Helping companies go digital has become one of the biggest opportunities in the IT services and consulting space. Large consulting companies like Capgemini have massively scaled up in skills and systems in responding to this opportunity. This is as much a story of internal organisation change as it is of external opportunity. But there is much more to it. What has been Capgemini's own journey and learning here ? I interview Thierry Delaporte, COO of Capgemini
Mr Delaporte, thank you very much for speaking with me. Very broad question first, you have been investing heavily in helping your teams become digital ready. You have 211,000 people working for you so I am assuming this effort would have touched tens of thousands of people if not more. What has been the outcome and results so far ?
Thierry Delaporte: Yeah, Govind we are in an industry where, if you’re not keeping up with the evolution of technology, you become rapidly irrelevant. What has happened over the last year has been with, what we call, if you like ‘the digital wave’. This has completely changed the priorities in the way technology is being seen by companies, to transform themselves over the next years.
Our priority has been to continue to stay focused on what was going to be the new. What’s coming next? We are about technology. But it’s about innovation and so staying close to what’s going on in the market. And how it can boost the performance of companies.
What we call the new is about digital, cloud, data and cyber security. Therefore, the need for us was to rapidly rotate our portfolio of offerings in this area where we know demand is going to accelerate over the years. And, indeed, we’ve had strong, if not super-strong growth, double-digit growth, in this new digital and cloud, around the world.
You’ve said that we are a people business and it is critical to get our people current with technology evolution. In India, you said it, we have 110,000 people, more than 50% of the entire group, the most fantastic power force of Capgemini. With this huge concentration of talent, it was absolutely critical that this population be current and focused on new technologies.
We’ve invested in hiring talent, in training talent, in up-skilling people. Let’s be clear, it’s exciting for the people to learn about technologies, the potential of it. It’s actually fun for them. They love what’s new; they love to play with the potential of technologies. For them, investing the time into learning more about what’s happening in cybersecurity, what’s happening in data or cloud is nothing but exciting.
So, 45% of your revenue is cloud, and in digital that’s grown 20% as much more than every other sector or most of the sectors. But, on the other hand, Business Process Outsourcing (BPO), which is an area we are all familiar with, sitting in order of India, has slowed down. So, why is that? Is that because of specific geographies or?
Business Process Outsourcing is a very important part of our business.
And this is just, if I may supplement, this is not a question aimed only at Capgemini. This is, I am just trying to understand what’s happening in the environment as a whole here.
I will tell you. BPO is being transformed by the power of automation. Automation is about how can you improve, streamline, accelerate; do your different processes via technology. Automation is in some cases reducing the need for individuals, which somehow is impacting revenue itself. But it’s the reality. So we are going through this transformation. We have engaged, you know, several months ago, a real shift of our portfolio in BPO.
We have a strong base around accounting and finance. We really have a leadership position, in there. What we are doing is accelerating our investment around intelligent process automation. And around digital supply chain. So, those are two areas where, we are shifting our attention, growing our capabilities, up-skilling our people and will rapidly find growth.
So, when you talk about growth in digital, in cloud, could you illustrate that for us through the eyes of a big client or business sector or an industry that you work with? For instance, you just said finance is a big one.
Yes, for sure.
And how that has changed for me, the consumer, and my touch points.
In banks it has changed it completely. Take a step back, five years ago. You go in a bank. You are in front of, you know, the director of the branch. He’s asking you your bank account. You can give him your name. He doesn’t know you. He gets some details. He probably sees your balance position. Has no clue who you are. Doesn’t know who you like, doesn’t knew what you need. How can he push products to you ?
The obsession of the banks has been in terms of managing their customer experience, improving it. How can I empower my employees to be able to get the information they need in order to provide and have an intelligent discussion with their customers, every time, they see them?
That has completely changed interaction. But, for banks, digital transformation has also been about how can I streamline my processes. How can I do that in the back of it ? So, behind the customer interaction processes, we have simple processes. Banks are dealing with immense challenges, coming from the level of complexity and so digital transformation is about driving more leaner processes, less expensive, more efficiency.
And if you look ahead, what are the kind of challenges that you see for both customers and for yourself in delivering, let’s say, more precise and fine-tuned offerings of digital transformation products in services?
Digital transformation will always be about what is the business challenge we are trying to address. Two, what kind of data are we exploiting ? How do we leverage all the data ? How do we make them, you know, good quality?
Three, do we have the people in the company, the leadership alignment, the clear strategy identified in order to drive this transformation? And four, you know, in the way we deploy digital transformation, can the organisation deal with the massive change management required by the transformation.
And, what’s the answer to that question? Are they able to change? Are they able to adapt? And obviously they are adapting. But I am sure there are people who are not.
They all are facing the limits of what employese can accept and deal with, in term of change at any moment in time. Yes companies that have taken the challenge to really drive a significant digital transformation. Let’s say to leave the digital world aside to really embark on the transformation of their business model in order to respond to the eruption of disruptors in their own industry.
These companies know they will need to put in the right positions the people that have completely accepted the necessity to transform the organisations. Where do we, where are we in terms of, you know, IT setup? What is the level of maturity of the team? Do we have a clear articulation of our digital strategy?
Technology is an enabler but technology is not the transformation itself.
The financial services sector is facing a lot of competition world over, from young start-ups, fintech companies. They are also getting the funding. How are you in this battle, with your traditional, almost legacy banking clients? Are you able to help them along in traditional ways? Are you yourself trying to become like more start-up?
I will tell you one thing. Govind. About five years ago the banks were looking at the start-ups; you know, seeing them growing fast and grabbing market share but being very small and therefore, not so relevant for them. And, then year after year, they have seen the impact and the potential of innovation coming from these start-ups. So, they have started to connect with them.
But, there are millions of start-ups around the world, as you know. And it’s difficult for the company to clearly pick the ones that will have the impact, they need and able to deal with scale and security challenges that is required to be, you know, implemented in a bank.
Capgemini is here to help the banks, our clients to navigate and work with all these start-ups. So we have an eco-system of start-up ourself. We have clearly identified for each part of the business, whether its in capital market, payments, in cards or in asset management. Looking at different streams or services, what are the right partners, the right companies that can really respond to their business challenges? Then, we are working with these start-ups in order to see, how we can together build differentiated solutions.
We have at the same time, the understanding of this world of start-ups. We know better than anybody those clients. We provide access to those clients, to those start-ups. We are helping them dealing with scale. So, this eco-system between start-ups, system integrator (SI) companies like us and our clients, you know, we need each other. Together, we really can build some, you know, significant piece of transformation.
And, in some ways, that’s also saying that, you know, the big brands and even this, even if they are legacy companies still have an edge in this marketplace. And, that’s really the opportunity vs reality. The reality is that, not all start-ups will overtake legacy companies overnight, as maybe some people thought they would.
Reality is that start-ups have a huge potential but often in very narrow, niche. They have two challenges, if not three. One is a wrong scale. One is around security and second is around access to client and large clients’credibility. Also the reality of start-ups is one day, they are on top of, you know, they are leading the way and you know, the next day, they are running behind because a new company is coming and, you know, climbing leadership.
We also allow because we are product agnostic. We don’t own products. We are dealing with different partners. We allowed different, our clients, the banks in this case, or insurance companies or any other sector to not be dependent on those start-ups. If one technology is being overtaken by another one, we can always adjust and work with them to stay on top of the competition.
Last question. You have acquired a lot of companies, close to a half a billion euros of acquisitions in the last year. What are those acquisitions like and how are they helping you take your own vision forward as an organisation, whose working for your client?
Every year, we want to allocate pretty much 50% for cash to acquisitions. Bolt-on acquisitions allowing us to accelerate in spaces where we see high demand. It can be in the hot markets. America being one significant market. Germany, another one. It can bespecific sectors, could be financial services, could be automotive. It could be utility, around specific technology.
We are just finalising the acquisition of a cybersecurity player in America. Last year, we acquired LiquidHub, you know, a leader in customer engagement in America with very strong presence in financial services and retail sectors. And that’s how we are continuing. We continue to complement, if you like, our arsenal of weapons around those, you know, priorities, around digital and cloud.
And that’s where most acquisitions will happen in this year as well and are these mostly, I mean, are these globally, I mean, agnostic in terms of geographies and so on.
Well, you know, they are geographies. We know that we want to maintain a balance between geographies. We have a clear view per geographies, on the ones where we have room for growth. Where we can versus the ones where we are already in a leadership position and I mentioned North America as an obvious place. But, India as well, where theres a real potential for us to continue to strengthen our position of leadership, as a transformation partner for our clients.
That’s a good note to end on. Thank you so much for speaking with us Mr. Delaporte.
You are welcome.