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Atos Origin will either freeze or dramatically scale back its recruitment of IT staff and contractors in a pre-emptive strike against the looming recession. Analysts briefed by the company warned that indirect staff hires will be halted, while “extreme caution” will be exercised when taking on new hires directly. Alongside budget cuts for staff training and travel, the IT contractor for the UK Olympics will also implement a reduction in the number of sub-contractors it uses. The operational cutbacks will coincide with growth of Atos’ presence offshore – to hit its target of low-cost locations housing 20% of its headcount by the end of 2009. The opening of a 3,000-seat IT centre in India early next year will help elevate its offshore workforce from 8% group headcount today, and allow it to catch up with its rivals’ offerings. Cash will also be released to the group once it disposes of its ailing units in Turkey and Thailand, which account for €249m in revenues, further to other possible sell-offs. The cost-cutting measures partly explain why Keith Wilman, Atos’ CEO, told Ovum analysts he predicts growth for the company in 2009 to be in the region of more than 5%. If achieved, the company’s growth will be 1.3% less than it was in this year so far, helped by organic revenue growth of 5.3% at the third quarter of 2008, to €1,329million (£1.08m). Yet Ovum analyst John O’Brien said visibility about where this growth will be achieved remains “sketchy”, and that Atos is going to “find life a lot harder” in this final quarter and next year. “Consulting, while the best performer at a group level, with an 11.2% growth in revenues in the third quarter 2008, is likely to be one of the first to be hit as clients freeze their discretionary spend,” he said. “Likewise, there is real potential for short-term systems integration projects to come under pressure.” The analyst said despite a recent alert from SAP about its own business, Atos expects its SAP services to hold up well due to the long-term nature of existing programmes. Perhaps most fortuitously, is the company’s status as a major outsourcing and managed service provider, where 68% of its business derives from recurring revenues. “This should give it some added buoyancy in 2009, although that leaves the remaining 32% of its business open to uncertainty,” Mr O’ Brien said. “Nonetheless, with a healthy pipeline of business – slightly up on 2007 at €2.6 billion – it is certainly not impossible that Atos could manage modest growth in 2009.” However, he cautioned that turning this pipeline into new business will likely become an “increasingly difficult task” as clients delay decisions on their IT investments. “The acid test for Atos will be how successful it is at turning these opportunities into real business over the next few quarters. Only then will we have a clearer view on its real prospects for 2009.” Nov 11, 2008 Email this article Printer friendly page Previous Page
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