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Vendor Analysis
published on Nov 14, 2023
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Report Overview:
This NelsonHall key vendor assessment consists of 64 pages and provides a comprehensive and objective analysis of CGI's IT and business process services offerings, capabilities, and market and financial strengths
Who is this Report for:
NelsonHall's Key Vendor Assessment on CGI is a comprehensive assessment of CGI's offerings and capabilities, designed for:
- Marketing, sales, and business managers developing strategies to target service opportunities within the BPS/IT services markets
- Sourcing managers monitoring the capabilities of existing suppliers of IT services and identifying vendor suitability for IT services
- Consultants advising clients on vendor selection
- Vendor marketing, sales, and business managers looking to benchmark themselves against their peers
- Financial analysts and investors specializing in the BPO/IT services sector.
Scope of this Report:
The report provides a comprehensive and objective analysis of CGI’s offerings, capabilities, and market and financial strengths, including:
- Identification of the company’s strategy, emphasis, and new developments
- Analysis of the company’s strengths, weaknesses, and outlook
- Revenue estimates
- Analysis of the profile of the company’s customer base, including the company’s targeting strategy and examples of current contracts
- Analysis of the company’s offerings and key service components
- Analysis of the company’s delivery organization.
Key Findings & Highlights:
CGI has a very specific profile amongst IT services providers: the company is known for its attention to project delivery, revenue resiliency, high profitability (by onshore standards), its proximity model with a mild adoption of Indian offshoring, its ‘Build and Buy’ strategy, and the stability of senior execs.
The company’s business model relies on:
- Operational excellence. The company has based its business model on its operational efficiency, systematically examining operations to the contract level as part of its CGI Management Foundation playbook
- High profitability (an EBIT margin of 15.4% in FY23), driven by MS and IP
- A symbiotic systems integration & consulting (SI&C) projects and managed services (MS) relationship where SI&C gains the client proximity, drives new MS on a sole source mode, and brings the firm long-term contract visibility. CGI sees MS contracts drive high utilization rates and offshoring while reducing client acquisition costs. The company is to have MS representing 70% of revenues (and SI&C 30%) by FY25, up from 54/46% in FY23
- A focus on IP (proprietary software products and related services), representing ~21% of revenues in Q4 FY23. IP is a cornerstone of CGI's portfolio strategy, with the company expanding in annual SaaS subscriptions and driving long-term IP-centric MS contracts. CGI aspires to reach 30% of total revenues by FY25
- Client proximity based on its ‘metro market’ approach, which combines a local client base and delivery (‘proximity centers’). CGI is systematically acquiring in metro markets to expand its proximity centers rather than focusing on expanding its service portfolio in digital. Onshore presence (onsite or in a local delivery center) accounted for 61% of headcount in Q4 FY23
- An attractive profile to employees, with CGI having 85% of its employees being shareholders
- Acquisitions: CGI targets two types of acquisitions: metro market acquisitions that bring a presence and a client base in a specific country region, sometimes bringing specialized capabilities, and transformational acquisitions such as those of AMS, Stanley, and Logica.