Sunday 16 January 2011

Real Profitability Part II: classical System Integrators

In my previous post I gave away financial stats on The Big Three and The Big Four, showing their revenue, profit and R&D - for the company as a whole but also calculated relatively for each employee

As Wim Rampen marvelously noted, the real drooling stats would be in measuring all that by customer, rather than employee - but these figures would be hard to come by, and remember this is just a one-size-fits-all calculation, not subdividing all that in hardware, software, services, licenses etcetcetc...

Still, the quest continues, and this post contains the same calculations for the classical system integrators: Accenture, Capgemini, Logica and Atos Origin. This is from my / a European point of view, I promised to do this post today and have little time but it'll give you an impression - or should I say shock?
Update Jan 17th 13:42 CET: added 5-year figures, formatted with decimal-point
There has been a lot of consultant-bashing going on lately, some of which I wouldn't even think of arguing with, but if you compare these stats to the ones in my previous post, I think you'll change your mind about that. I think it suffices to say that I have expanded the profit per employee with three extra decimals...
  • First, the stats: absolute ones, in billions. Note the different currencies. Allow me to be perfectly blunt: a pound was 1.3 euro back in 2009, and a euro was 1.3 dollar. It would be beyond my capabilities to to report everything in euros, but if you want to give it a try, please feel free
  • Second, the relative ones, in thousands. So e.g. the average Capgemini employee is contributing an average operating profit of 3,236 euros per year over this 5-year period
    ... (a pause to let these figures sink in)

    An average revenue of 100K euros per employee roughly for every one of them, profitability varies greatly: an average of 7,500 euro operating profit per employee.
    One could argue that then probably costs are very high and all potential profit is just thrown away, but the average costs are 95K euro per employee: that pales in comparison to what the Big Three and Four do...

    Most noticeable, none of them spend any money whatsoever on Research & Development, save Logica: although that varies greatly over the years.
    What does that mean, not investing any money in Research and Development? One would expect consulting to be the product for these companies, and training / education being the R&D.
    Well, no quantitative figures on that, alas

    It is really funny how all these system integrators talk about training, education and research and development in their glossy annual reports, but when it comes to their financial reports, there is much less of that - and no financial stats or figures expressing them. And when all the financial figures are straight-jacketed down into a 10K, Accenture even manages to not mention the word "education", "training" or "R&D" even once.
    So, my conclusion: at best these companies treat innovation and training as hidden costs - and certainly not as an opportunity

    Next post will be the non-classical system integrators: Indian players
    In the final post, I'll compare them all and have a little chat about cost, margins and the very near future for all players.
    For now, I think you'll just feel bad for the poor system integrators - or at least their employees?

    Again, with the next post, you're in for a BIG surprise

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