After years of expensive restructuring and strategic confusion, Bull has finally laid down its IT services credentials with a new global strategy and an advertising campaign designed to raise its neglected brand awareness. But the Louveciennes, France-based hardware/software supplier cum services company still has to overcome financial stagnation if it is to truly make its mark in the most competitive sector of the computer industry.
The importance of IT services to the new look Bull is obvious. Service offerings made up some 51.2% of Bull’s total revenue of FFr24.9m ($4.21bn) including related product sales during fiscal 1998 (43.2% minus product sales), having consistently outgrown its traditional server business. To make its service capability clearer CEO Guy de Panafieu has created a new Bull-in-Services division, which brings together Bull’s two existing service lines in a attempt to foster closer integration and better consistency of service. These comprise a range of consultancy, implementation and maintenance services for both legacy and desktop/open systems architectures. These ‘customer services’ operations made up 40.1% of Bull-in-Services revenues in 1998. The remaining 59.9% is accounted for by Bull’s integration services lines, centered around systems and network integration (with an emphasis on ERP systems from SAP and Baan) and outsourced managed services.
Ghislain Lescuyer, co-president, Bull-in-Services and head of integration services, says that sales of Bull’s integration services are most geared towards industry verticals unlike customer services that are more solutions-based. Bull-in-Services sales can be divided for the most part between the public sector (28%), telecommunications (19%), manufacturing (12%, mainly ERP) and financial services (8%) with some historically-based local focus in areas such as healthcare.
Lescuyer is convinced that Bull now has the right range of services to compete in the global market place. It also has the manpower. Bull-in-Services now has around 11,000 employees spread throughout more than 85 countries, some 56% of Bull’s total staff. Of these around 60% belong to Bull’s integration services and 40% to its customer services operation. Lescuyer estimates staff turnover to be less than 10%, well below the industry average, although he expresses some concern that the average age of its consultants was increasing, indicating a failure to attract new talent.
And while Lescuyer makes clear that Bull-in-Services wants to grow its worldwide presence it is trying to establish itself in several key countries first. Bull-in-Services’ first step is to become global in Europe according to Lescuyer. This seems sensible as Europe is by far its strongest market – Bull claims already to be the number five supplier of customer services in Europe and in the top three for integration services.
European revenue streams are far from balanced, however. Some 34% of Bull-in-Services revenues come from its domestic French market with the UK commanding Bull-in-Services’ next largest channel for service revenues, at 20%. This is followed by central Europe (Germany, Austria and Switzerland) with 11%, Italy (9%), Benelux (6%), and the Nordic countries (4%). Lescuyer argues that pan-European contracts are acting as leverage for Bull-in-Services, reinforcing its presence in those European territories where the company is weakest, principally northern Europe.
South America will come next followed eventually by the USA (together these account for only around 10% of Bull-in-Services revenue). In the US, Lescuyer is hoping that Bull-in-Services can leverage the company’s growing North American software business, which has recently been increasing at about 70% and is headquartered in Boston, Massachusetts, as well as its customer services partnership with Wang Global (which also extends to Australia and Mexico). The failure to date of European-based service rivals such as Sema Group and Cap Gemini to conquer America, suggests that Bull-in-Services’ conservative US strategy may be prudent.
But despite a clear strategy, Lescuyer is aware that Bull needs to raise its services profile. The public face of Bull’s services offerings remains somewhat confused by different branding across territories. There is also an urgent need to dispel the image that Bull is just a provider of arcane hardware, if it is to achieve its objectives. With this in mind, on April 26, 1999 Bull started a high profile advertising campaign charged with raising the profile of the Bull name. The campaign, currently focused mainly on Europe, centers on Bull’s security and smart card offerings. In due course the emphasis will shift to Bull-in-Services.
Despite the recent creation of Bull-in-Services, many of its services are sold under the name Integris. Integris remains, for the time being, the principal outlet for Bull’s services in the UK and Brazil, as well as offering outsourcing services in France and the USA.
This confusion could severely affect the company’s growth potential, as could its limited geographic penetration of the important US market. However, Bull-in-Services problems are not just limited to brand awareness and market penetration. Lescuyer is acutely aware that Bull as a whole needs to become more competitive if it is to remain viable, despite the fact that Bull-in-Services was the only division of Bull’s business to record growth during fiscal 1998. Bull has invested considerable expense in retraining staff – many for services work. By the end of 1999 it will have spent FFr1.0bn ($169m). And with only 7.4% revenue growth in 1998 Bull-in-Services still lags some way behind the sector average of between 15% and 20%.
Lescuyer is not down-hearted though, pointing to a number of key growth areas for Bull-in-Services. First is security and distributed systems management, leveraging Bull’s highly regarded AccessMaster enterprise systems management product and its undoubted smart card experience. He admits though that the company faces strong opposition – particularly from IBM and Computer Associates in the systems management arena. A second area marked down for expansion is the growing demand for so-called extended ERP solutions, such as customer relationship management and sales force automation. Here, Bull-in-Services can leverage its 1,000-plus ERP consultants, each of which generates around FFr1m ($0.17m) each year.
E-commerce will also become an increasing focus for Bull-in-Services and it is soon to announce a new range of e-commerce offerings. Again Lescuyer believes it already has the basis for strong sales through a combination of its Internet and smart card experience. Similarly, managed services could also play an expanding role in Bull-in-Services growth, although the company is keen to avoid competition with big deal specialists EDS and CSC. Instead Bull-in-Services will be concentrating on the expanding market for applications and network management among small to medium sized companies and is actively investigating new management technologies like application hosting with this goal in mind. This is likely to be the focus of Bull’s services push in the US.
However, Bull-in-Services’ growth is likely to remain mainly organic, at least in the near future. While Lescuyer admits that Bull is always looking at making small acquisitions in its targeted areas, shortage of disposable cash and the fact that many takeovers in this sector fail is likely to lead Bull-in-Services to grow its core competencies internally for now.
This may change, though. Bull is looking for greater external investment to back up major shareholders NEC, Motorola and France Telecom, each of which currently holds 17.7% of the company. Lescuyer hints that this may be achieved by reducing further the equity held in Bull by the French Government. This may happen quickly but we are just at the beginning, says Lescuyer. He also suggests that extended partnership agreements with other service companies, similar to that with Wang Global in the US, are possible. Cambridge Technology Partners has been mentioned in this capacity.
Bull is not rushing head first into the worldwide IT services arena but it is beginning to show its horns.
