HFS Research attended Atos’ 2019 Global Analyst Summit in Boston, its first update to the global analyst community since its $3.4B acquisition of Syntel in July 2018.

Our previous analysis from the company’s investor update assessed Atos’ immediate plans for Syntel’s global delivery capabilities to re-balance its services mix to drive higher margins and cost savings. After the current summit’s discussions, HFS believes that Atos needs to move much faster with its integration efforts, and have a crisper message clearly outlining how it customers will benefit.

Enterprise clients that currently work with Atos – or its competitors – must carefully evaluate whether they will derive value from the combined entity. Will Atos leverage this valuable asset and truly transform to a business outcome and solutions-focused company, or be content to remain as a competent IT firm with offshore gains that are rapidly losing relevance to customers in their hyperconnected journeys (Exhibit 1)?

Exhibit 1: The hyperconnected future state

Source: HFS Research 2019

Atos’ 2021 growth strategy will require a massive shift from legacy Atos

Like all its IT services-focused competitors, Atos is attempting to transition towards high-value digital services and solutions. The event centered on its “Advance 2021” three-year plan, including alignment by industry, growth of digital including a major focus on Google Cloud, delivery of business outcomes, and reskilling and certifying its workforce – all initially targeting its top 100 “global integrated accounts” (Exhibit 2). However, its articulation of execution feels like legacy Atos. There was a notable lack of Syntel representation on the main stage, with the onus very much on the existing (pre-Syntel) or new guard Atos leadership driving the narrative, and a dearth of discussion of the impact of Syntel and its proprietary Syntbots process automation platform, which has real potential with clients.

Exhibit 2: Atos’ 2021 growth strategy

Source: Atos 2019

Customers don’t care what you’re selling, only what value you can bring to the table

As the CIO agenda gives way to increasingly influential business buyers, customers are much less interested in service provider identities as consultants, software providers, systems integrator or outsourcers, instead expecting a broad representation of all of these capabilities to help them innovate and meet their business needs as shown in Exhibit 3. While Atos is finding success in partnering with clients on their cloud journeys, and expanding its cybersecurity solutions, these are largely still IT-driven agendas. Atos has limited business transformation capabilities and business process expertise, where competitors such as Capgemini/iGATE and Accenture have significantly pulled ahead.

Exhibit 3: Enterprises need a curated set of capabilities from their partners to drive digital transformation, not sales and contractual models that reflect antiquated provider org structures

Further, Atos’ automation, AI, analytics capabilities remain fairly siloed. This is going to hurt its chances in a market that has moved beyond siloed automation experiments and onto concepts such as “integrated automation.” Atos stated that it has over 100 clients for automation – if you are one of these, look for whether broader Atos capabilities are presented merely as a cross-sell opportunities, or truly integrated solutions.

A few bright spots that Atos can build on to further its “Advance 2021” strategy

Customers should look for progress in the following critical pillars of Atos’ development:

• While Atos can and do support other cloud environments, it is placing a big bet on Google Cloud, as a premier partner with more than 300 certified technical staff and 1500 trained sales people supporting 26 deals and growing. So few companies are cloud native today, thus this present strong opportunity for Atos to service this technical debt.
• Atos is matching its “reskilling” rhetoric with rapid and sweeping action. We heard about a redoubled effort on digital certifications, cultivation of industry expertise, and a critical focus on internal use of automation, AI and smart analytics to improve the quality of work and retention. Over 100,000 employees have already earned new technical certifications in the last year, with upcoming plans to expand training to impact domain knowledge.
• Clients including Coca-Cola, State Street, CoreLogic, John Hancock, and Siemens spoke about business objectives and the innovative ways from IoT to automation to analytics are enabling these companies to advance their businesses. Two new deals in the last year that were highlighted throughout the event (Aegon and CNA) are solely based on revenue-tied business outcome models. This is a sign that Syntel’s willingness to try new models and take risks is transferring into the larger Atos organization.

Bottom line: Atos must move much faster to integrate Syntel’s capabilities to stay competitive in the hyperconnected economy

Atos is making critical internal investments in employee enablement and technology innovation. But, if it doesn’t move quickly to integrate and embrace Syntel’s capabilities, it will not be able to bring its value to clients. To enable its clients on the journey to become hyperconnected enterprises requires a substantial amount of change from within and the ability to move the customer dialogue from what can we deliver to what can we create and innovate together.