK with 12.7% organic growth (!) and 8.1% margins. Why was this so? Mainly because both have a very high exposure Public Sector and to Outsourcing.

Both players have marquee outsourcing contracts in the public sector, Atos with the likes of DWP, MoJ and more recently subbing to IBM in ID Cards (the identity management bit, not the cards themselves), whereas Cap is of course embedded in the Aspire contract at HMRC, and also has deals at the Learning & Skills Council, Met Police and some local authorities. Indeed I understand that some of Cap’s local authority delivery is starting to come from offshore. This, by the way, is not unique to Cap, but of course is not much advertised for reasons which we covered just yesterday (see Public sector IT offshoring makes front page news). One of Government’s (of any colour) biggest challenges on the whole offshore debate is how to balance pragmatism with politics. But both Cap and Atos say that public sector business is still tough to win, with contracts being delayed just like in the private sector (Wilman gave the example in one deal where the bid manager is already on his second run of paternity leave!).

In the private sector both players honed in on ERP, and especially, SAP, as being good for business. It’s still mainly ‘keep the lights on’ type projects and of course cost-cutting through rationalisation. But there are new contracts being awarded. Just last month, Cap won a major deal with Cadbury for the second phase of a major international SAP roll-out. Hodgson also called out Business Intelligence as a very hot area, with its BI team pretty much maxed out.

Their views on the UK competitive landscape were quite diverse. Of course, they are archrivals in UK public sector and for much this reason, Atos also sees Fujitsu too. But Wilman commented that they have not been seeing much of Logica recently and nothing of Steria, which is a little surprising I feel. Atos has also been giving the leading India-based players a good run for their money, beating TCS and Wipro in some key insurance deals. Hodgson called out a more active Axon since its acquisition by HCL, but made the point that they “never, ever take Accenture for granted”.

Both Wilman and Hodgson seemed cautiously optimistic about the rest of the year, but neither went as far as calling the bottom. Prudent, I would say. Let’s see if Logica thinks likewise Friday week.

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