Ian Brown
LogicaCMG creates new Outsourcing Services division
LogicaCMG is creating a new Outsourcing Services division, which will become operational in 'key' European geographies from Q1 2008 and will be in place across the whole organisation by 2009. Current Chief Operating Officer, Jim McKenna, will lead the creation of the new division.Comment: This is the first result of LogicaCMG taking a long, hard look at its business with the arrival of its new CEO, Andy Green. Around a third of LogicaCMG's revenues come from outsourcing and under the previous regime the vendor had a target of '30-40 percent' of revenues from outsourcing. While it achieved its target, there were some discrepancies between the achievements in different countries, ranging from the low teens in the Netherlands to 40% of revenue in the UK. LogicaCMG would clearly like to get outsourcing revenues up to the level of those in the UK across Europe. It also needs more scale in Europe (we think it should be winning more business in Germany, for example) and the acquisitions of Unilog and WM-Data still need to be more fully integrated into the business. We therefore think it makes sense to pool all the outsourcing customers from the different local geographies into a single, centrally managed operation. There are numerous synergies that can come from sharing expertise, skills and go-to-market capabilities across geographies. LogicaCMG already manages its vertical-industry lines of business 'internationally' so that it can identify similar opportunities across geographies and ensure that knowledge and skills are shared rather than duplicated. It seems to us to make a lot of sense to run the outsourcing business in a similar fashion. Most of LogicaCMG's competitors think so too and European competitors such as Capgemini already co-ordinate their outsourcing business on a global basis. To some extent, LogicaCMG's move could be seen as falling in line with industry norms. Lastly, an international Outsourcing Services division should enable LogicaCMG to go after more pan-European and international outsourcing deals. All in all, then, we see this as a positive move.
