CGEYOutsourcingChiefTargetsEDSClients.707words10April2003ComputerWireNewsEnglish(c)2003ComputerWire.Nottobereproducedinwholeorinpartwithoutwrittenpermission.Europe'slargestindigenousITservicesproviderCapGeminiErnst&Youngisaimingforstronggrowthinitsoutsourcingoperationbydramaticallybuildingitsoffshorearm,targetingnewbusinessinapplicationsmanagementandBPO,andtargetingtheclientsofrivalEDSCorp.HubertGiraud,globalheadofParis,France-basedCGE&Y'soutsourcingpracticewhichlaunchedofficiallyinJanuary2003,toldComputerWire:"Weplantogrowouroutsourcingservicestobetween40%and45%ofrevenueoverthenexttwotothreeyears,upfromitscurrentlevelof27%."GiraudsaidthatCGEYisbuildinganewmodelofonsite,near-shoreandoffshoresoftwareandservicesdeliverycapabilities.Traditionally,thecompanyhasworkedthroughprovidingconsultingandsystemsintegrationservicesonsiteatitsclients'locationsinWesternmarkets.Buttotakeadvantageofthecostadvantagesofmovingdevelopmentworktolessexpensivelocations,thecompanyhassetupnear-shoredevelopmentsitesinBarcelonaandMadridinSpain,aswellasanoffshoresiteinMumbai,India.InMumbai,CGE&Ycurrentlyemploys600engineersanddevelopers,workingonsome40projectsforexistingWesternclients.ThisincludesdevelopmentworkaroundERP,SiebelCRM,applicationmanagement,infrastructuremanagement,andnineSAPprojects.SalilParekh,COOforAsiaPacificsaidthecompanyislookingtoincreasethepercentageofworkdoneoffshoretoasmuchas60%ofanentireprojectfrombetween30%and35%currently.Headded:"Bytheendof2003,weaimtohavegrownheadcountinIndiatobetween1,500and2,000peopleorganically,andexpecttocontinuethisgrowthin2004.InParis,boardmembersarealsolookingintothepossibilityofacquisitionsinthemarket."CGE&Yclaimstobethemarketleaderinapplicationsmanagement,whichinvolvesthedevelopmentandsupportofthird-partyapplications.MostrecentlyinMarch2003thecompanysignedamajor$500msubcontractwithIBMGlobalServicesonits$2bnoutsourcingcontractwithautomotivepartsmanufacturerVisteon.Despitethis,thecompanyfacesclosecompetitionfromEDS,whichbasedonresearchfromIDCalsoclaimstobethemarketleaderinapplicationmanagement,withan18%shareofthe$11.1bnmarket.Meanwhile,CGE&Yestimatesithasa6.7%shareofanestimated$13bnmarket.CGEYisalsotargetingpotentialopportunitiesarisingduetotherecenttroublesatEDS,whichsawCEODickBrownresignlastmonthfollowingaseriesofprofitwarningsatthecompany.ItalsosawitscreditratingslashedandbecamethesubjectofaSecuritiesandExchangeCommissioninvestigation.KevinTomlinson,headofoutsourcingforCGE&YintheUKsaid:"WeknowthatEDShasalotofrenewalscomingupinthenexttwoyearsintheUKandcustomersarealreadyaskingquestions."Businessprocessoutsourcing(BPO)isanothertargetareaforCGE&Y,andhereGiraudclaimsthecompanywonthelargestprojectinthemarketin2002,valuedatCAD1bn($642m)toprovidehumanresources,transactionprocessing,supplychainmanagementservicesforCanadianutilityHydroOne.Morethan900employeeswillmovefromHydroOnetoCGEY-ownedvehicleInergi,whilethecustomerservicesoperationsaremanagedbyUK-basedBPOoperationVertexundersubcontractfromInergi.ItwasinterestingthatCGEYhastosharethebootywithVertex,whichwassetupin1996byparentcompanyUnitedUtilitiesbutthenacquiredCap'sbusinessprocessoutsourcingpracticeinFebruary2001.CGEYsoldupatatimewhenitwasbuildingupitshigh-endconsultingoperationthroughtheacquisitionofErnst&YoungConsulting.Itmustnowwishthatitkeptholdofthedivision,withconsultingspendfrozenandoutsourcingservicesemergingastheoneareaofITservicesspendtoshowresistancetothegeneralslowdown.Vertex'srevenuehasgrownataCAGRof20%duringthelastthreeyears,anditplanstogrowitsoperatingprofitmarginfrom5.5%lastyeartobetween7%and8%incomingyears.Cap'sownoperatingprofitmarginshrankto1.6%in2002from5%inthepreviousyear.Documentcomwir0020030410dz4a0000n©2003DowJonesReutersBusinessInteractiveLLC(tradingasFactiva).Allrightsreserved.
