Atos recently held its Capital Market Day for Tech Foundations. It is a year since the company announced its intention to spin off its high-growth units into a new company, Eviden, and keep its historic IT infrastructure services (and U.K. BPO capabilities) in an entity called Tech Foundations. Alongside the spin-off, Atos initiated a massive €1.1bn restructuring plan for Tech Foundations. The plan came on top of an ongoing restructuring plan in Germany for €180m.

A year ago, the outlook for Tech Foundations was mixed, with uninspiring objectives to reach positive organic growth in 2026 and an operating margin above 5%.

After its profit warning in July 2021, Atos had indicated that its IT infrastructure services business was under pressure and could not reduce its data center costs as fast as declining revenues from clients migrating to public cloud. The scale of Tech Foundations’ challenge in its core infrastructure business was considerable and included a large burden of underperforming contracts, representing around €750m in revenue.

Restructuring Is the Priority…

One year into the reinvention, financials are gradually improving, and Atos shares a more positive outlook. Tech Foundations is now targeting €5.0bn in revenues by 2024, significantly higher than the previous guidance of €4.1bn. Positive organic growth continues to be expected from 2026. And the operating margin target range has increased from around 5% to 6-8%.

Tech Foundations has made progress in some aspects of its turnaround: for example, it has addressed two-thirds of its red contracts. Progress with personnel downsizing has been slower: so far, 900 positions have been cut, primarily onshore, out of the total 7,500 planned. This reflects Atos’ large employee presence in Continental Europe, which has strong labor laws. Tech Foundations aims to increase its offshore ratio by 10 pts, reshape its pyramid, and gain further efficiencies from automation. The business is ramping down its little-profitable or non-synergistic non-strategic activities (~€900m), primarily its standalone VAR and several U.K. BPO activities.

… With Commercial Momentum

Tech Foundations had lost some of its commercial rigor. It is now looking to reignite its commercial activity. The business should benefit from the current market appetite for in-year cost savings and managed services contracts. Tech Foundations is focusing on the usual suspects. With cross-selling in mind, it focuses on add-ons in its top 100 accounts, targeting 13% of additional revenue. It has also expanded its large deals (€30m+) team, creating 90 new positions, and looking to standardize its large deal processes to drive repeatability. Tech Foundations is also regionalizing its IT outsourcing approach, giving more independence to the geographies for their service portfolio priorities. The unit has changed its incentivization scheme, with bonuses based on the first three years of the contracts and KPIs focused on profitability rather than organic growth.

There is also a much closer focus on contract performance, with a team monitoring contracts weekly.

Continuing to develop partnerships with the hyperscalers is naturally important, with AWS as a priority: the current AWS-related pipeline is €0.5bn and is expected to double within the next 12 months. The AWS CloudCatalyst partnership includes a commitment for AWS to provide training for 20k certifications. Another element of the partnership is that AWS will utilize Atos’ servers left free by clients migrating to the public cloud, helping Tech Foundations reduce costs.

Four Units with Different Priorities

Atos is refreshing its organizational structure. Tech Foundations now has four units: Hybrid Cloud & Infrastructure (HCI), Digital Workplace (DW), Technology Advisory & Customized Services (PS), and Digital Business Platforms (DBP):

• HCI is Tech Foundations’ largest business (€2.1bn). It faces revenue decline and is about reinvention (with new services such as hybrid and multi-cloud orchestration, edge computing monitoring, and enlarged partnerships), proactively helping clients migrate to the public cloud and a service catalog. Of those initiatives, CloudCatalyst with AWS is probably the highest priority for getting HCI back to growth after a couple of years of transformative decline
• DW (€1.2bn) is in a better position, enjoying revenue growth. And with UCC/Unify set for divestment, the unit is offloading a declining business. It emphasizes its transformation capabilities and existing or new offerings, e.g., XLAs, IoT/connected device management, and as-a-service offerings. It is leveraging gen AI for service desk level 1 automation
• PS (€0.9bn) is another Tech Foundations’ growth driver. The unit operates in an apparently unattractive market, staff augmentation in IT infrastructure services and, to a lesser extent, in application services. However, PS is Tech Foundations’ highest growth business and is highly profitable. The unit is introducing new offerings, such as technology advisory services, having launched innovation labs (Inno’Labs) to ideate with clients and create PoCs. It also created expertise networks (Tribes) to share knowledge across its 8k employees
• DBP prefigures the future of Tech Foundations and includes its hosted platform business. The business is small (€0.3bn) but includes the visible Sports Event unit known for its work for the Olympics/Para Olympics and the UEFA. It also has a digital ID business (with contracts in Togo and Morocco) and sustainability software products. DBP is a disparate business that goes beyond Tech Foundation’s IT infrastructure-centricity. Expect Tech Foundations to scale this business strategically.

Ensuring Best Practices Are Engraved at Tech Foundations

The future of Tech Foundations depends on ensuring its commercial, delivery, and service portfolio priorities are engraved into the company’s DNA. Achieving this is clearly a priority in the highly competitive IT services infrastructure market.

The business focuses on transformation contracts and being highly selective rather than only addressing run services.

Investment in automation continues: Tech Foundations was reassuring, showing early deployments of generative AI use cases.

The mid-term future of Tech Foundations lies in portfolio development. Relevant areas include cybersecurity services, particularly SOC/managed security services, and application services around native cloud development and migration. In both of these, AI and generative AI will play important roles.