Yes, it is official. It is not good to be a market leader in the Benelux IT services market. We already hinted that Q4 would be grim a couple of months ago. And it is. Atos down 10%; Cap Gemini down 8%; Ordina down 8%; Logica down 5%; KPN Corporate down 3%; All five combined down 6%. Full year revenue decline all combined: down 4%. Ouch!
What’s the problem? Couple of things. Demand is down, especially in the government sector, but also in financial for some. Competition is heating up, especially from Indian based low cost vendors. Consultant skill sets and product portfolios are out of balance with Enterprise demand shifting to public cloud services and buying power shifting from IT to the business.
But the underlying problem is deeper. None of the five vendors seem to be able to formulate an answer to the changing market conditions. None of the five are gaining market share. And here is the thing. Government spending is likely to remain flat for some time, with Government announcing extra budget cuts. Financial markets will remain volatile, with priority number one being an improved balance sheet. Low cost competition will continue to heat up. Enterprise demand will continue to shift. The IT services market is likely to remain flat for considerable time. What to do?
For the time being it looks like the five are painfully transitioning to become a copy of the low cost India based vendor, and some are further down that path than others. But with new initiatives around social, mobile, and analytics likely gravitating towards public cloud, and buying power gravitating to the business, a repositioning of portfolio, skill sets, partners, and customer base is what is also called for.