NelsonHall Industry Insight: December 19, 2011

The following extracts are  commentary and insight from NelsonHall Industry Insight, NelsonHall analysts weekly views on key industry developments that impact your sourcing. Register to receive your copy weekly  This newsletter forms part of NelsonHall's Key Vendor Assessments service. For further details, contact Paul Connolly

 

Significant News and Developments

IBM Awarded IT Infrastructure Management Contract Renewal by BNP Paribas

Dec 19, 2011 | Contracts by Dominique Raviart
industry: Retail Banks

IBM through venture BNP Paribas Partners for Innovation (BP2I), has been awarded a 6-year IT infrastructure management contract renewal by BNP Paribas.

BP2I is a joint venture owned equally by IBM and BNP Paribas founded in April 2004 with the initial IBM award. Initially, the contract included retail banking in France. It has expanded to include other businesses:

• BNP Paribas Securities Services
• Cardif (insurance)
• Cetelem (financing and credit)
• BNP Paribas Leasing Solutions
• BNL (retail banking Italy)
• Findomestic (financing and credit Italy).

The investment unit (BFI) of BNP Paribas is not part of the scope.

BP2I manages

• 70bn transactions per second
• 6Po in storage (~6,000,000 Go)
• 8 datacenters
• 10,000 servers.

The contract runs until end 2017.

BNP Paribas' headcount has increased from 95,000 to 200,000 since 2004, of which 150,000 in Europe.

BP2I has an estimated 1,500 headcount.

Analyst comments:

The contract is estimated to be worth €3bn over 6 years according to French business paper Les Echos. This make the contract the largest IT outsourcing in France ever along Alcatel-Lucent's contract with HP. IBM is the preferred choice by French business for large scale contracts in spite of being the home of Atos and Capgemini (Schneider Electric) and despite the presence of HP (Alcatel) and CSC (CACEIS). IBM has won several of the largest contracts in the country including:

• AXA
• Michelin
• CMA-CGM.

IBM has been open to joint ventures in France, as indicated by the BNP contract and the (recently cancelled) JV with train transportation public enterprise SNCF. The joint venture structure meets the client requirements for cost transparency as well as avoids personnel issues. It remains however quite unusual even in the French market.

•                Accenture Announces Fiscal Q1 2012 Revenue up 17% to $7,075m

Dec 16, 2011 | Financial Results by Rachael Stormonth

Accenture has announced fiscal Q1 2012 revenues, for the period ending November 30, 2011, of $7,074.5m, up 17.0% year-over-year, and up 14% in constant currency. Net revenue was thus just above the guided range (which assumed a positive 3% forex impact) of $6.8bn to $7.0bn.

Fiscal Q1 2012 operating income was $981.1m, a margin of 13.9%, up 20bps from a margin of 13.7% in the prior year quarter.

Fiscal Q1 2012 revenue (with actual and constant currency revenue growth) by service line was:

• Consulting and systems integration $4,083.4m (+14%) (+11% in CC)
• Outsourcing $2,991.1m (+21%) (+18% CC).

Fiscal Q1 2012 revenue (and revenue growth) by industry sector was:

• Products $1,669.6m (+20%) (+17% CC)
• Communications Media & Technology $1,535.2m (+20%) (+16% CC)
• Financial services $1,483.8m (+14%) (+11% CC)
• Resources $1,326.9m (+18%) (+15% CC)
• Health & Public Service (HPS) $1,054.3m (+13%) (+11%CC)
• Other $5m.

Fiscal Q1 2012 operating margin (and for the previous year quarter) by industry sector was:

• Products 13% (11%)
• Communications Media & Technology 15% (15%)
• Financial services 14% (19%)
• Resources 16% (15%)
• HPS 13% (11%).

Fiscal Q1 2012 revenues (and revenue growth) by geography was:

• Americas $3,074.7m (+17%) (+16% CC)
• EMEA $3,008.5m (+14%) (+10% CC)
• Asia Pacific $991.3m (+28%) (+20% CC).

New bookings in fiscal Q1 2012 were $7.8bn, and reflect a positive 3% foreign-currency impact compared with new bookings in the prior year quarter. Fiscal Q4 2011 bookings by service type were:

• Consulting $4.2bn
• Outsourcing $3.6bn.

Utilization for the quarter was 87%, up from 85% in fiscal Q4 2011. Attrition for the quarter was 12%, compared with 14% in fiscal Q4 2011 and 15% in fiscal Q4 2011.

Accenture has provided revenue guidance:

• For fiscal Q2 2012 of $6.5bn to $6.8bn. This range assumes a foreign-exchange impact of negative 1 percent compared with fiscal Q2 2011.
• For fiscal year 2012 of growth in the range of 7% to 10% in local currency.

Analyst comments:

While too much should not be read into any one quarter's results, there are several features of interest in Accenture's performance this quarter. At an overall level, this another strong quarter, with:

• The constant currency growth of 14%, in line with what was achieved in the best four of the last five quarters
• Operating margin up 20 bps y-o-y
• A second quarter of strong bookings, with the $7.8bn slightly below last quarter's record achievement of $8.4bn, but significantly stronger than the $6.31bn achieved in fiscal Q1 2011. Accenture is targeting new bookings for full FY 2012 in the range of $28bn to $31bn, indicating anticipated bookings of between $12bn and $15bn in fiscal H2.

Outsourcing has had its strongest quarter of constant currency growth in years. In contrast, revenue growth in Consulting has noticeable softened, and is the quietest for five quarters. Management commentary highlights the increasing uncertainty in the market and admits that, for the rest of the year, Outsourcing is now likely to be stronger, and Consulting weaker, than its original plan for the year.

Utilization at 87% is very high, though management asserts it is comfortable with this level. The softening in attrition is one of several indicators that the market is getting tougher.

In terms of regional performance:

• Revenue growth in Europe is slightly stronger than last quarter, but it should be taken into account that Accenture's results reported in Europe include a lot of activity in projects and programs for multi-nationals that are headquartered in Europe
• Accenture claims to be "particularly pleased" with its progress in its 10 priority emerging markets, which grew at a significantly faster rate than the rest of the company. The company highlights it is both helping global clients in their global expansion into emerging markets, and also to be developing major client relationships with leading companies in these markets, several of which are already Diamond Clients. Accenture does not provide further breakdown by region, but CC revenue growth in APAC this quarter is very slightly muted compared with the last four quarters

Looking at the Operating Groups:

• Products and CMT have both had strong quarters
• P&HS has had a second quarter of topline growth at a level that is strong for the market, with Accenture's repositioning of its public service offerings, and its focus in health on connected health and health administration offerings clearly bearing fruit
• The weakest operating group is Financial Services, where Accenture admits to seeing lower activity in management consulting in banking and capital markets: in contrast, the company comments on seeing strong growth in consulting in the insurance sector. A year ago, financial services was Accenture's strongest growing sector; this quarter it is its weakest. Financial Services is also the only operating group to see a substantial dip in operating margin: the reasons given for the dip were business development activities and also integrating recent acquisitions. Nevertheless, in his closing remarks CEO Pierre Nanterme (who formerly headed the FS Operating group) said "Financial Services is very close to my heart... I'm going to work with the current leadership to make sure that we show a good game".

Accenture once again displays its ability to pick up and respond quickly to changes in market requirements. Where a few months back, management was talking about Accenture's capabilities to help clients with their growth agendas, the commentary today is about cost optimization being paramount, and how cost optimization "plays to our strengths, in terms of getting to real outcomes on business cases".

(NelsonHall will be publishing an updated comprehensive Key Vendor Assessment on Accenture in the first week of the new year which includes these results and recent developments).

•                HCL Technologies Awarded 5-Year Datacenter Management Contract by AstraZeneca

Dec 16, 2011 | Contracts by Mark Dale
industry: Pharmaceuticals

HCL Technologies has been selected as a strategic IT infrastructure management outsourcing partner, along with Wipro, AT&T and Computacenter, by AstraZeneca.

Under the contract HCL is responsible for the management of AstraZeneca's datacenter environment, spanning 60 locations globally. Services provided include:

• Hosting and migrating some of the existing datacenters into modern facilities.
• Management of AstraZeneca's email, messaging & collaboration environment
• Server virtualization
• Storage and backup services
• Implementation of a hybrid cloud.

Analyst comments:

HCL Technologies and its partners are taking over from IBM who was previously awarded a 7-year IT infrastructure management deal back in 2007 worth ~$1.4bn. Reports of IBM having lost the deal have been circulating since Spring.

AstraZeneca has split the former single vendor mega-deal into several towers with HCL winning the server and datacenter management awards, AT&T the contract for network services and Wipro and Computacenter contract on the end-user computing side.

This is a great win for HCL, who has been increasing its presence in the pharmaceuticals sector, with a client base including GlaxoSmithKline, Eli Lilly and Merck.

•                IBM to Acquire Emptoris to Enhance Smarter Commerce and Procurement Offerings

Dec 15, 2011 | Mergers and Acquisitions by Rachael Stormonth

IBM is to acquire e-sourcing software vendor Emptoris Inc. Financial terms of the acquisition, anticipated to close in Q1 2012, have not been disclosed. Headquartered in Burlington, Mass. with offices in the U.S., U.K., France, Germany, Australia, India, Brazil and China, Emptoris has ~750 employees and ~350 clients, including ADP, Delta, McKesson, and Motorola, in 750 countries.

Emptoris' software portfolio covers in e-sourcing, spend analytics, contract lifecycle management, services procurement, and supplier risk and performance management.

Analyst comments:

For IBM Software Group, Emptoris is the latest - but not the last - in a string of acquisitions. Recently, many of these acquisitions have focused on the areas of sales, marketing, and services - and indeed IBM is generally showing much more interest in targeting the CMO.

IBM emphasizes that it is executing these acquisitions as part of the 'Smarter Commerce' initiative it launched in March 2011. It is not yet clear how IBM will go about integrating Emptoris IP with the IP it is picking up from the likes of Coremetrics, Unica and, most recently Dymantec, into a coherent 'Smarter Commerce' platform that spans corporate functions from procurement through to service.

But without doubt, the e-sourcing and spend analytics software that Emptoris brings in will complement the B2B integration and SCM capabilities IBM gained with its $1.4bn acquisition of Sterling Commerce in 2010. As well as the CMO, IBM is also increasing its focus on the procurement function (which in many organizations is increasingly in the spotlight and, exactly as the press release says, "being asked to show how it can deliver value to the organization"). IBM is developing software offerings that will have a number of features that NelsonHall research indicates as being likely to resonate with CPOs given their concerns and priorities. These include:

• Spend analytics
• Services procurement: IBM already has some IP here, in areas like telecoms expense management (GERS) and in marketing services analytics (via Coremetrics), Emptoris will bring in additional capabilities in areas such as contingent labor
• Supplier lifecycle management, compliance management, and supplier risk management
• Vendor master data management.

Emptoris offers its software solutions on a traditional on-premise license basis and also as a hosted service: IBM is likely to focus on developing an integrated cloud-based offering that spans Emptoris, Sterling Commerce and IP from other acquisitions. This will be a substantial undertaking: Emptoris own software suite is drawn from several acquisitions.

This acquisition is more than about the software, though. Whereas the IP coming from Sterling Commerce remains, in the short term at least, solely under the jurisdiction of IBM Software Group, IBM's Global Process Services (GPS) organization will also be able to leverage Emptoris software assets to enhance its Procurement and Supply Chain BPO capabilities.

Again, the assumption must be that IBM will be developing a platform-based offering for procurement BPO, leveraging a combination of Emptoris and its own existing tools for transactional processing, and eventually also Sterling Commerce for a broader supply chain platform-based BPO offering.

Furthermore, the transaction will keep BPO competitors' hands off Emptoris (some of whom have used it in their own BPO offerings).

In short, Emptoris should become a significant asset in IBM GPS' portfolio.

IBM already uses Emptoris Sourcing Portfolio (SP) for its internal processing.

In the short term, IBM may have to deal with a less than ecstatic reaction from SAP, and indeed concerns about putting any further strain on this strategic partnership could prevent IBM from making any further acquisition in the e-procurement space.

Accenture, Capgemini and now IBM have acquired (albeit different types of assets) to bolster their procurement BPO capabilities. The procurement BPO vendor landscape remains relatively immature and further acquisition activity should be expected.

•                T-Systems CEO Contract Extended for Five Years, to Manage Deutsche Telekom IT

Dec 15, 2011 | Financial Results by Dominique Raviart

Reinhard Clemens has had his contract as CEO of T-Systems and Deutsche Telekom Member of the Board of Management extended for another five years by the Supervisory Board of Deutsche Telekom. The contract extension is "ahead of schedule".

Mr. Clemens, who has been T-Systems' CEO since December 2007, is to take responsibility for IT at Deutsche Telekom and for consolidating all its IT activities.

Analyst comments:

Financial Times Deutschland reports that Deutsche Telekom is to cut its ICT spending by several hundreds of millions of euros by 2015. It intends to merger its various ICT operations (representing potentially 8,000 personnel within Deutsche Telekom in Germany) with T-Systems. Such a move would help improve coordination between business units, increase go-to-market, favor re-use across the group, and lower prices through the elimination of internal price transfer.

The news is unconfirmed yet credible as Mr. Clemens is now in charge of all the IT of Deutsche Telekom. Deutsche Telekom has been engaged in cost savings programs as part of its Save for Service initiative, which in Q1-Q3 2011 brought $1.5bn in reported savings. For the 2010-2012 period, the program is targeting €4.2bn in savings. Additionally, Deutsche Telekom has merged its operations with those of France Telecom in the U.K. giving birth to the Everything Everywhere jv, which awarded this year awarded a €700m IT infrastructure management contract to T-Systems. Deutsche Telekom and France Telecom are currently combining their procurement forces through the creation of JV, BUYIN, targeting savings of €400m for Deutsche Telekom over three years.

From a T-Systems perspective, the transfer of its ICT operations to T-Systems would only mean further restructuring to lower its cost structure, and a delayed return to the company to normative profitability. There is for than financial risk: large companies usually retain internal IT departments for flexibility purpose and for best responding to fast demand from the internal client. Nevertheless, the transfer of units to T-Systems can be considered by the company as a contract expansion and is a tribute to the ongoing turnaround of the company.

T-Systems had revenues of €2.64bn from Deutsche Telekom in 2010, representing ~30% of global revenue.

•                An Update on IBM Acquisition of Curam Software

Dec 14, 2011 | Mergers and Acquisitions by Sarah Burnett
industry: Government

IBM's acquisition of benefits administration and social care management software company Curam Software announced on December 9 is due to complete soon. Dublin-based Curam Software has offices in U.S, Canada, UK, Australia, New Zealand and India and >670 employees.

Analyst comments:

Curam brings IBM the capability to offer platform-based BPO services for benefits administration. Curam's case management is highly verticalized and is focused on key parts of the benefit cycle: the processes of applying for, adjudicating, calculating and paying social benefits. It can be configured to support different types of social programs and benefit payments and through that provide a single view of the claimant to enable service optimization. These features allow benefit and social care decisions to be made based on a wide set of known facts about the claimant instead of a limited view. Curam has established a strong presence among government agencies including an application for Jobcentre Plus for the Department for Work & Pensions (DWP), the U.K.'s largest government department.

Curam and IBM have a history of working together. The software supports IBM middleware and some of its databases. The two companies have also worked together on software implementations such as the one at the DWP.

Curam significantly enhances IBM's benefits administration and social enterprise management capabilities, a new vertical capability for IBM. When combined with analytics, users are able to glean trend information for planning and resourcing. As such it is a good fit to IBM's analytics software, business optimization and smarter government or smart city initiatives.

Curam also supports Oracle technology and has partnerships with other technology partners such as Actuate. The company works with a host of services providers and system integrators, HP and Accenture among them. IBM's strategy is for Curam to continue to work with its existing technology and other partners. Its decision to acquire Curam has taken the company out of the reach of acquisitive competitors such as Oracle while furthering IBM's smarter government ambitions.

•                Logica Announces Accelerated Restructuring: 1,300 Posts to be Cut

Dec 14, 2011 | Financial Results by Rachael Stormonth

Logica has announced an acceleration of its restructuring plans and a more prudent view on some contracts in the face of increased economic uncertainty in Europe. CEO Andy Green commented that the pockets of weakness the company first saw in September have widened this last quarter.

Guidance for full year 2011 has been revised downwards to

• Revenue growth of ~3%
• Underlying profitability of £240m to £250m (net of £25m of previously announced restructuring charges).

The restructuring will impact >1,300 jobs, of which ~1,000 are billable, primarily in:

• The Netherlands and Belgium, with 450 to 550 job cuts, exits from over half of the property Logica currently occupies and moving to more agile ways of working
• The IT infrastructure management business, with accelerated automation and offshoring and ~ 450 job losses, mainly in Sweden and the U.K.
• Sweden, with further reduction of 200 billable jobs and property exits.

This will lead to charges in 2011 of approximately:

• £80m related to restructuring of jobs
• £13m relating to property.

In addition, Logica has undertaken a review of ~100 long term contracts and taken a more prudent view of eight contracts, with between four to six years still to run, where it expects reduced volumes. It will take a one off charge of £39m which will also be incurred in 2011.

Financial benefit of £25-35m from the restructuring is expected to start in H2 2012, with full year 2012 operating margin expected to be >6.5%. The full annualized benefit in 2013 will be ~£50-60m.

Logica asserts that, as a result of these moves, in 2012 its:

• Benelux business will return to profit
• Swedish business will deliver an improved margin
• IT IM business will become more price competitive.

Net debt/EBITDA at end 2011 is expected to be around 1.0x and remain at around 1.0x at end 2012, even after the cash impact of restructuring of £60-70m.

Logica Board confirms that it intends to pay an unchanged final dividend for 2011 of 2.3p, making a full year dividend of 4.4p, also to maintain its dividend policy of a 40% payout in 2012.

Full year results will be announced on February 22, 2012.

Analyst comments:

Today's news should come as no major surprise given both Logica's recent performance and also the softness in many parts of the European market.

Logica's recent progress has been mixed: there has been an improving topline this year but in the last few years there has been no improvement in profitability in spite of a long-held ambition for the group to reach (or more recently "head towards" double figures. There have been several other occasions in recent years when prior guidance for operating margin has been revised downwards. Margins in Sweden have been weakening for some time, with transition costs in outsourcing work being the recent explanation for this. Earlier this year, management asserted that any overall margin improvement would be dependent on progress in H2 in Benelux - and clearly, this has not occurred. Not that there was much new regional CEO Seamus Keating could do: Benelux remains a major headache for all IT services vendors.

The European market generally is showing an increased appetite for offshoring and also for outsourcing. The difference, in terms of typical revenue and margin performance, between the Indian tier 1s, the global SIs, the European majors and then European tier 2s (unless they have distinctive domain expertise) is becoming more starkly obvious.

Logica is very probably the first, not the only, European vendor to make an announcement of its need to rationalize headcount and property.

(NelsonHall has just published a Key Vendor Assessment on Logica. Today's announcement will be incorporated into a revised version within the next week.)

•                Citi GTS Awarded Securities Lending and Custody Contract by State of Washington

Dec 13, 2011 | Contracts by Andy Efstathiou
industry: State/Regional Government

Citi GTS has been awarded a securities lending and custody contract by the State of Washington. The Office of State Treasurer (OST) invests funds on behalf of various state governments and the State.

Citi GTS uses its proprietary lending platform, OpenLend, to process securities lending. The OST is using the securities lending services to increase portfolio returns and reduce operating costs.

Analyst comments:

Governments are looking for yield and income enhancements, without aggressively increasing their risk profiles. Due to the large, long term portfolios governments hold (primarily for pensions) they have portfolios that are large enough to make securities lending a viable option.

We expect to see much greater demand for securities lending from asset holders, primarily pensions, to help reduce their underfunded status. If proprietary trading is aggressively curtailed, then there may be a reduction of demand for borrowing of securities.

•                CSC Creates Cybersecurity Advisory Council and Targets the Insurance Industry

Dec 13, 2011 | New Offerings by Dominique Raviart

CSC has created a Cybersecurity Advisor Council targeting the life insurance and annuity providers; and property and casualty insurers. The Council will help develop best practices and technology strategies for mitigating the risk of cyber attacks. It will conduct its first meeting in January 2012 in Washington D.C.

CSC employs 2,000 cybersecurity personnel across the world.

Analyst comments:

NelsonHall has just published a comprehensive 102 page Key Vendor Assessment on CSC which looks at the progress it is making this year and considers the various challenges faced by the company. For details, contact paul.connolly@nelson-hall.com.

•                HP Awarded 7-Year IT Infrastructure Management Contract by Syngenta

Dec 13, 2011 | Contracts by Jamie Snowdon
industry: Agriculture & Mining

HP has been awarded a 7-year IT infrastructure management contract by Syngenta Crop Protection AG, a Swiss based global agribusiness.

Services to be provided by HP will include:

• Cloud based data center outsourcing
• Security services
• Help desk services
• End-user support
• Print management

The services will support 26,000 users spread across 90 countries. It will include virtual desktop services for ~5,000 users.

The services will be supported for HP delivery centers based in Argentina, Bulgaria, China, India, the Philippines and Slovakia.

Analyst comments:

This contract is the renewal of a 5-year deal signed in 2008. The scope of the new deal is extended with more emphasis on end-user support than the original data center centric deal.

HP has announced three substantial IT infrastructure management contract renewals in the last month that involve some migration to IaaS: Maersk, Elders and Syngenta. In order for IT infrastructure management services providers to be resilient in their activities in mature economies, they need to be able to renew their existing clients with more flexible and more attractively priced contracts, extending scope where possible. HP is clearly using its cloud offerings and transformational capabilities with this in mind.

Syngenta has also recently signed an applications outsourcing contract with Infosys (see separate article). Its other outsourcing partners include BT (a 7-year network management contract signed in 2009) and Capgemini (F&A, renewed in 2010).

•                Logica Awarded Framework Agreement for Back-office Services by Government Procurement Service

Dec 13, 2011 | Contracts by Sarah Burnett
industry: Government

Logica has been awarded a framework agreement for payroll, human resources (HR) and finance services by the U.K. Government Procurement Service. This is a renewal of the existing framework agreement that runs to 2013. The new framework is estimated to be worth up to £300m over 11 years with services provided on a subscription basis.

The new framework is open to any central government, police, education, local and health authorities and any partially funded or fully funded public sector entity to take advantage of shared resources without having to go through a long tendering exercise.

The new framework includes payroll services, HR systems, HR outsourcing, outsourced training and integrated financial and accounting systems.

Analyst comments:

This win is good news for Logica as it allows its established payroll clients to continue to use the service. Existing clients include 80 government bodies on behalf of whom Logica handles the pay of ~140k civil servants. Signed in 2002, the current payroll contract was extended to HR systems in 2007 but payroll has remained the main revenue earner with only Ordnance Survey and DCMS taking up the other HR offerings.

The differences between the existing and the new framework agreements are:

• Currently the framework is open to all organizations that are listed in the Civil Service Year Book with the exception of a few police authorities. It is not open to Local Authorities
• The new contract is open to all including health
• The existing contract is for HR systems only, excluding services. The new one includes services also and extends the offerings to F&A and procurement systems but not services.

As well as offering services based on its own ePayfacts and on Oracle, Logica is going to provide clients with options for industry specific applications, e.g. Cedar HR for the police and McKessons for the health sector.

Logica has won this award at a time when there is growing opportunity and competition for government back-office shared services. Migration to shared services is one of the government's key measures to cut costs in the public sector but it is also introducing more competition through measures such as:

• The privatization of Department for Transport's Shared Service Center
• Department for Work and Pensions offering back-office shared services to the rest of the public sector
• Additional independent shared service centers (ISSCs) planned.

To have a slice of the burgeoning market is a positive for Logica: however, amid all this competition, it will have to work hard to win clients. Buyers are most likely to fall into platform groups divided by SAP and Oracle. Logica is in the fortunate position that it can offer strong SAP capabilities too. The exclusion of F&A and procurement services from the framework agreement could prove to be a disadvantage if the ISSCs offer the complete range of services.

•                Solera Acquires Majority Stake in Sinexia to Enhance Presence in Spanish P&C Market

Dec 13, 2011 | Mergers and Acquisitions by Charles Juniper
industry: Property & Casualty

Solera Holding Inc, has signed a definitive agreement to acquire the majority stake in P&C insurance software developer Sinexia Corporacion Tecnologica. Solera also has the right to purchase up to 100% of Sinexia's outstanding capital shares.

Sinexia's APCAS software is a web-based platform used by assessors and insurers processing automobile and residential property claims within the Spanish market.

Analyst comments:

The size of Solera's initial investment in Simexia was not revealed, but this acquisition carries some risk. Spain is one of the most challenged regions identified by Solera in its Q1 results announced just over a month ago and that led to a downgrading of previous revenue guidance. While web-based platforms that potentially cut the costs of claims will have appeal, the depressed state of the Spanish economy means maintaining revenue growth will be a significant challenge. However, the acquisition will provide Solera with a new client base and IP that potentially could be utilized beyond the Spanish market.

•                Fujitsu America Awarded $250m IT Infrastructure Management Contract by Blue Cross / Blue Shield of North Carolina

Dec 12, 2011 | Contracts by Jamie Snowdon
industry: Healthcare Payers/Insurance

Fujitsu America has been awarded a $250m 5-year IT infrastructure management services contract by Blue Cross & Blue Shield of North Carolina (BCBSNC).

Services to be provided by Fujitsu include:

• Data center management
• Mainframe/server management
• Network management
• Desktop/end-user management
• Help desk services delivered from Costa Rica.

Fujitsu will be managing the middleware, databases and the client's enterprise data warehouse, but the deal will not include any corporate applications.

Fujitsu will purchase the existing data center in Durham and will take on ~185 BCBSNC employees. Fujitsu will take over the service and take on the people in February 2012.

Blue Cross and Blue Shield of North Carolina provide health care products, services and information to over 3.7m members, including ~900,000 served on behalf of other Blue Plans. BCBSNC has ~4,000 employees.

Analyst comments:

This contract is one of the largest IT infrastructure management services contracts signed by Fujitsu in the U.S. Its last large IT infrastructure management win in the U.S. was with Alliance Group in 2009.

The data center is currently at ~50% capacity and Fujitsu will be looking for additional clients to utilize the extra clients. This will give Fujitsu America a data center on the East Coast of the U.S., an important addition its capabilities.

(See separate article for an EHR contract that BCBSNA signed with Allscripts in September 2011).

•                Infosys Awarded 5-Year Application Management Contract by Syngenta

Dec 12, 2011 | Contracts by Jamie Snowdon
industry: Chemicals

Infosys has been awarded a 5-year application management contract by Syngenta.

Services to be provided by Infosys include:

• Standardization of SAP platform across Syngenta globally
• Managing its entire application suite as single prime contractor
• Establishing a business architecture group which ensures IT strategy (particularly applications) is aligned to business strategy

These services will be delivered from Switzerland, India, China, the U.S. and Brazil.

Analyst comments:

Infosys has been providing services to Syngenta for seven years, and for the last two has been working on consolidating and standardizing its global SAP platform. Like many large multi-nationals, Syngenta had accumulated a large number of SAP and legacy applications in local and regional offices. Infosys has been providing support in building a common "foundation" SAP platform which aligns the basic SAP use across the organization. There are three phases to the SAP transformation program and Infosys has completed the first two phases. The initial phase provided the foundation and the next phase completed the standardization, rolling it out into key countries/business units and bringing functionality from other applications under the SAP umbrella. The final phase will complete the roll out to the remaining countries.

Syngenta is consolidating all its applications outsourcing activities under the one framework agreement with Infosys, who is taking ownership for all of Syngenta's diverse range of applications in all 90 countries in which it operates. As mentioned above, over time many of these applications will be brought into the common SAP environment. Infosys will also manage the implementation and provide ongoing management of other applications Syngenta requires. This may mean Infosys working with subcontractors, particularly local players supporting niche/legacy applications.

The business architecture services team will operate on-shore in Switzerland to ensure that applications landscape fits in with the business needs of the organization. The service will use a combination of Infosys value realization framework (VRM) and Syngenta's internal value mapping. These methodologies help focus the transformation activities on process improvement that drives business value and helps evaluate/measure the success of operational changes. Infosys being awarded this service is a demonstration of its ability to position for higher value services.

One of the qualifying factors in choosing Infosys was its ability to operate across all five continents, managing applications which originated in any one of Syngenta's local offices. Although Infosys has a strong global footprint overall it was relatively slow in setting up delivery capabilities of scale in Latin America. In this case Infosys' experience in managing large SAP consolidation engagements for global organizations like P&G and its recent efforts to expand its workforce in Brazil (Infosys more than doubled its personnel in Brazil in 2011) have strengthened Infosys capabilities in the region.

Another key factor was the ability to deliver services rapidly in a fast growth area able to respond quickly to a growing client, particularly when it is expanding into high growth markets. Syngenta is growing rapidly with ~16% constant currency growth in Q3 FY 2011 (from their quarterly results). Infosys ability to demonstrate that it has helped other MNCs grow into emerging markets was an important proof point for this win.

Syngenta's Business Services shared services organization has chosen to outsource to a single primary vendor for support in managing the group's:

• Applications: Infosys
• IT infrastructure management (recently renewing a contract with HP, see separate article from this week)
• BPO (Capgemini).

This will be a major reference for Infosys to demonstrate its ability to provide a transformational service to a multi-national, moreover one which is supporting a client on its growth agenda.