Unisys’ investment in security, automation and cloud capabilities moves the firm to stable growth, and should add them to your selection process

For as long as HFS has been in business, Unisys has been the poster child of a traditional IT services firm grappling with the onslaught of offshore delivery and, more recently, the new digital services market. For over a decade, the firm has posted revenue declines, but under its new strategy and new CEO, the firm is reversing its fortunes by focusing on security, cloud, and automation (see Exhibit 1). This market decisiveness is a boon for large service providers; in a space occupied by firms trying to do everything, standing out is more about deciding what you won’t do. At a recent analyst event in New York, we spent some time with executives and clients from Unisys, who are aiming to bring the firm back on track. For enterprise leaders looking for a partner, this hails the return of one of the most trusted firms in the space.

Exhibit 1: Unisys revenues and margin improve since the firm committed to cloud, security, and automation

Source: HFS Research, 2019

Success in a crowded market is about having a clear story and picking your battles

At HFS, we’ve spotted a trend. In a crowded space where buyers are finding it increasingly tough to spot the differences between providers, one strategic maneuver makes more impact than anything else: having a single, coherent story and a point of clarity about what the provider does and does not do. We’ve seen this clarity impact the success of some firms. Unsurprisingly, the cloud giants have an easier time than many setting their stall out, but even complex, broader IT services firms have pitched their story just right to break out of the pack. Specifically, Accenture, HCL, and TCS have each tailored their story not only to resonate with the market but also to nudge their broader market perception outside of the pack (see Exhibit 2).

Exhibit 2: Stuck in the middle with who? Providers in the IT Services market struggle to differentiate

Source: HfS Research. Buy-side n= 302, Adviser n=171, G2000 study 2018

If Unisys can build a clear narrative, it can move out of the pack and reverse its fortunes

The crux of the issue is that for many years, Unisys’ market position has been unclear. The firm has battled with servicing its traditional clients and bringing in the fresh talent, mindsets, and capabilities needed to battle its rivals in the digital services space. Unisys spent almost a decade not investing in its future.

All of that’s changing if Unisys executives and clients are to be believed. Couple this with the firm’s boosted, industry-leading Net Promoter Scores which, in the past, CEO Peter Altabef had comically compared with secondhand car salesmen and ambulance-chasing lawyers. A big part of this is the strategic decision for the firm to blend its historical strengths with a degree of selectiveness in the type of work the firm takes on. At its core, Unisys focuses on security, cloud, and automation, and each of these is rooted in the highly pragmatic engineering talent that Unisys tends to bring to client engagements.

The firm has invested considerable resources in building out core capabilities in each of these spaces. Cloud Forte in cloud and Stealth in security are each examples of the firm’s fresh client-focused thinking in the space. Alongside partnerships, which include AWS and ServiceNow, the firm brings a suite of solutions and services to help enterprises re-platform their business. The proof is in the pudding; the firm has brought on 150 new clients, lauds an NPS score of 53, and boasts industry-leading client retention rates of 95%. These major changes have all occurred in the three years since Peter Altabef took the helm as CEO and reshaped the firm’s strategy.

With 95% client retention and an NPS of 53, Unisys’ strategy seems to be working—but for how long?

It’s fair to say the strategy is working…at least for now. Focusing on areas of the market where Unisys has heritage and capability is sensible. And by happy coincidence, these are areas of the market showing rapid growth and a discerning buyer class that looks for long-term partnerships. With over a century in the space, Unisys ticks a lot of boxes and increasingly leans on happy client referrals to gain market traction. The firm has also found a sweet spot delivering to government organizations, particularly in the United States, which has helped the firm steer back onto a growth track and reassure the market that Unisys can still be a healthy growing business rather than the increasing analogy of a harpooned whale slowly bleeding out alongside many of the other traditional services firms still trying to find their path back to healthy revenue growth.

But sustaining this will be hard. The market shifts with ever-increasing speed, and while enterprise leaders are looking for secure cloud environments now, they may not to the same extent in the future. Particularly, given that the current horizon of the business seems low, focusing on high-quality services that resonate for the next two to three years. But at the cost of a less structured narrative on longer-term technology roadmap.

The Bottom Line: Unisys has a clear strategy that is gaining market traction. But the firm, and indeed the rest of the market, need to show more agility with their service delivery to ensure long-term survival.

Unisys is pushing a clear story that is resonating with clients in a cluttered market. However, for Unisys and the industry, this may not be enough to sustain long-term growth. Being clear to the market is one thing, but being agile enough to anticipate and meet the next enterprise demand is another thing entirely. Unisys’ leadership team argues that if you arrive to the market “on time,” you’re probably already too late. And while the firm is wise enough to recognize this and embed this thinking throughout its business, it remains to be seen if this will be enough to keep that all-important revenue growth up.