MCN Direct Newswire

Vol. 4 No. 3, 28 February 2005

This issue is sponsored by:

TeleWare and The Evaluation Centre

This issue news

1. Capgemini down but not out
2. IBM accelerates with £50m AA deal
3. Accenture creates new BPO leader
4. Capita announces record results
5. Morse makes slow progress
6. Further information - feedback/pass on to a colleague/remove from mailing list

Sponsor

TeleWare

What Gives a IT/Telecom Managers Sleepless Nights?

In a world of constant change, technology often provides an IT/Telecom manager with as many headaches as solutions. Some questions we believe Telecom managers are asking today:

- Can I change my infrastructure without having to change my applications?
- Is my telephony system meeting business needs and board expectations?
- How can I keep costs under control and still have the best?
- Another merger or acquisition, another PBX! How do I make this easier to handle?

For answers to these and other questions: Click here.

Register for the TeleWare consultants programme: Click here.

1. CAPGEMINI DOWN BUT NOT OUT

Capgemini has turned in a dismal set of financial results for 2004, but promises a "significant improvement" in European profitability in 2005 and to break-even in its troubled North American operations.

Net losses increased from €197 million (£136.7 million) in 2003 to €359 million in 2004, including restructuring costs of €330 million and an exceptional tax charge of €125 million.

Operating profit dropped from €155 million in 2003 to €58 million, while revenue rose 9.4% to €6.3 billion.

The results reflect the company's continuing struggle to improve profitability since the merger of Capgemini and Ernst & Young's consulting business in 2000, just ahead of the IT market downturn.

Commenting on the poor margin in 2004, Capgemini said the first half of the year marked the low point of the past three years with a margin of -0.7%, while the second half showed a margin of 2.4%. It said 2004 was a year of transition and did not reflect the effects of stabilisation in price or improved utilisation rates the company has seen since last September, or the drastic measures taken to improve the cost base.

Pitching another positive point, Capgemini said: "2004 marked the turning point in the recent history of the group as it implemented its strategy to rebalance its business portfolio."

Outsourcing accounted for 33% of total business over the year, an increase of 21% on 2003. Capgemini also claimed activity in 2004 "confirmed its breakthrough into the dynamic transformation outsourcing arena" as well as its strength in business process outsourcing.

While far adrift of Accenture's performance in business transformation, Capgemini said: "The group's ability to provide execution in consulting, technology and systems integration at a global level has become a trump card whenever transformation is central to clients' needs."

Capgemini is forecasting 2005 group revenues up around 10% and an operating margin showing "a marked improvement" over the 2.4% achieved in the second half of 2004.

2. IBM ACCELERATES WITH £50M AA DEAL

IBM Global Services has secured a £40-50 million, seven-year contract with the Automobile Association to transform the motoring organisation's IT services to a flexible on-demand model.

The AA's need for IT infrastructure services became crucial after it was bought from Centrica by two private equity firms last September. IBM will take over a number of AA IT systems as well as 40-50 AA staff. It will then take responsibility for the provision of IT services from the end of April and work with the motoring organisation towards a managed, on-demand service.

Commenting on the contract, AA chief executive Tim Parker said: "We are confident that IBM's unique combination of excellent people, innovation in technology and tried-and-tested processes will help us meet our strategic objectives and ensure that our IT systems support our plans for growth."

Sponsor

The Evaluation Centre

VISIT THE NO.1 GUIDE TO SOFTWARE, SERVICES & TECHNOLOGY

Click here

A NEW PMP SERVICE FOR CONSULTANTS AND SYSTEM INTEGRATORS

3. ACCENTURE CREATES NEW BPO LEADER

Accenture has strengthened the management of its business process outsourcing (BPO) business with the appointment of Kevin Campbell to the new post of global managing director of BPO.

Campbell rejoins Accenture after leaving in 1999 to become president and CEO of outsourcing specialist Exult. Following the merger of Hewitt Associates and Exult, Campbell became market strategy and development leader of Hewitt's HR outsourcing business.

In his previous role at Accenture, Campbell was partner in charge of outsourcing for the resources operating group, where he helped pioneer the firm's BPO activities.

Commenting on the appointment, Accenture CEO William Green said: "Kevin's return to Accenture reflects our deep commitment to building a BPO capability that is second to none in the industry."

Campbell will take operational and client management responsibility for Accenture's cross-industry BPO businesses, including finance solutions, learning and procurement solutions. He will also lead its industry-specific BPO businesses, such as insurance services.

He will report to Joellin Comerford, Accenture group chief executive of outsourcing and BPO, who will retain responsibility for the company's HR services.

4. CAPITA ANNOUNCES RECORD RESULTS

IT and business services firm Capita has returned record results for its 16th consecutive year as a public company.

The UK market leader in business process outsourcing grew business across its eight chosen market sectors by 19% to reach total revenue of £1.3 billion in 2004. Pre-tax profit rose 22% to £148.2 million, pushing margins up from 12.2% in 2003 to 12.5%.

While organic growth led the way in 2004, Capita continued its policy of "cautious and selective" acquisitions, investing a total of £47.6 million in seven transactions. Noting the current pricing environment, the company said further acquisition activity will be relatively low in the coming year.

Executive chairman Rod Aldridge commented: "Capita has again returned record results and we are well placed to make continued progress in 2005. Existing revenues are strongly underpinned, the sales pipeline is at a record level and the group is trading strongly."

Potential work includes an option held by Transport for London to extend its congestion charging contract with Capita for an additional year to February 2009. This would generate additional revenue of about £38 million for Capita.

5. MORSE MAKES SLOW PROGRESS

Morse is making slow progress in its efforts to change from a pure reseller to a profitable consulting, technology and support company and has yet to maximise last August's acquisition of SAP specialist Diagonal.

Reporting its interim results for the six months to 31 December, Morse said 41% of sales and 54% of gross profit were generated from services, up from 8% and 11% respectively when the company listed in 1999.

But the group remains in the red, with post-tax losses widening from £6.8 million last year to £7.6 million. Total turnover for the six months rose 16% to £216.6 million - including an £18 million contribution from Diagonal - with operating profit up £1 million to £4 million.

Despite the losses, Morse executives remain confident they can remould the company and build a profitable business. Chief executive Duncan McIntyre said: "The process of changing the profile of Morse has been an evolutionary rather than an overnight one. Nevertheless, by proceeding with caution over the past five years, we have avoided paying inflated prices for assets and have maintained a strong balance sheet.

"We are confident that, given current trading conditions and with our portfolio of solutions to build upon, the group can look forward to accelerated development in the second half of this year and we are targeting increased gross margins and profitability over the coming years."

With a cash balance of £39 million, Morse is believed to be considering further acquisitions and has its sights set on building a solutions-based business that will account for 70-80% of profits.

6. FURTHER INFORMATION - FEEDBACK/PASS ON TO A COLLEAGUE/REMOVE

• For more information or if you have any feedback on MCN Direct, please email editor@pmp.co.uk
• If you no longer wish to receive MCN Direct, simply send a reply to mcndirect@pmp.co.uk. In the BODY of the message please type MCN DIRECT REMOVE.

Please visit http://www.pmp.co.uk to view any of these publications, all of which are fully searchable and represent thousands of pages of information relevant to the consultant community.

Publications include:
Management Consultants' News
Consultants' Advisory
International Consultants' Guide
International Consultants' News

Written by Sarah Underwood. Copyright 2012 PMP (UK) Ltd.