Summary:

• While 2014 was a “transformational year” for Atos MS and Worldline businesses, Atos’ C&SI business has also been reinventing itself. 2014 saw good progress against nearly all of the unit’s three year financial targets
• Atos C&SI has been making substantial investments to strengthen its capabilities to support clients in their digital transformation agendas, with a revamped portfolio that increasingly has vertical flavors
• The articulation of four Customer Transformation Challenges (CTCS), the creation of the new Atos Digital unit, and “innovation workshops” are key developments in Atos’ work to position as a “partner of choice and trusted advisor” to support clients in their digital transformation.

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In April, NelsonHall attended an Atos analyst day which focused primarily on its Consulting and Systems unit, a €3.4bn business, accounting for 39% of Atos global revenues

• A year ago, we wrote about how Atos was making a “bold move” in the reorganizing of its Consulting and Systems units into a single organization and was preparing for the next stage of its evolution (see here).
• In a separate note, we also suggested that in its MS unit, acquisition to bring in infrastructure management capabilities in the U.S. was likely (see here).

2014 was what its management calls a “transformational year” for Atos, with three transactions started or finalized during the year:

1. The announcement at the end of the year of its agreed acquisition of Xerox ITO, which will expand its MS foothold in the important U.S. market (see our blog here)
2. The acquisition of Bull, also expanding its capabilities in MS and in cloud
3. The spin-off of Worldline, providing it with necessary strategic flexibility (see here).

Atos’ C&SI business was also busy, quietly reinventing itself while it pursues its three year (2014-2016) targets. C&SI head Francis Meston highlighted the progress that was made in 2014 against a number of these targets, including in:

• Revenue growth (+8.5%, but down 1.5% organic)
• Operating margin improvement (up from 6.5% in 2013 to 7.4%)
• CSAT and NPS scores:  achieving in particular a huge improvement in the NPS scores in H2 2014
• Global delivery (steady progress, but still some way to go in order to reach the 50%+ offshore ratio target for 2016.

Atos C&SI has also been making substantial investments to strengthen its capabilities to support clients in their digital transformation agendas, with a revamped portfolio that increasingly has vertical flavors. It also continues to work on enhancing customer intimacy and its ability to cross-sell.

These initiatives are causing some major shifts, both in portfolio and in go-to-market.

Increased Emphasis on Digital Across Atos

As part of a much stronger corporate focus on digital, Atos C&SI has redesigned its portfolio with offerings to support clients address their digital agendas. Atos C&SI now includes:

• Atos Consulting, whose offerings now include digital transformation consulting
• Atos Digital, a new unit set up in January this year with about 100 consultants; offers services in areas such as digital commerce and mobility, embedded software, CX solutions, big data & analytics, connected universe solutions
• Enterprise application services
• Application development and support services: Atos has been beefing up its DevOps capabilities, and claims it has 5,000 engineers trained on agile/DevOps.

With a stronger articulation on engaging with clients on their business priorities, Atos’ go to market approach to digital transformation centers on helping clients across four strands of what it calls ‘Customer Transformation Challenges’ (CTCs):

1. ‘Customer Experience’ (CX): personalized omni-channel interaction and integration; analysis and customer insight
2. ‘Trust & Compliance’: ensuring infrastructure, personnel and customers are secure and compliant
3. ‘Operational Excellence’
4. ‘Business Reinvention’: enhanced or new business models that take advantage of new digital networks.

There has been progress in matching the four CTC themes to industry challenges and priorities in each of Atos’ target verticals (Public & Health; Financial Services; Manufacturing, Retail & Transport (MRT); Telecoms, Media & Utilities; Energy & Utilities) - with CX, for example, connected living, connected health, connected citizen, connected car, omni-channel retail, etc.

Atos has been producing case studies of digital transformation achieved for clients across each of the four themes, all its target verticals, and spanning its portfolio. This work continues: expect to see more industry POCs and also further strengthening of vertical capabilities.

Reinforced capabilities in ‘Business Reinvention’ CTC theme

Recent investments that have strengthened existing or brought in new capabilities that support Atos’ offerings around the “Business Reinvention” CTC theme include:

• Cambridge Technology Partners, acquired last June brought in some personnel who have capabilities in digital marketing
• Business Technology Innovation Centers (BTICs), onshore in Paris, London, Madrid, Munich, Vienna, Utrecht and offshore in Pune
• Recruitment of onshore data scientists.

The “Business reinvention” theme refers to enhancing existing business models or introducing new ones that take advantage of digital technologies, data analytics and new digital networks to provide value in new ways and find new sources of revenue. The digital transformation consulting offerings from Atos Consulting vary from 20-day ‘digital discovery’ projects through to Proof of Concept projects (6-24 week duration) that are delivered by multi-function teams from across Atos.

Innovation Workshops

Another key strand in Atos’ approach to being able to support clients in their digital transformation is the “innovation workshop”, a high-level event at a BTIC attended by C-level execs from both the client and Atos with an agenda that looks at the client’s specific future challenges. With this approach, there is a clear drive by Atos to:

• Demonstrate to the client a deep understanding of their company specifically and of the challenges/ opportunities for their industry
• Convince the client of its capabilities around innovation
• Identify business opportunities with the client
• Subsequently deliver results fast through POCs or pilots.

Atos conducted 123 innovation workshops in total in 2014, including multiple workshops with strategic accounts such as Siemens, Airbus and ING. The top five innovation topics, reflecting the high proportion of workshops with MRT sector clients, were

• Economy of data
• Connected customer
• Smart mobility
• Industry 4.0
• Augmented reality.

These workshops are serving to strengthen Atos’ relationships in the account with key decision makers beyond its normal CIO relationship: this is particularly useful for MS accounts, and position Atos as an innovative partner. And of course, they also help build the pipeline.

Client Intimacy

Across its largest 150 accounts (which together account for 50% of total revenue), 70% engage with Atos for one service line only. While this might be regarded as surprising for an IT services provider with business consulting capabilities, it perhaps reflects that Atos has been a siloed organization. Bringing together consulting and SI into the one unit should assist in cross-selling, at least across C&SI.  Adding Bull and Xerox this year should also help in the ability to cross-sell.

Initiatives to improve client intimacy and increase the level of cross-selling include expanding the client executive role for major accounts. The client exec is responsible for a three-year plan for the account involving all of Atos and is now incentivized on cross-selling.

Co-innovation through digital POCs is also a key aspect of Atos’ focus on strengthening client intimacy.

Atos is certainly doing something to improve CSAT: there has been a huge improvement in NPS scores since 2013, which H2 2014 reached a level both ahead and above the 2016 target.

Talent Management

Atos C&SI also shared some aspects of how it is aligning its HR management to the digital agenda, in terms of:

• Workforce management
• Talent development, including a program of external certifications in areas such as agile/SCRUM, DevOps, S4HANA, SFDC, etc.
• Global delivery resourcing.

To date, few onshore-centric vendors have been as open about their approach to the critical aspect of skills development and workforce management.

All IT services vendors (that have application services in their portfolio) today are emphasizing ‘digital’ in their offerings. Some have been acquiring to gain new capabilities, for example around digital marketing; others appear to be doing little more than applying a touch of lipstick to their current portfolio. Atos may have been a little late in highlighting its capabilities around digital, but it is doing so wholeheartedly across all its SBUs. The creation of an integrated C&SI unit has been an enabler in portfolio development. So far, development has been organic - any acquisition activity is likely to be small and bolt-on. Expect to see production of more industry use cases around the four CTCs.

Finally, its partnership with Siemens, with whom Atos has been jointly developing an Industrial Data Analytics (IDA) platform, has the potential to position Atos very strongly for future managed services opportunities around clients’ IoT initiatives.