Capgemini’s Q3 2013 results marked a milestone: North America overtook France as the company’s largest region, contributing ~21% of its total revenues. If we go back a few years, North America was the company’s most troubled region. But over the last two years, it has been one of Capgemini’s fastest growing regions. The company has ambitious plans to grow its North America business more aggressively over the next five years. At a U.S. analyst event in Washington this week, Capgemini management discussed how it is restructuring North American organization and focusing its offerings in support of these plans, and shared a target for North America to reach 30-35% of global revenues and also be a center of innovation for the group.

Go to Market by Vertical

Capgemini North America is transitioning its client-facing organization from being service-line led (consulting, application management, BPO) to being industry-led. Financial services is already a standalone vertical in Capgemini North America, with several service lines under its umbrella. Six other verticals (Retail/CPG, Telecoms, Manufacturing, Energy, Government, Hi-Tech) currently share horizontal service lines. The intention is that all verticals will become standalone over time. Telecoms & Media, a sector advanced in digital transformation, is likely to go first.

The sales approach is changing to rely not only on RFP-led opportunities, but to also focus more on upsell demand generation within the client base. Capgemini is expanding its North American sales team and building four key roles in the sales organization:

• Business development
• Sales: pursue warm sales leads from advisers, consultants, and industry sources
• Account development: assigned one or more existing clients to work with the relationship manager and identify and pursue other opportunities within the client
• Sector development executive: pursues industry-specific opportunities.

Portfolio Development:

Capgemini North America has also been undergoing a portfolio rationalization initiative to focus on high growth opportunities where it can be a major competitor. 

In the past Capgemini North America pursued a “string of pearls” strategy for portfolio development, pursuing high margin businesses, with less regard to growth potential. Today, it is focused strategy on offerings that have all the following characteristics:

• High growth potential
• Scale: big enough to be a significant contributor to overall revenue growth
• Differentiation: where Capgemini can be a market leader with an offering

Examples of offerings, some still under development, include:

• Service aggregator: managing multiple vendors for a client (e.g., State of Texas)
• Brazilian tax management (see our blog on Capgemini’s BPO business in Brazil, which discusses this new offering)
• Sales support for financial services clients: two solutions; preconfigured customer analytics and sales stations
• ‘Elastic analytics’: leveraging the Amazon cloud to deliver business analytics
• Digital distribution of movies and media
• Software testing priced on a transaction basis (using Test Case Point). Capgemini has established a presence for software testing in the U.S. in the financial services (via Kanbay) and government sectors, where it has won very large contracts with the Department of Agriculture and U.S. Army
• Mobile app testing.

Capgemini is also partnering with ISVs to expand its IP-led offerings, for example a partnership with Data Ventures. An ISV whose management has worked in advanced analytics at Los Alamos labs, Data Ventures is owned by a Coke bottler, who uses their capabilities for sales and marketing. Capgemini is using this partnership to expand its sales and marketing analytics capabilities.

Capgemini highlighted that 76% of companies it has surveyed list innovation as one of their top three strategic priorities, with North American organizations in particular moving from cost optimization initiatives to focus on innovation and growth. Capgemini is focusing on digital transformation engagements. In joint research with MIT it has mapped organizations within these categories

• Fashionistas, interested in innovation but not pulled together
• Digital Masters, in the vanguard, with innovative initiatives under way (media & telecom sector)
• Beginners, where management is still skeptical of innovation
• Conservatives, have large assets and see digital transformation as a strategic accelerator, but have concerns about investment, for example banking and mutual funds sectors.

In terms of target sectors, Capgemini is looking to build on its presence in North America in the manufacturing sector, a sector where it is already strong in Europe. Its offerings portfolio span planning, ERP, PLM and MES solutions, and Capgemini is also targeting opportunities that leverage big data, analytics & mobility.

In BPO, Capgemini is looking to build industry-specific offerings, expanding beyond its primarily F&A business.

North America has been one of Capgemini’s fastest growing regions since 2011. This reflects partly its renewed focus on the U.S. in recent years and partly a lack of growth in western Europe - like Atos, Capgemini has had to contend with a softer market in western Europe, and its U.K. business remains very dependent on one large outsource (the Aspire contract).

Looking ahead, the level of future growth in North America will depend on factors such as:

• Effectiveness of training employees for “everyone sells”, without everyone stepping on each other’s toes
• Acquiring a few key businesses to drive growth in certain markets, e.g., transaction banking and healthcare
• Its partnership initiatives, including recent cloud partnerships such as Skysight with Microsoft, storageaaS with EMC.

In BPO, growth of industry-specific offerings, particularly in financial services, will help boost growth. We expect to see some new BPO offerings (probably through acquisition) in transaction heavy segments, such as payments in banking and insurance policy processing, to support profitable growth.

Andy Efstathiou and Jessica Soler