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Atos Gets Into Health in the U.S. with Anthelio

 

Atos (which some years ago was at risk of itself being consolidated), is today one of the more effective consolidators in the IT services industry, with impressive experience of taking on challenging low-margin (or loss-making) businesses and turning them around in super quick time.

Last week, just 14 months after its acquisition of the IT outsourcing business of Xerox Corp, Atos completed its acquisition of another company in the U.S. Unlike some of Atos’ other acquisitions in recent years, Anthelio Healthcare is a business that is both profitable and growing (8% in 2015). We spoke with Michel-Alain Proch, CEO of Atos’ North American Operations, to learn more about his plans for Atos’ newly formed healthcare practice in the U.S.

Immediate priorities following the acquisition of Xerox ITO were clearly realizing the anticipated revenue and cost synergies. Then earlier this year, with North America back to organic growth (following ramp downs at McGraw-Hill Education and MetLife), Atos began a new work stream to further expand its profile in the U.S., targeting specific verticals: healthcare, retail/consumer goods, hospitality, and manufacturing.

With Xerox ITO, Atos had gained a $250m U.S. healthcare business, primarily in the provider segment, serving clients like Queens Medical Center and the Rehabilitation Hospital of the Pacific in Hawaii, UMass Memorial Healthcare, and Harden Healthcare. Anthelio adds $200m in annual revenue, and a healthcare payer client base. Its largest client McLaren (~50% of its revenues) signed a five-year renewal before the acquisition. Other key clients include LHP Hospital Group. The revenue split is roughly $130m ITO and $70m revenue cycle management services (RCM, boosted by its 2015 acquisition of Pyramid Healthcare Solutions).

Atos has committed that its U.S. healthcare practice, headed by former Anthelio CEO Asif Ahmad and with 2016 revenues of ~$450m, will be delivering double-digit growth within 24 months - a target of ~$50m incremental revenue by 2018. The immediate opportunities over this period will be cross-selling (infrastructure) managed services into the Anthelio client base, and Anthelio RCM offerings to legacy Xerox ITO clients. Atos also intends to invest in automation in revenue cycle services, in particular in further automating medical coding, which remains heavily manual.

Over the next three months, Atos will be formalizing its strategy for further expansion in the U.S. healthcare sector: the clear opportunities include supporting healthcare providers in their infrastructure transformation to hybrid cloud environments: see our blog about Atos’ ‘Digital EDGE’ (Engineer, Design, Gather, Enhance) approach in its MS business here. Significant client references in the U.S. are Monsanto and Texas DIR (with another win being announced in the next few weeks). Will we also see a ‘Digital Edge’ infrastructure transformation client reference in the healthcare provider industry in the next two years?

Atos currently has ~9k employees in the U.S. Anthelio will add a further 1.3k (plus 400 employees in Hyderabad). In December, Atos is opening a new site in Irving, near Dallas, which will become a regional headquarters. As well as providing office facilities for ~1,000 locally-based employees (around 100 from Anthelio and 900 from Atos), the 100,000 sq. ft. site will also open as a BTIC (Business Technology and Innovation Center) showcase in 2017.

Atos’ ambitions to further grow its business in the U.S. are likely to be supported by further inorganic investments, including possibly ones that strengthen its SI capabilities in its target industries: a healthcare specialist would seem to be likely. Demand for IT and BPO services will continue to enjoy healthy growth in the U.S. healthcare provider sector, and it is a sector where the supplier landscape remains fragmented.

We will know more about Atos next three-year strategic plan after its analyst day in November. We would expect something akin to the MS articulation of the  'EDGE' approach to transforming clients’ application landscapes feature highly in the strategic vision for its C&SI business. We also expect to see targeted improvements to C&SI topline growth and operating margin be a major contributor to overall group targets in the plan.

And will we at some point see partnerships with Conduent (the new name for the Xerox Services business) targeted at this sector?

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