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Computacenter Focused on Portfolio Consolidation & Geographic Expansion

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NelsonHall recently attended Computacenter’s analyst summit in Hamburg, Germany, its first such event since 2014. Key takeaways are that the company is now focusing on portfolio consolidation and workplace services opportunities for Win10 migration, and on geographic expansion, specifically in the U.S. and Germany.

Let's look at initiatives driving the evolution of Computacenter’s services business, which in 2017 generated revenues of £1.16bn, growing at 7.3% in CC.

Portfolio consolidation & services development

Computacenter is consolidating its portfolio around three core go-to-market propositions across geographies. The U.K. has traditionally been viewed as a workplace services market, with Germany being the market for data centers and networks, so this move is as much about changing that restricted mindset as anything.

The three go-to-market propositions are:

  • Digital Me – digital workplace
  • Digital Power – cloud, data center, networks
  • Digital Trust – security services.

This portfolio alignment will enable Computacenter to showcase its end-to-end capabilities across geographies. It has also invested in senior leadership hires and introduced two new functions to support the development of the services business, which also includes a ramp of Indian delivery resources.

It is also seeing strong adoption of Win10, an important growth area for the digital workplace, where it sees security as the main driver for adoption. These moves also align with the company’s top line growth drivers, which include digital workplace, cloud, networks, and security.

Services development

In line with CEO Mike Norris’s key focus on the development of the services business, it has made some recent senior hires to support this initiative, with Andy Stafford joining as COO (previously SVP, Services at Unisys), and Mo-Siddiqi recently re-joining the company to lead strategy. A key focus for Stafford will be the standardization of the group operating model, although it is likely local management will still retain levels of autonomy regarding go-to-market, which reflects the importance of having local client relationships. Also, Stafford has introduced a Line of Service team across end-user, cloud & DC, networking, data & analytics and security to support proposition development, qualification of large deal pursuits, and driving more repeatable solutions.

Stafford has also created a Service Innovation and Change team to ensure the portfolio is in line with future client requirements, and he will also be tasked with improving global delivery, and as such, is accelerating growth in Bangalore, India. This is an area where Stafford has plenty of experience, having previously been responsible for Accenture’s delivery capability in India. We also asked Stafford about plans for vertical-specific offerings, and he alluded to a focus on the public sector and manufacturing (mostly related to automotive in Germany) in the near future.

Win10 practice

One clear area of focus within the portfolio is Digital Me, where Computacenter sees growing demand for digital workplace services, particularly driven by Windows 10 migration. Computacenter has built a dedicated Windows 10 practice and service offering, and is seeing demand for improved security (in addition to the end of life support for Win7) now becoming the primary driver for Win10 migration.

It also has a strong focus on collaboration and engagement to drive end-user experience, evidenced by its tech bars (providing on-site, self-serve, collaborative services) at over 200 locations. Future developments include greater use of AI and cognitive capabilities, including virtual agents in support of end-user requirements. This is also in line with our recent analysis of the Next Generation End-User Computing Services Market.

Geographic expansion

Computacenter is also focusing on a geographic push, in particular targeting opportunities across the U.S. in support of the subsidiaries of European HQ’d clients. It has focused on the U.S. for a number of years in partnership with CompuCom, but announced recently it had transitioned ~600 employees from CompuCom into Computacenter to target the U.S. independently.

It is likely that Computacenter will acquire further capability in the U.S. This approach seems to make sense, and follows on from the recent acquisition of TeamUltra, which brought ServiceNow capability, further strengthening its Digital Me proposition.

The company has also announced a significant investment in Germany, which has now become the largest and most profitable part of the services business, with CY 2017 operating income overall of £60.3m and 3.5% margin, up 100 bps on CY 2016 (growth driven by the renewal of two of its largest services clients). The manufacturing sector provides good opportunities, in addition to the security requirements driven by Germany’s strict data protection laws. The company’s manufacturing client base includes Daimler, where it is currently supporting the ramp-up of its private cloud infrastructure for initiatives such as autonomous driving.

Computacenter is also investing £35m in building a new HQ and integration center in Kerpen, where it has ~930 employees. However, talent acquisition in Germany remains a problem, and Computacenter has recently opened a center in Poznan, Poland, to support German-speaking opportunities, with ~200 employees providing L1-3 end-user infrastructure support.

One further area of geographic expansion is APAC, where it has established a presence in Dalian, China to support the APAC operations of European clients.

Summary

Computacenter has a strong focus on the digital workplace through its Digital Me proposition, and has the opportunity to target Windows 10 migration opportunities. Its play in security will position it well. However, it will need to expedite its Windows 10 service portfolio, as many of its competitors already have well established Windows 10 migration practices and capabilities.

Although Computacenter has a strong partner ecosystem, it may need to expand its digital ISV partnerships to provide the requisite niche skills and services, in particular in addressing end-user requirements and continually improving the overall user experience.

In support of its services business development, it will also need to expedite the ramp of SMEs, consulting and advisory services, which will take time, to engage clients around a digital transformation roadmap and business outcomes, as opposed to simply responding to client demands.

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