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Productizing its Service Offerings is Working Well for Unisys

Unisys recently held an analyst/adviser meet in New York; shortly before, it had reported another set of very encouraging quarterly results, with its Services business delivering its sixth consecutive quarter of organic (CS/CC) topline growth. The double-digit organic growth Unisys has achieved in Services this year is market leading (its much smaller Technology business is lumpy by nature) and this topline growth has been supported by steadily improving operating margins. This is a very different Unisys from a few years back. The company recently raised its full year revenue guidance, and has solid medium-term growth expectations of low single-digit growth.

The engine driving the company’s topline growth in Services this year is its U.S. Federal unit, which has recently been delivering hyper growth, notably for its Cloud & Infrastructure Services (CIS), on the back of four large deals secured over the last year, including in the State sector at Virginia (VITA), Georgia (GTA), and Kansas. Some of these new logo wins are requiring significant CapEx in the first year or two (e.g. Kansas is transferring ownership of its aging IT hardware to Unisys) and they are impacting cash flow in 2019, but these are large, long-term deals where margins improve over time.

Unisys has been investing in a few key enabling assets that are underpinning a drive to productize its services; these have helped drive the recent double-digit growth in CIS and should also position it well for new opportunities, and the strong emphasis on security throughout the portfolio, something that is part of its heritage is, of course, highly relevant.

The first is Unisys CloudForte, a policy-based managed service solution for automating and managing the migration to and use of, initially, public cloud environments, specifically AWS (launched June 2018), with a solution launched in February this year for Microsoft Azure (expect to see a template for GCP in 2021), followed in May by a release for hybrid cloud environments. Development of the platform continues: November saw the announcement of additional features for CloudForte for Microsoft Azure (Cloud Architecture Navigator, and Cloud Compliance Director for cloud security posture management), and also of the availability of CloudForte for ServiceNow, for modernizing ITSM.

2020 will see further enhancements including ones using AI. Cloud Forte was developed with the federal and state sectors as the initial primary target markets, and there is a very strong emphasis on automating operations around governance, preventing cloud sprawl, and strengthening cloud security. While there has also been some early commercial sector success, for example a win with a major bank headquartered in the Middle East (an existing client for Elevate), most traction to date is in the U.S. government and public sector, where Unisys is well positioned to help organizations move away from ageing datacenter assets.

CloudForte includes products in Unisys’ Stealth software suite. Key features of Stealth include its use of identity-based microsegmentation, cryptographic cloaking and encryption of data in motion, and its ‘Zero Trust’ architecture extending from endpoints to cloud infrastructure and a “never trust always verify” approach to monitoring users, devices, data, storage, and network traffic. A recent enhancement to Stealth is its use of identity-based dynamic isolation of a bad actor or device, enabling the non-affected part of an network to remain operational. Having the NSA’s certification for its Commercial Solutions for Classified (CSfC) program enables Unisys to offer Stealth to U.S. federal agencies for protecting classified data and systems, and this has opened doors: a significant win earlier this year is for a U.S. defense agency's virtual data center, for a worldwide deployment of Unisys Stealth across several DoD organizations.

And in the commercial sector world, one client who presented at the event, a Fortune 200 company that has grown through a series of acquisitions, implementing Unisys Stealth was the first global standardization initiative in ICT. This is evidently a satisfied client; it is now also looking at Unisys digital workplace services offerings. Unisys is looking to expand its Stealth channel partnerships and has bold ambitions for the proportion of revenues coming through the channel.

A third asset which has been further developed over the last two years is InteliServe, an AIOps platform for workplace services with a focus on resolving the self-service adoption challenges. InteliServe began as Unisys’ transformation of the service desk function deployed alongside ServiceNow. The platform guides users through the fastest means of issue resolution, whether automated or live, based on the premise of achieving self-service through a conversational interaction. Elements of InteliServe for Service Desk include a cloud contact center that enables omnichannel personalized support where both virtual and live agents provide context aligned support derived from the individual’s support usage history, an Enterprise Personal Assistant/Virtual Agent (IPsoft’s Amelia) across all support channels that determines intent of an individual’s needs through human interaction, Machine Learning that dynamically triages ticket assignments, automated resolution opportunities, or where self-help can be presented to the user, and Robotic Process Automation for automation of business processes.

Arguably, Unisys has been somewhat in catch-up mode, but it has been moving fast to enhance  InteliServe, for example utilizing IPsoft’s Amelia to support more complex use cases (e.g. a lost/stolen laptop, provisioning a BYO device), UiPath to automate resolutions based on decisions made by Amelia, and also bringing in Automation Anywhere and NICE. And development of the platform continues: new features in 2020 will include AI and smart glasses for field technicians, and integration with Remedy as well as ServiceNow and integration of InteliServe with end user experience monitoring toolsets such as Nexthink to enable true proactive response to issues affecting users.

InteliServe is helping Unisys win some major service desk awards, including one in Q4 with a TCV of $214m to optimize and consolidate service desk and field services for 19 DoD Fourth Estate organizations, and one in Q2 worth $150m to support DISA's Joint Service Provider program for the management and maintenance of the DoD IT infrastructure. And InteliServe is also helping expand some commercial sector relationships including in Q3 with Nutreco and Bancolombia.

InteliServe is a significant component in Unisys’ suite of digital workplace service offerings and positions it more strongly in a market where some other major providers have been underperforming, with one major player recently announcing its intention to potentially divest this part of its portfolio.

Back in early 2018, we noted an ambition by Unisys to be seen by prospective clients as being easy to do business with, including in responsiveness and affordability, and there was a clear desire to achieve topline growth after many years of decline. Having achieved that, there is now less of an emphasis on the ‘affordability’ element and more of a play on Unisys capabilities in security.

Talent management features as a topic in every IT services provider analyst event we attend these days, and Unisys was no exception. Usually the emphases are on reskilling initiatives, resourcing and/or pyramid management. Unisys referred also to a drive to nurture a slightly different culture, shifting from one where the mindset of employees commonly featured accountability and order taking, to one where there is a stronger focus on  continuous learning and on curiosity, and where accountability is supplemented with a strong sense of collaboration. We are aware that a number of major IT services companies are contending with behaviors in their company that are not particularly well aligned with newer ways of working, newer technologies, or shifts in market expectations. Few acknowledge this, and very few discuss how they are seeking to address this.

We note there has been a slight shift in direction over the last year or so, the primary emphasis shifting from industry software IP such as Elevate, LineSight, and Digistics to the key assets discussed above, and Unisys has been moving at pace to develop these. 2020 will see further enhancements, and the drive to reduce cost of delivery in Services, including through automation, will continue. In the short term, large C&IS deals in Unisys Federal will continue to be the principal contributor to top-line growth. Unisys is more competitive in its C&IS business than it has been for many years and does not need to chase topline growth at the expense of margins; there has also been a refresh of the sales force. We expect to see additional significant C&IS wins in other sectors in 2020.

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