Over the last year or two, CSC has gone from looking like a certainty to be the target of the largest-ever acquisition of an IT services provider to beefing up its own capabilities to meet new strategy aims. Realizing that its home territory of lengthy, full-service outsourcing deals with the world’s biggest corporations and numerous governments was under imminent threat from market changes and increased competitive pressure, the company has executed a quick turn to broaden the markets that it can target, and to focus its resource levels more accurately.
For example, in Europe, the UK’s National Health Service transformation program, NPfIT, has become one of CSC’s biggest commitments, since it took over (after Accenture’s failure) the main systems integrator role in the east and northeast regions, adding to its incumbency in the northwest and West Midlands areas.
However, while constituting a major opportunity within the rapidly-growing healthcare sector, this level of exposure to the success or failure of the NHS program has led directly to a tricky position, in which CSC has felt it necessary to intervene directly in the fate of iSoft, the company providing vital application functionality to the project. Whichever way the provenance of iSoft is resolved, CSC will remain critically affected by the outcome, but may be prevented from having as much control over its fate as it would wish.
Perhaps most marked is the change from a few years ago in CSC’s position on providing its customers with access to the cost advantages of offshore locations. Having seemed somewhat behind the competition, in having a smaller scale of offshore resources, and taking what some viewed as a legacy, ‘body-shopping’ approach, it is launching a fully-marketed solution in the form of India Direct.
Having augmented its staff levels of some 9,000 in India by the recent and highly significant $1.6 billion acquisition of Covansys, CSC will go forward with at least double that number of Indian resources, and with an approach that aims to take on higher-value tasks, such as technology consulting from India, rather than solely more commoditized work.
With the Covansys acquisition, CSC is catching up with similar moves made in the past few years by its major competitors, such as IBM (which acquired Daksh), EDS (with Mphasis), and Capgemini (with Kanbay). The greatest difficulty evident in its results was lack of growth, and this must be seen as the major prospect with the scope that India Direct offers.
The move will enable CSC to compete more strongly with the top- and second-tier Indian service providers that are targeting so effectively its established customer base. CSC also intends to use India Direct to take on much smaller-scale deals than it typically has in the past, part of the aim being to allow its large customers to consider undertaking those niche transformations that can provide the agility they lack, in comparison to smaller competitors.
CSC looks like it is moving to address the fast-changing markets it competes in, but in a number of key areas it seems betwixt threat and opportunity, with strategic changes in progress that have yet to reach their conclusion.
Source: OpinionWire by Butler Group (www.butlergroup.com)
