NelsonHall recently attended a Unisys analyst and advisor day in London. The tagline for the UnisysNOW event was Securing Your Tomorrow, with security taking a central role in the firm’s corporate transformation, along with a vertical-led go-to-market strategy, and analytics. Here I take a look at Unisys’ transformation to date, and at its future strategic direction.

Unisys financial performance

Unisys has undergone a number of turnaround programs over the last ten years; its last CEO refreshed leadership, sales, delayered the organization, simplified the portfolio, and reduced the expense structure. There has been a major reduction in the global field-force, with NelsonHall estimating this has almost halved over recent years to ~4k personnel.

The current CEO Peter Altabef, who joined in January 2015, has reorganized Unisys to a vertical-led go to market organization, and introduced a stronger focus on industry IP, supported by globally integrated delivery teams. In April 2015, the company introduced a further cost reduction plan to drive a more competitive cost structure and rebalance its global skill set. This achieved $205m in annualized cost savings exiting 2016, above its original plan of $200m.

Unisys’ revenues in 2016 were $2.82bn, a CC decline of 4.4%, at the upper end of guidance, and non-GAAP operating margin was 7.7%. However, the Services business (~85% of overall revenues) has recorded revenue decline for the last three years. The ongoing focus is to improve margins of Services and overall business through operational efficiencies, improvements to WC and FCF.

However, margin expansion at corporate level is dependent on Technology revenue and ClearPath licenses which tend to be lumpy on a quarter basis. Unisys also has a major challenge over the next few years with its underfunded U.S. DB plan.

Leadership and salesforce refresh

Altabef has built an entirely new senior leadership team, with hires from the likes of Accenture, IBM, Capgemini and Dell Services, bringing in outside experience and helping evolve the Unisys culture, and over a quarter of the company’s client execs have been replaced. There is a stronger focus on proactive proposals.

Looking to demonstrate its innovation capabilities with clients, Unisys has launched a dedicated center in its Virginia HQ for exec briefings about new services. Of the first six exec briefings, four were with clients in Australia.

Consultative-led sales approach

Unisys is also looking to significantly ramp-up its consulting and consultative-led sales engagements (advisory & project work). It has launched a new sales enhancement training program focusing on advisory and consulting skills across the firm, and has also hired 54 domain experts.

The aim is to drive outcome-based client conversations, focusing on business issues, with a drive to increase overall client satisfaction.

It has also introduced a new compensation plan, where a third of account executive compensation is now tied directly to client NPS scores.

Vertical-led go-to-market strategy, leveraging IP to target market opportunities

Unisys has aligned its sales executives to four verticals: Public Sector, Travel & Transportation, Life Sciences & Healthcare, and Financial Services. These are supported by 36 vertical-specific solutions and services such as Digital Investigator (an upgraded version of U-LEAF, Unisys Law Enforcement Application Framework) in the public sector, Pharma Track & Trace in life sciences, and Elevate by Unisys in financial services.

Unisys has deployments of Digital Investigator across EMEA, the Caribbean and Australia. Unisys is likely to see further expansion of its Law Enforcement and Border Protection capabilities across EMEA, in particular U.K. (post Brexit); there may also be opportunities in the U.S.

Elevate by Unisys, its omni-channel digital banking platform, has built-in biometrics and is offered as-a-Service (via public or private cloud) or as an on-premise solution. Launched in Q1 2017, it is being targeted at tier 2 banks in EMEA first and then in APAC and LATAM.

Reinforced by security

As highlighted by the tagline, a key focus of Unisys continues to be security, in particular the Unisys Stealth assets. Altabef highlighted that “(we) don’t enter every conversation with Stealth, (we) enter with the offering and what security makes sense in the context of the offering”.

Unisys has evolved Stealth from dedicated on-premise software, and it is now available on AWS and Azure. Stealth functionality now includes Stealth(mobile), Stealth(cloud), Stealth(identity), Stealth(analytics). The recently launched Stealth(aware) automates the implementation of Stealth. Stealth revenues are still relatively small (NelsonHall estimated revenue of ~$12m in 2016), but now has a dedicated sales team.

Unisys also highlighted its plans for ClearPath Forward, including the ability to deploy ClearPath Forward in hybrid cloud environments by 2020.

Improving the Services business

Unisys is looking to increase its use of automation and AI across EUC, infrastructure managed services, and application services. Initiatives currently underway in support of this include:

• Within C&IS, Unisys is expanding automation with toolsets including VantagePoint and ServiceNow, driving more self-help, and also the use of Tech Cafes. Unisys cited an example within infrastructure support, where it currently deals with ~16k tickets per month, and is looking to automate 75-80% of these tickets
• In application services, Unisys is looking to grow its transformational consulting capabilities, next-generation ADM and DevOps capabilities. It has made a number of recent hires (agile transformation leads). As well as increasing automation, including the use of virtual agents and chatbots in service delivery, it is also leveraging analytics within application maintenance.

Unisys is also seeking to further leverage its advanced data analytics capabilities, which are currently focused on its main client, the Department of Homeland Security, where it claims to have ~300 personnel running >700k predictive models daily to identify threat. Unisys plans to ramp up its capabilities in advanced data analytics, and is hiring a number of data scientists and consultants.

Summary

Unisys continues on its corporate transformation, and has selected security, industry-specific IP and analytics as focus areas for growth. The transition to a consultative and advisory led sales culture; and ramping up on domain experts across industries will take time.

Altabef highlighted EMEA (~27% of 2016 revenues) as a region of focus, and this has been evidenced with a number of recent senior hires in the EMEA region. Restructuring continues in EMEA: the divestment last year of its Italian SAP practice helped to improve EMEA operating margin.

The early signs are that Unisys continues to improve its overall financial stability.

In the near to mid-term, improving margins of the Services business will continue to be a priority for the company.

NelsonHall has recently published an updated Key Vendor Assessment on Unisys, providing a comprehensive and objective analysis of Unisys’ IT and business process services offerings, capabilities, and market and financial strength. NelsonHall also produces Quarterly Updates on Unisys in its Quarterly Vendor Update program. For details, contact [email protected].