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July 29, 2009

Cloud computing adopters fear becoming “guinea pigs”: Atos UK CEO

Most customers not ready for new paradigm

By Jason Stamper

Keith Wilman, the UK CEO of IT services firm Atos Origin, said that the firm’s clients do not want to act as “guinea pigs” by becoming cloud computing early adopters.

“Cloud computing is a technology that will be embraced by our clients but right now what they are looking for are technologies with a quick return on investment that can improve their efficiency,” Wilman said. “They are looking right now for the tried-and-tested – they don’t want to be the guinea pigs.”

The Atos UK CEO said that clients today are instead looking to more mainstream technologies such as server virtualisation.

The UK operation did better in the firm’s first half results than the company as a whole: in the UK revenue was up 6%, compared to an organic decline of 2.4% across the group. Wilman put the better-than-average performance in the UK down to the fact that there is less exposure to time-and-materials contracts here than in most other geographies.

Asked whether the London 2012 Olympics – for which Atos Origin is the main IT services partner – had added a boost to UK revenue in the first half, Wilman said that most revenue related to the Olympics is separated out from the UK figures, apart from a deal with the Olympic Delivery Authority worth around £4m a year for the next three years.

Wilman also said that the UK operation started a major cost-cutting exercise, including staff cuts, last year. “The order of the day now is business winning,” Wilman said, “and in fact we are recruiting now and will continue to do so this year.”

Wilman also said that 20- to 22% of the UK operation’s revenue now comes from ‘output based’ contracts. These are deals where the customer pays for the product of the IT delivery, rather than the IT infrastructure itself. “For example the ticketing at National Express, or Go-Ahead London: if they sell a ticket, I get a fee. Cineworld, NCP – I get a fee. We have to make sure all the IT behind that ticketing works and if it doesn’t, obviously I don’t get a fee,” Wilman said.

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Wilman said ‘output-based’ contracts are growing rapidly, and he expects the UK operation to be able to announce a couple more output-based wins this year, one of which is the infrastructure to support a loyalty card scheme.

For the first half 2009, Atos posted revenue of EUR 2,589 million, down 2.4%. Excluding a EUR $14m charge after the insolvency of one of its former customers, Arcandor, operating margin increased 5%. Net income came in at EUR 74m, while net debt was down from EUR 514m to EUR 328m.

Worldwide, consulting was down 22.6%, systems integration was down 9.3%, but managed operations was up 5.4%.

Thierry Breton, chairman and CEO of Atos Origin, said: “During the first half of 2009, the Group implemented strong measures to address the deterioration in the economic environment in order to control its cost base and to improve its operational profitability.”

“The implementation of the TOP Program contributed directly to the improvement of the operating margin by circa 50 basis points. The TOP Program will continue to accelerate in the second half of 2009 which means the Group is confirming its guidance that there will be an improvement in operating margin of 50 to 100 basis points this year,” said Breton.

Geographically, the UK saw 6% growth and Atos Worldwide saw growth of 5%. France and Rest of the World reported a decline of less than 2%; Germany / Central Europe / EMA and Iberia / South America reported declines respectively of 5.2% and 6.9%; Benelux reported a decline of more than 11%.

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