Saturday, 31 March 2012

Traditional system integrators 2004-2011 financials

Traditionally, 31st of March is the date that all my favourite system integrators (SI) have released their annual report for the previous year.
Oddly, however, I've seen some strange changes this year - for the first time. I could -and will- even say that traditions have been broken with

I had to look hard and deep to find Logica's annual report, which was hidden somewhere between the press releases, and on their site there still is the 2010 annual report prominently filling up the entire space - not the 2011 one. Secondly, it's in landscape, and looks like a Powerpoint presentation. Odd? Wait

Capgemini's annual report has the same layout. Don't click the 2011 Results link there, you'll download a 0 kb PDF. Sloppy? I couldn't possibly comment...Instead, go to Presentations and click the 2011 Full Year results link. As Capgemini doesn't show average headcount anymore, I guesstimated theirs by taking the BOY and EOY headcount and divide the difference by two

Logica's as well as Capgemini's report were extremely less informative than they used to be, and is Logica still spending money on R&D? I haven't found any evidence for that, but just left it at its old value - might update this post in the coming days.

Here's the interesting part: relative figures, where I take the headcount and divide revenue and profit (all operating profit, by the way, before interest, taxes and whatnot):

As you can see, it's all good in the SI industry, looking at headcount. However, this is deceiving: most of these new recruits are in Asia Pacific and attrition has been rough. Logica scored a mere 13%, but Capgemini managed e.g. 18%. Of the 32,000 new hires in Capgemini, half of them are offshore. I will write another blog post about what I call the long tail of SI: the Indian connection

  • Looking at relative performance however, only one stands out: Accenture. Where it took a serious in 2010 (finally, one would almost add), it is now slowly making more revenue and profit is better than in 2009. It still continues to make 120% more revenue and profit than the others combined on a like-for-like basis
  • Atos Origin has taken a nose-dive, with losing double-digit on revenue per employee. However, it magically has managed to cut cost at the same time, and 'only' lost 20% on profit. Twenty percent is a lot, of course, but if you lose 12,000 euro per employee in revenue and only 1,200 in profit, that's not too bad
  • Logica continues to bleed very, very hard, after the mysterious upsurge last year. I wouldn't be surprised if they file for bankrupcy sometime soon - an operating profit of 1,300 pounds (say 1,500 euro) per employee doesn't leave much room for pay raise, education, etc. One could argue that these have already been deducted but I know what happens in bad times: those get frozen stiff
  • Capgemini shows a magical turnaround. It consolidates last year's profit increase, while making even less revenue. Please note: this revenue lies almost 10 percent below Atos's and Logica's

The verdict? Atos and Capgemini will probably fight over buying Logica, and the French pride will cost he who wins dearly - that's my gut feeling based on absolutely no inside knowledge at all.

Other than that, if you look at 2007 (pre-crisis, shall we say?) then Logica is the odd one out, and Capgemini still recuperating

Will the system integrator survive? I don't see much of a business case for their business model in the remaining years of this decade. On the other hand, these four companies are still feeding half a million mouths, and probably well over a million if they have a partner and kids. They are cutting cost hard everywhere, and as usual the employee is at the end of that - while being squeezed by his government in his or her private life as well

All in all, 2012 will be a decisive year for one or two on this list, I think. let's meet again in exactly one year from now?

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