Atos’ 3-year-plan to strengthen its position as a pure play leader in IT services; key take-aways from the Investor Day on January 30, 2019

Atos remains true to itself in all matters linked to operational excellence. But we are observing a real transformation of the group's model.

The 3-year-plan follows a complicated year 2018. As such, a substantial part of the Investor Day was dedicated to presenting the intended short-/medium-term transformation measures to put the troubled business areas back on track (IDM, US, Germany), as well as to increase the level of margin despite the low growth rate.

The partial divestiture of Worldline was an expected major announcement. This move is in fact a good deal for Atos’ shareholders in the short term. More importantly, with the newly gained autonomy at financial and management level, Worldline will be able to pursue its development strategy aimed at consolidating its leading position in the European landscape of payment services providers. Among other things, it intends to replicate the model of the SIX Payment Services deal if the opportunity arises. Gilles Grapinet, who since February 1st has dedicated 100% of his time to his role as Worldline CEO, has strong ambitions to lead the consolidation wave of the European payment services industry.

The Worldline success story, which in 10 years has grown from a division of a fragmented group to a leader in its market, is a perfect illustration of Atos' leadership expertise. This is why Thierry Breton's barely veiled message to apply this model to the company’s cyber security activities was the other major announcement of the day. The BDS (Big Data & Security) division is the best performing business of the group. It comprises former assets from the acquired company Bull, is IP-intensive and very different from the historical core activities of the group. At first glance, Atos has all the elements to blossom into a leading security player in Europe, offering complete solutions, including hardware, software and services.

In openly discussing the execution problems encountered in 2018 in the IDM division, particularly in its two largest markets (USA and Germany), and explaining the measures taken, Thierry Breton has sent a strong message. A necessary signal to keep up confidence of the financial markets, given that the Atos stock has been hit hard in the past 12 months.

Eric Grall, COO of the group since summer 2017, has clearly taken over the reins of the IDM division again. The presented plan is solid; Eric's enthusiasm persuasive. Therefore, we trust IDM to return to a solid operational performance in the short term (not only in terms of efficiency but also organic growth). The long-term vision of positioning the IDM asset at the heart of EDGE computing models is in fact very interesting. For several years, I have been stressing the importance of Atos building on its historical expertise and business model to help its customers tackle their (digital) transformation in a differentiated way and leverage new levers such as IoT or the cloud.

Simon Walsh (formerly Dell), who had his first appearance as the new CEO of Atos USA, chose to present himself as a man in the field, with thorough knowledge of the business and a close relationship to both customers and employees. Our impression: he is the right man with the right approach at the right moment.

The acquisition of Syntel is a real game changer, not only for the American market. Through this move, Atos is completing its model and finally integrating substantial capabilities into its global delivery model, based on the two pillars of offshore and automation. Of particular interest is the company’s statement that the Syntel model has been adopted for all Business & Platform Solutions (B&PS) activities in reverse takeover mode. A roll-out to all major customers and contracts is planned in the coming months.

It seems that Atos has accepted the importance of B&PS for the success of its verticalization and for positioning itself as a strategic partner for its very large accounts ("one Atos").

What are we going to learn from that day? The company’s performance in 2018 was presented as a consequence from execution issues rather than major structural problems. The strategy concerning Worldline and planned cyber security activities are in fact major announcements with a substantial impact on the company’s value creation.

At first sight, the new strategic plan suggests that Atos will remain true to itself: financial orthodoxy, operational efficiency and a clear vision of the evolution of the business lines in the face of the major (technological) trends to come.

On closer inspection, however, the company’s positioning is being shifted much more strongly: the adoption of the Syntel model for its B&PS activities, the announcement of a verticalized organizational model and the new vision for IDM all illustrate that the management recognizes the company’s need to evolve.

The subjects of necessary consulting skills, subject matter and CX expertise have not been sufficiently addressed, however, even though the group has made good progress in this regard in recent years. And I see only limited ambition of B&PS at a time when market conditions remain exceptionally favorable and most C&SI players are performing very well. We will see if this was a deliberate precaution after a complicated 2018.