How Capgemini is building tech outsourcing biz

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Digital, cloud and industry specialization drove Capgemini’s organic growth in Q3 2016, says Elitsa Bakalova, senior analyst at TBR.

Capgemini’s strategy to enrich its portfolio, expanding its capabilities around digital and cloud, which collectively contributed 29 percent of revenue year-to-date in Q3 2016, and launching industry-specialized solutions, supported the 2.1 percent year-to-year organic revenue growth in Q3 2016.

The majority of Capgemini’s IT services competitors are competing for digital and cloud work, especially in Europe and North America, driving the company’s emphasis to fill capability gaps by hiring 20 senior digital executives. Less-developed consulting capabilities in the U.S. challenge Capgemini’s ability to attract clients’ CxOs with business-relevant digital and cloud solutions, pushing the company to seek acquisitions in the coming quarters similar to the one of Fahrenheit 212 to scale its onshore specialized skills in North America.

Capgemini solidifies its leadership in North America to capture digital transformation opportunities.

While Europe remains Capgemini’s largest geography, the company pursues its North America expansion, seeking opportunities around digital transformation, cross-selling its portfolio offerings to acquired clients and building client success stories. Leadership appointments, such as those of Todd Rovak as head of Capgemini Consulting in North America and Kim Smith as chief digital officer of its North American Application Services and Consulting Services, will positively affect Capgemini’s less- developed consulting organization in North America when compared to Europe.

Rovak, previously managing partner and CEO at Fahrenheit 212, which Capgemini acquired in February, will drive Capgemini’s digital innovation strategy by combining Fahrenheit 212’s entrepreneurial and outcome-driven capabilities with Capgemini Consulting’s digital transformation agenda. North America accounted for 31.1 percent of revenue in Q3 2016 and grew 0.2 percent year-to-year as reported in euros, with increasing activities in digital and cloud, indicating the company’s next-generation solutions are becoming popular with clients in the region.

Capgemini faces pressures from competitors, such as IBM and Accenture, due to their established North America business structures, consulting and next-generation solution capabilities that enable the companies to win consulting-led digital transformation work with clients in the region.

Capgemini scales its managed security services capabilities to effectively compete with Atos.

To solidify its security capabilities with advanced threat intelligence, detection and reaction services, Capgemini partnered with IBM Security in August to launch a new multitenant Managed Security Operations Center (SOC) in India. The SOC is part of a growing global network of seven facilities, and Capgemini will combine its services with IBM QRadar advanced analytics to provide an intelligence-driven managed SOC.

Expanding its security capabilities offshore provides Capgemini with the opportunity to cost-effectively address clients’ cybersecurity needs and use security as a driver for clients’ adoption of next-generation solutions, such as cloud, mobility and Interned of Things. Capgemini’s competitor Atos is also expanding its managed security services capabilities by opening a SOC in Timisoara, Romania, and has 13 SOCs globally.

Atos positions close to clients in Europe, benefits from local talent and protects clients’ businesses from cyber threats. Capgemini is effectively competing with Atos by expanding SOCs in low-cost locations and by integrating security with analytics through partnering with IBM, which according to TBR’s Enterprise Security Benchmark is a leader in managed security services and maintains investments in SOCs and staff to gain share in the segment.

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