MCN Direct Newswire

Vol. 4 No. 19, 27 July 2005

This issue is sponsored by:

TeleWare and The UK Consulting Industry 2004/5

This issue news

1. IBM names new Global Services leaders
2. Accenture bets on information management
3. LogicaCMG makes headway in first half
4. Capgemini adds agility to WH Smith
5. India's finest off to flying start
6. Further information - feedback/pass on to a colleague/remove from mailing list

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1. IBM NAMES NEW GLOBAL SERVICES LEADERS

IBM has appointed three senior executives to lead its Global Services consulting and IT services division, following the departure of John Joyce who was promoted to run the division just a year ago.

Ginni Rometty, former head of IBM's consulting business, steps up to lead high-value services such as business process transformation and outsourcing, as well as consulting. Mike Daniels, former head of IBM's US sales operation, takes on basic IT services such as outsourcing. Last but not least, Bob Moffatt, responsible for IBM's supply chain, will take charge of services delivery.

IBM denied suggestions that the new management structure indicates a break-up of the services business and says it will continue to report results for the whole division. But it will also look to provide more detailed disclosure on its various activities.

Joyce, who worked at IBM for 30 years, has joined private equity group Silver Lake Partners. His departure was not unexpected after his name had been linked to a number of CEO positions in the IT industry.

The new Global Services management team has taken over as IBM reported a return to financial form in the second quarter. This followed a poor first quarter when CEO Sam Palmisano said the company would have to take "appropriate measures" to sharpen its execution (MCN Direct 4-10). These measures included a restructure and proposal to cut 10,000-13,000 jobs worldwide.

By the close of the second quarter, this figure had increased to 14,500, with 70% of the cuts being made in Europe, predominantly in the services business. IBM said the increase in job losses was a result of good acceptance of voluntary redundancy schemes in Europe.

In total, the company turned in second-quarter net profit up 5.4% at $1.8 billion (£1 billion), on revenue down 4% compared to last year's second quarter at $22.3 billion. The fall is attributed to IBM's PC business, which contributed revenue in only one month of the quarter before it was sold to China's Lenovo. Revenue from Global Services rose 6% to $12 billion in the quarter.

Palmisano said: "IBM returned to form in this quarter. In particular, strategic high-growth businesses - in business performance transformation services, software and in key industry sectors and emerging markets - were among our best-performing operations, achieving double-digit revenue growth. In addition, IBM Business Consulting Services posted an outstanding quarter, with strong revenue growth and a 30% increase in signings."

Services contracts signed in the quarter, including consulting, totalled $14.6 billion, leaving IBM with an estimated services backlog of $113 billion.

2. ACCENTURE BETS ON INFORMATION MANAGEMENT

Accenture plans to invest $100 million (£57 million) over the next three years in information management services and says it is "committed to being the undisputed leader in this market space".

Accenture has chosen Royce Bell to lead a global information management practice that will marshal the skills of more than 5,000 consultants worldwide, specialising in services such as business intelligence, enterprise performance management and content management across Accenture's service lines and industry groups.

According to Karl-Heinz Floether, group chief executive of technology and delivery: "This investment will enable Accenture to extend its existing information management capabilities to provide a broader set of services and deliver business value that is superior to that provided by competitive offerings."

Accenture has been working with clients on information management projects since 1992 and has completed about 4,000 such assignments, with a further 300 ongoing.

Bell, CEO of Accenture information management services, explained: "Our clients are grappling with information overload. To manage their businesses, interact with customers and make financial and operational decisions more efficiently and effectively, they must be able to maximise the use of all the data and content at their disposal. Our enhanced information management capabilities should help them do just that."

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3. LOGICACMG MAKES HEADWAY IN FIRST HALF

LogicaCMG hit the halfway mark of fiscal 2005 with order intake up 50% over last year and revenue growth of 11%.

In a trading update for the six months to 30 June, the company said its IT services business - which represents 86% of total revenue - was continuing to experience a "gradual recovery with strong order-taking in the first half". Order growth was driven primarily by outsourcing, including contracts with the Ministry of Defence, Energias de Portugal (EDP), Transport for London, the Metropolitan Police and Thames Water.

The UK performed well, despite pricing pressure in short-term time and materials projects. LogicaCMG said its wireless networks business also showed "solid performance" in the first half, underpinned by resilience in the SMS market.

Group chief executive Martin Read commented: "While the market recovery remains gradual and cost control is still the primary driver for our customers, we are beginning to benefit from our focus on growth. We continue to expand our outsourcing business, underpinned by delivery capability which is increasingly global."

Looking forward, full-year organic revenue growth (excluding Edinfor which joined the group in April), is expected to be at the top of LogicaCMG's indicated range of 4-5%, with overall performance expected to show a significant improvement over 2004.

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4. CAPGEMINI ADDS AGILITY TO WH SMITH

Capgemini has completed a £3.5 million systems upgrade at WH Smith News and secured a five-year outsourcing contract extension to support the new systems.

The 12-month systems upgrade was managed by Capgemini working in collaboration with hardware and software vendors IBM and EMC. The systems are due to go fully operational this month and are designed to accommodate rapid changes in patterns of retail distribution, the demands of different retailers and the tastes and preferences of readers.

WH Smith News, which is the UK's leading newspaper and magazine distributor, plans to use its new capabilities to offer IT services to its supply chain partners, including publishers and retailers, on an application service provider basis.

Richard Webb, IS director at WH Smith News, said: "Our new systems will give us the agility to support whatever innovations our management team decides to make in any part of the business. They will also enable us to accommodate any amount of external change in our markets and environment."

5. INDIA'S FINEST OFF TO FLYING START

Indian offshore services giants Tata Consultancy Services and Wipro have made a good start to fiscal 2005 on the basis of increased international business.

TCS finished the first quarter to 30 June with net profits rising 23% to 6.2 billion rupees (£82 million) on revenues up 27% on last year's comparable period at 27.1 billion rupees. International revenue rose 28% to 24 billion rupees.

TCS said it added 68 new clients in the quarter and 2,690 employees. For the full year, it expects to add 13,500 associates in India and a further 2,000 elsewhere. The company said: "TCS continues to drive along its high-growth path and there has been great traction for our IT, BPO and engineering services across geographies and industry verticals."

Wipro also fared well in international markets. Its net profit rose 31% to 4.3 billion rupees, on revenue up 29% at 22.9 billion rupees. Global IT services and product revenues rose 31% to 17.3 billion rupees on the strength of volume growth and improvements in price realisation.

The company's global IT services and products business added 29 new clients in the quarter, with Europe leading growth in terms of geographies.

Looking forward, Wipro chairman Azim Premji said: "Our unique strengths in the technology and enterprise domains, coupled with leadership in differentiated services, put us in a strong position to lead industry growth."

MCN DIRECT

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