MCN Direct Newswire

Vol. 5 No. 13, 8 May 2006

This issue is sponsored by:

InterSystems

This issue news

1. EDS shows signs of recovery
2. Small IT services players doing best, says Datamonitor
3. Capgemini pushes up revenue
4. Accenture hands systems back to Sainsbury's
5. CSC wins third term at BAE Systems
6. Further information - feedback/pass on to a colleague/remove from mailing list

Sponsor

InterSystems

Massimo Pezzini, Gartner presents at InterSystems UK Symposium in September
"Innovation…. at the centre of your organisation!"

If innovation is the key to competitive edge, then the challenge is to embrace continuous innovation and your IT must both support and enable that versatility. To find out how the latest Service Oriented Architectures (SOA) technology enables that versatility join Massimo Pezzini as he presents on 'Best Practices in Service Oriented Architecture Implementation - the Do's and the Don'ts'

PMP readers are entitled to a 10% discount if they register with the code "PMP01" - click here for full information.

1. EDS SHOWS SIGNS OF RECOVERY

EDS has reported gains in both its first-quarter profit and revenue, suggesting that the restructuring undertaken by the company over the past three years is beginning to bear fruit.

First-quarter net profit rose six-fold to $24 million (£13.2 million) from $4 million in last year's first quarter, on revenue up 10% at $5.1 billion. In its last financial year, EDS reported net profit down 5% on flat revenue figures.

Commenting on the first quarter, company chairman and CEO Mike Jordan said: "EDS posted solid financial performance in the quarter and continued to make progress on investment initiatives."

The company signed $10 billion worth of contracts in the quarter, up 45% on last year, and said its second quarter started well with contracts including a $1.7 billion IT infrastructure services agreement with Kraft Foods. Under the terms of this contract, 670 Kraft employees globally will transfer to EDS, with EDS taking responsibility for the company's IT infrastructure and services, and working with its Agility Alliance partners to develop a flexible platform for Kraft's business.

EDS said revenue across all its regions rose in Q1, with EMEA up 16% at $1.6 billion, the Americas up 3% at $2.3 billion and Asia-Pacific up 8% at $327 million.

Looking forward, the company forecast second-quarter revenue of $5-5.2 billion and full-year revenue of $20-20.5 billion.

2. SMALL IT SERVICES PLAYERS DOING BEST, SAYS DATAMONITOR

The world's 50 largest IT services firms booked combined revenue of $262 billion last year - but they grew more slowly than the overall market and the largest failed to match the pace of smaller offshore delivery firms and those focused on the lucrative US government market.

Figures from market analyst Datamonitor's annual ranking of the world's top 50 IT services firms show they grew sales by 1.9% in 2005 to a total of $262 billion - but this was below the 8% growth in the overall market for external IT services expenditure.

Datamonitor ranked the suppliers according to 'as reported' annual revenue figures and found little change at the top, with IBM, EDS, Fujitsu and Accenture heading the list. India's five largest players all moved up the league table, growing their combined sales by 35% to $9.3 billion.

The 10 fastest-growing IT services suppliers last year were Cognizant, Satyam, Patni, Tata Consultancy Services, Infosys, HCL and Wipro, all in the offshore delivery camp, and SRA, Caci and Saic, all focused on the US central government and defence sector.

Datamonitor estimated the size of the global IT services market in 2005 at $513 billion, meaning the 50 largest vendors claimed a 51% market share - IBM Global Services, the largest vendor, accounted for 9%.

Nick Mayes, principal analyst for global computing services at Datamonitor, said: "The game has changed for many of the traditional powerhouses in the IT services market. Pricing pressure is sweeping through infrastructure and application services, and clients are opting for smaller outsourcing engagements rather than mega deals. Bigger suppliers are becoming increasingly reliant on M&A activity to improve their top-line growth."

3. CAPGEMINI PUSHES UP REVENUE

Capgemini has increased its first-quarter revenue by 10% to €1.9 billion (£1.3 billion), prompting an upward revision of the company's full-year revenue forecasts.

Capgemini said revenue from its consulting business rose 8% on last year's comparable period, building on momentum begun in the final quarter of 2005. Outsourcing rose 9%, technology services climbed 10% and local professional services rose 13%.

On a regional basis, Europe was the strongest performer, turning in a revenue rise of 13%. In North America - an area that has long been a trouble spot for Capgemini - revenue from consulting, technology and local professional services rose 6%, but this was not enough to compensate for outsourcing contracts cancelled as a result of the company's outsourcing margin improvement programme.

On a more positive note, Capgemini said bookings in the first quarter of €3 billion were more than double those in last year's first quarter. The bookings included a large outsourcing contract with General Motors in the US, as well as an extension to the company's Aspire contract with HM Revenue & Customs in the UK. Consulting and technology bookings were also up, particularly in North America, where they showed a 27% gain on last year's first quarter.

4. ACCENTURE HANDS SYSTEMS BACK TO SAINSBURY'S

Accenture has returned IT infrastructure, services and employees outsourced in a £1.7 billion deal with Sainsbury's back to the retailer. The companies signed a 10-year outsourcing deal in December 2000 and transferred 800 staff from Sainsbury's to Accenture - but Sainsbury's decided to terminate the arrangement and take IT back inhouse last October.

Some 470 Accenture staff have now moved back into Sainsbury's, along with all assets and third-party contracts.

Sainsbury's will take an exceptional cost of about £65 million as a result of the termination, but expects future savings will allow these costs to be paid back in less than two years. Accenture does not expect the transition to have a negative impact on its results in fiscal 2006.

While the companies' mega outsourcing deal has been terminated, Sainsbury's and Accenture will continue to work together to develop some of the retailer's IT systems and provide online services.

5. CSC WINS THIRD TERM AT BAE SYSTEMS

CSC has signed a $1.9 billion (£1 billion) IT outsourcing services deal with BAE Systems, the third renewal of an agreement first signed in 1994. The contract replaces a deal that would have expired this October and will run for five years, with CSC taking responsibility for IT operations at a number of BAE Systems businesses.

The companies' relationship dates back 12 years, when BAE Systems and CSC signed a $1.5 billion, 10-year IT outsourcing deal in the UK - then one of the largest commercial IT outsourcing contracts awarded to a single European supplier. This contract was expanded to cover mergers and acquisitions in the UK and US, leading to a second agreement under which CSC provides IT services to support 13 BAE Systems businesses and joint ventures in the UK and North America.

Commenting on the contract, BAE Systems programme director Steve Barrett said: "Since 1994, BAE Systems and CSC have worked together to respond to technology changes in the IT arena. This new, next-generation outsourcing contract delivers flexibility, improved service and savings that BAE Systems businesses need."

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 wish to unsubscribe please reply/send an email stating 'Remove !*FIELD1*! from MCNDirect' to: mcndirect@pmp.co.uk.

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

Publications include:
Management Consultants' News
Industry Reports

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