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Sopra Highlights Application Management Capabilities Before Likely Merger with Steria

Sopra recently updated NelsonHall on its application management (AM) capabilities. In 2013 Sopra generated ~€393m revenues from AM, or ~29% of its total revenues. The company is a top application management vendor in its domestic market, along with Accenture, Capgemini, Atos CGI, and IBM. Key AM clients of Sopra include Airbus, Orange, SFR, Crédit Agricole, EDF, Auchan, SNCF, BN Paribas, Crédit Mutuel and Minefi. The company tends to address mid-sized (TCV up to €25m) AM contracts.

Sopra combines its application management capabilities with systems integration to promote an application service approach to clients. This application services approach also reflects the company’s focus in AM on level 2 and level 3, which implies a greater focus on maintenance and enhancements and much lesser so on level 1 end-user support.

The company promotes an AM value proposition based on a mix of industrialization and client proximity.

Industrialization

The industrialization approach is very evident in its delivery approach. Sopra has in recent years moved from onsite to factory-based delivery. Onshore, its network of regional delivery centers domestically, is now based on seven locations (Aix-en-Provence, Lille, Lyon, Nantes, Paris, Rennes and Toulouse). These centers tend to address regional opportunities, with the exception of the Nantes  and Lille centers that service Paris-headquartered clients, together with the Paris suburbs center. In total, the headcount in these domestic factories is ~4k (out of a NelsonHall total estimated app services headcount of 8k in France).

Sopra has also invested in its delivery capabilities in Spain (application services headcount: 470, 400 in Madrid and 70 in Valencia), servicing mostly French-headquartered clients. The Valencia center was opened in 2013 and acts as an extension of the Madrid center.

Sopra has also invested in building its factory-based delivery unit to over 1k personnel in Noida. Sopra Group India (SGI) is taking a growing role within the firm, having expanded from a delivery only approach to project governance now being shared between France and India and growing domain knowledge in India. Sopra has moved towards a global delivery network where India is taking a growing part, as France is, for managing client contract delivery, away from an internal subcontracting mode. Interestingly, 70% of SGI personnel services French clients.

Client Proximity

The proximity approach of Sopra in AM relies on location and regional application services centers. The company highlights that it is taking a different approach to HR, relying less on the traditional pyramid model, and aims to keep attrition level low (2013 for overall Sopra: 9.4%, of which 8.3% in France, 7.6% in Spain and 17.8% in India). A consequence of this approach is higher labor costs than those of competitors relying on the pyramid model, which Sopra highlights it counterbalances by lower attrition, more experienced personnel delivering higher productivity, and higher client satisfaction.

What next for Sopra in AM?

Looking ahead, Sopra has recently launched an offering, IT asset portfolio enhancement. The offering includes sourcing rationalization; cost optimization; go-to-market; security; legacy modernization; end-user satisfaction; usage of new technologies; and business involvement.

Sopra wants also to increase the involvement of Sopra Consulting with its application service contracts in terms of governance, application services strategy and contract pricing. An example of this approach has been for a telecom service provider to link contractual pricing to application performance in terms of business needs. Sopra highlights it has vertical knowledge in sectors including banking, telecom, retail, aviation industry, energy, and transport.

Sopra will go through a significant change with the likely merger of Steria and the planned creation of Sopra Steria Group (SSG). As far as AM is concerned, Steria will bring:

  • Scale to Sopra outside France: Steria derived in 2013 ~€300m in AM revenues, of which 60% from the U.K. (~€220m). Steria France accounted for 30% (~€100m). Steria AM headcount is ~4k
  • A successful U.K. operation, largely recently with the €1bn SSCL BPO contracts. SSCL is to provide significant application services opportunities during 2014/15, while Steria builds new applications for the client. SSCL builds on other current AM and BPO  contracts including those with NHS SBS, Cleveland Police and BT
  • A track record in winning large deals: SSCL in the U.K., and to a lower extent in France: Ministry of Budget (6 years for a combined TCV of €120m), with Capgemini as main subcontractor.  Another example is Pôle Emploi (application services, 3-years, TCV estimated by NelsonHall to ~€75m). Steria also brings a success story in Norway in servicing central government with mid-sized AM contracts
  • Additional offshore and nearshore presence, with 1,000 personnel in Noida, Chennai and Pune; 100 in Casablanca, Morocco and a small 30-strong presence in Krakow, Poland.

However, AM has not been a growth driver for Steria since its acquisition of Xansa, in spite of its references and presence in India. NelsonHall assumes that the forthcoming SSG will align the capabilities and approaches of Steria and align in particular its approach to application management: Steria tends to have Indian offshore and factories delivering AM services while C&SI is more onsite or onshore.

NelsonHall has recently published a profile of the application management capabilities of Steria. The report is available here for subscribers. For non-subscribers, please contact Guy Saunders at [email protected]

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