INTRODUCTION TO THE CAPGEMINI GROUP

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2 2. INTRODUCTION TO THE CAPGEMINI GROUP Capgemini provides the technological back-up—especially in cloud computing—and the expertise to build e-commerce platforms combining flexibility and speed. �� Telecom, Media & Entertainment: operators in this sector are facing many challenges—lower revenues from their traditional activities, digital content competition from players in other sectors, and saturated networks following the explosion in digital content. With more than 30 years’ experience in the sector, Capgemini offers innovative solutions based on its deep sector and digital knowledge, and its technological expertise in networks. �� The services sector also has strong growth potential. Capgemini’s sectoral skills may be combined with one another in order to improve clients’ business processes across the board. For example, for Anglian Water, a UK water supply company, Capgemini drew together its experience in outsourcing and utilities with its expertise in energy and retailing. Anglian Water was intrigued by the solutions provided by Capgemini for oil companies piloting their Norwegian drilling platforms by remote control, and for one British retailer, ahead of the pack in client relations, in managing its call center. 10 REFERENCE DOCUMENT 2010 CAPGEMINI TRANSFORMATIONAL ABILITY Capgemini has proved its capacity to weather macroeconomic storms and to make the very most of innovations and technological breakthroughs. This resistance is largely attributable to the Group’s double positioning within both the “businesses” and “sectors” in its area of activity, to the strategic decisions it took at the end of the 1990s (reduced exposure to cyclical activities in favor of recurring outsourcing activities) and to its major transformation programs (see graph below). MAJOR STEPS IN THE GROUP’S TRANSFORMATION SINCE 2000 ;6 : 9 8 7 6 M"0/'N !"#"$%"&'($')(**(+$&'+,'"%-+& ./"-01($2')0-2($'345 EFG H++&1"- ABC%D" H0I 7666 766; 7667 766@ 7668? 766> 7669 766= 766: 766< 76;6 ?'''''J(2%-"&'0CC+-K($2'1+'AJ!L' In 2002, Leap! turned outsourcing and BPO into the Group’s fourth major businesses. The challenge for Capgemini was to draw on its global presence and distinctive business model to stand out as one of the leaders in the field. Launched in the first quarter of 2005, Booster aimed to permanently turn around the Group’s Nor th American operations. The plan took a three-pronged approach: simplified structures, reduced costs, renewed management. In September of the same year, the Margin Acceleration Plan (MAP) was launched to improve growth and profits in outsourcing. With similar ambitions to the 2000 Genesis program, the I.cube (Industrialization, Innovation, Intimacy with the client) transformation program was launched in 2007. Its aim was to adapt Capgemini’s offers and organization to profound market changes and to strengthen Group resilience in times of crisis. The most recent transformation program, launched in the last quarter of 2009, Business as Unusual (BaU) contains three aspects: the global launch of five new service lines, lean management, and a new approach to human resources management aimed at turning Capgemini into a “talented company.”
CAPGEMINI REFERENCE DOCUMENT 2010 2.3 The market and competitive environment The Capgemini Group operates in what US market analysis company Gartner calls the IT services market, with the aggregate worldwide market totaling 483 billion euros in 2010. (1) Capgemini is regarded as seventh largest global player and in fifth place if the Japanese market, where the Group is not present, is excluded. (2) North America, the number one IT services market estimated at 202 billion euros in 2010, (1) represents an important part of the Group’s business, although Capgemini is not the leader there. Western Europe is the second global market, estimated at 142 billion euros (1) in 2010: here the group ranks second overall but is market leader in France and the Netherlands. (2) Other markets (excluding Japan) were worth an estimated 69 billion euros in 2010, with more rapid growth (+11% in 2010 compared with +1% for the whole of North America and Western Europe). (1) The Group’s global market share was around 1.8% in 2010: in Western Europe it stands at around 4.7%. (2) Gartner segments the market into the following categories: Consulting, Development & Integration (D&I), IT Management and Business Process Management. This categorization more or less correlates with the Group’s businesses, although Gartner’s IT Management and Process Management are grouped together under Outsourcing Services (OS), while, for Capgemini, Development & Integration come under Systems Integration and Local Professional Services (LPS). Since the different markets are closely related, there are overlaps in areas such as applications—which encompass both development and maintenance activities and are close to three Group businesses (TS, OS and LPS)—and IT infrastructures. The Consulting market totals 54 billion euros. (1) Overall, the Group is regarded as the number ten global player, with strong positions in Europe. Consulting is the most cyclical of all the segments. The Development & Integration market is estimated at 170 billion euros. (1) The Group is regarded as ninth player worldwide and second in Europe. D&I is also relatively cyclical, especially in local professional services, which function in short cycles and contracts, while systems integration activities have slightly longer time frames. Consulting and D&I mainly comprise investments on behalf of Group clients, making these cyclical markets too. IT and process management both involve, for the most part, maintenance and operations, with longer cycles and contracts, making them more resilient. The IT management market is estimated at 164 billion euros, (1) and the Group is regarded as the ninth global player. The process management market is estimated at 95 billion euros, (1) but the Group is not among the leaders in this segment. 1 Gartner Dataquest Forecast: IT Services Worldwide 2007–2014, March 14, 2011, Professional Services. 2 Gartner Dataquest Market Share: IT Services 2010, March 31, 2011, Professional Services. THE COMPETITION 2. INTRODUCTION TO THE CAPGEMINI GROUP Capgemini’s competitors may be divided into three groups: global, offshore and regional players. Global players include the two information technology giants, IBM and HP (the latter doubling its presence with the purchase of EDS in 2008). Their presence in other, closely related, hardware and software technology markets enables them to capitalize on their client relationships in a larger market. The pure IT service players, Accenture and CSC, come next. Capgemini can claim to belong to this small group of global players, its most direct competitors. In this group are also included groups of Japanese origin, such as Fujitsu and NTT Data, mainly present in Japan but who are developing their presence elsewhere. The offshore players (essentially Indian in origin) are the emerging players in IT services and, the biggest amongst them, such as TCS, Infosys, Wipro, Cognizant or HCL, can claim to compete against the global players. Lastly, the regional players, of which there are many, given that there are few entry barriers in IT services. Generally, they do not have the deep offers or the geographical coverage of the global players. The largest are Atos Origin, T-Systems, Siemens IT Services, Logica, Indra and Steria in Europe, and Lockheed Martin, SAIC, CGI, Deloitte and Xerox in North America. MARKET TRENDS The marked change in IT service market structure is mainly due to the spectacular development of offshore that first surfaced in 2000, driven by Indian service companies. These attacked the North American markets by providing them with offshore manpower, well-trained and low-cost, which enabled them to slash their prices. This is how they were able to win market share rapidly, especially in the most accessible market segments (re-engineering, maintenance and application development) and in the English-speaking world (the United States, but also the United Kingdom and Canada). Today, they are gradually moving into more complex market segments (installation of software packages) and into non-English speaking countries (first the Nordic countries, then the Netherlands and Germany and, most recently, France). In order to face up to the competition, all the players, particularly global companies such as Capgemini, have strongly stepped up their presence in India, adjusting their delivery models so as to allow their offshore teams to participate and, subsequently, to increase their involvement in the development of clients’ projects: in this way, they have been able to restore their margins and lower their prices, so keeping a competitive edge. The offshore players, on the other hand, have responded by strengthening their local presence to develop client proximity and grow in market segments where remote work is difficult to handle, as in consulting. 11 2
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