2005 Financial Report - Capgemini

8 ANNUAL
THE GROUP
Capgemini
Veolia Environnement, to name but a few – and in North
America where, during 2005, the Group rolled out a major
outsourcing agreement signed with TXU and won new
contracts in Canada with Hydro One and Ontario Power
Generation.
The major challenges mentioned here are prompting companies
active in this sector to take on profound transformations
of their organizations and, therefore, of their
information systems. They are also looking more and more
to outsource certain functions such as IT, or certain processes
such as those related to customer-relationships. At
the same time, new market segments are developing, such
as consulting on CO2 emission certification or the deployment
and management of information systems connected
to the new “smart” meters installed right at the users’ sites
(for which an alliance, called Smart Energy, has been formed
between Capgemini, HP and Intel). And the outlook,
as they say, is bright. During 2006, we are likely to see a
wave of acquisitions within the Utilities segment, both in
Europe and in the United States, generating new business
for service providers such as Capgemini.
3.3 The Manufacturing, Retail & Distribution
Sector: global challenges
Globalization, competitiveness and consolidation: these were
the three factors which most characterized this sector during
2005 and which will most likely continue to do so in
2006. The sector accounted for 28% of Capgemini’s total
revenues during 2005.
With the arrival of new industry players from emerging countries
(India, China etc.), globalization means playing by a
whole new set of rules. 2005 also produced quite a few
surprises from China, with the Chinese manufacturing company
Lenovo’s acquisition of IBM’s hardware activities (PCs).
Conversely, western groups such as Siemens, Alstom or
Schneider Electric, a client of Capgemini in a far-reaching
contract for transformational outsourcing, are placing significant
emphasis on Asia and Eastern Europe as they seek to
achieve growth. General Electric, the American conglomerate,
considers that, in the next ten years, 60% of its
growth will arise from the emerging countries.
As a result of this trend towards globalization, the established
players need to accelerate their transformation in order
to remain competitive. Due to its considerable sector knowledge
(as evidenced by worldwide logistics or automotive
studies), Capgemini can deliver added value to its clients.
In addition, specific RFID (Radio Frequency Identification)
expertise and mobility have enabled Capgemini to pro-
REPORT 2005 Capgemini
vide retailers with the solutions they are seeking for sales
outlets and back-office systems in order to help them to
reduce costs or, even better, to improve growth.
On the other hand, car manufacturers, for whom 2005
was a difficult year, are continuing with their programs of
cost reduction, reorganization, improvements in logistics
and reinforcement of their collaboration with suppliers.
Having won a transformational outsourcing contract early
in the year for General Motors, Capgemini – having been
selected as strategic partner - once again demonstrates that
it is at the very heart of this movement.
This sector - and the industrial world in general - are the
most advanced in their use of outsourcing, shared service
centers and BPO (Business Process Outsourcing). Hence,
the Canadian manufacturer Bombardier entrusted Capgemini
with the BPO of its publishing and technical documentation,
a first in the world of aeronautics.
3.4 The Financial Services Sector: an activity
on the upswing
In the world of banking, 2005 was marked by the announcement
of a number of mergers. These deals were seen as
major events in Europe, where retail banking remains a
highly regulated industry, organized along national lines and
dominated in each country by local players, as demonstrated
by the World Retail Banking Report.
The financial capabilities of certain banks enable them to
consider acquisitions. Future marketplace consolidation will
be extremely important for the Group, which is closely monitoring
its movements because each merger can bring major
transformation projects and information system overhauls.
Furthermore, Capgemini has made significant investments
in BPO (Business Process Outsourcing) in response to the
growing needs of financial institutions in the area of cost
variability. The Group has just signed a multi-year BPO
contract with Zurich Financial Services, one of the world’s
largest insurance companies, to take over part of its financial
and accounting functions. And new developments are
on the horizon for a ‘core business’ BPO in the area of credit
and mortgage loans, in particular.
More broadly, banking and financial institutions are investing
in their IT systems after several years of spending freezes,
following the transition into year 2000 and the transformations
connected with the euro. According to analysts at
Forrester Research, financial institutions will be investing
approximately 50 billion euros in their IT platforms over
the next 7 years.