Research 1999 Heptathlon: Global IT Services Leaders’ Results
IGS: The 1999 Champion!
IBM Global Services Wins Top Honors Despite Growth
Slowdown; Computer Sciences Corp. and Cap Gemini Win the Overall
“Silver” and “Bronze”
AUSTRALIA, Apr. 17 – Despite a slowdown
in its rate of growth, especially in the second half of last year,
IBM Global Services (IGS) emerged as the overall 1999 champion of
the Annex Research annual global IT services leaders
“Heptathlon.” Computer Sciences Corp. (CSC) and Cap Gemini Group (CGG) won
the overall “silver” and the “bronze” medals respectively in
this “seven-event” business competition.
It was the first time ever that
the IBM services unit won the overall annual Annex Research
competition, despite having become the world’s largest IT services
company in 1995, when it grabbed the industry’s pole position away
from EDS. But last year
(1998), IGS did win a special Annex Research award for the most
balanced performance among the top IT services firms (see Annex
Bulletin 99-16, 5/25.99).
Since 1999 was the last year of
the 1990s decade, this year’s competition included for the first
time a seventh event – the 10-year revenue growth.
The two growth categories, therefore, are supposed to
recognize the companies that show the best performance both in the
most recent period (1999), as well as over the long haul (the last
Unlike last year, when the
overall “gold” medal was decided in a “photo finish” between
Andersen Consulting (AC) and Cap Gemini Group (CGG), this year’s
champion won its “gold” by a wide margin.
IGS collected three “gold's,” three “silver's,” and
one “bronze” for a total of 16 points (based on three points for
a “gold;” two for a “silver” and one for a “bronze”
other words, the IBM services unit won a medal in each of the seven
competition events – the first time that any company has won the
overall Heptathlon in such a convincing manner.
came in second with 11 points, while CGG was third with nine points.
EDS and AC, a former three-time champion (for three years in
a row!), shared the cellar among the top five global competitors
with three points each.
Growth (2 Medals)
Unfortunately for IGS, and for the rest of the IT services
companies, one reason for such a dramatic turnaround of competitive
fortunes from a year ago was that the IGS competitors’ growth had
slowed down more rapidly than IBM’s. The aggregate 1999 revenue growth of the top five competitors
was 11%, only half of the corresponding growth figure in 1998, while
IGS’ dropped off from 22% to 15%, good enough for a “silver”
medal in this category.
The only company that actually
experienced a faster rate of growth last year was CSC, the 1999
“gold” medal winner in this category, whose revenue rose by 19%
and 16% respectively in 1999 and 1998.
As previously reported, CSC has now leapfrogged over AC
becoming the third largest IT services company in the world.
EDS, the only other competitor
to report a double-digit revenue growth in 1999, won the
“bronze” in this category.
As for the long-term growth, IGS
and CSC were again the top performers, but in reverse order.
IGS won the “gold” with a 23% compound annual growth
during the 1990s decade, while CSC was just slightly behind, with a
22% score. AC won the “bronze” with an 18% compound annual growth
rate during the same period.
The top five global IT services
leaders’ combined revenue growth during the 1990s decade was 18%,
making it this industry segment one of the fastest growing areas in
the information technology industry.
Despite its meager growth in
1999, CGG was a hands-down winner in all three profitability
categories in the last 12 months – winning the “golds” in the
net, pretax and gross profit competitions.
Its biggest lead was in the pretax margins, where this
Paris-based company was the only one in double digits (12%).
CGG was followed by IGS and CSC
which claimed the “silver” and the “bronze” medals
respectively in both the net and the pretax margin events.
But the net margin “gold” medal contest was a squeaker,
with both CGG and IGS coming it at 6.2% at the finish line.
CGG eventually won the “gold” because its net profit
increase, a tie-braking category, went up by a higher rate than
IBM’s since the year before (42% vs. 35%).
In the gross margin competition,
AC squeezed in between CGG and IGS, claiming the “silver” medal
with a 27% score.
Expenses (1 Medal)
In the 1999 belt-tightening
competition IGS came out on top, claiming the “gold” with a 13%
operating expense-to-revenue ratio.
CSC and EDS placed second and third respectively, with AC and
CGG sharing the last two cellar positions.
EDS’s “bronze” is
particularly notable because it was achieved despite significant
one-time write-offs (over $1 billion) that the company’s new
management carried out in 1999.
Without the write-off, EDS would have easily won the
“gold” in this category, as it did the year before.
Productivity (1 Medal)
Not surprisingly, the
belt-tightening champions were also the three medal winners in the
sales productivity category (revenue per employee).
And in the same order. IGS
won the “gold” with a $198,000 revenue per employee record; CSC
and EDS came in second and third respectively.
Happy bargain hunting!
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