|Annex Research | Annex Bulletins | Quotes | Workshop | Feedback | Clips | Columns |

The copyright-protected information contained in the ANNEX BULLETINS is a component of the Comprehensive Market Service (CMS). It is intended for the exclusive use by those who have contracted for the entire CMS service.

Confidential Annex Research Client Edition

SERVICES

Annex 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”

W. 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 decade).

Overall Results

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” medal). 

Text Box:

 

 

 

 

 

 

 

 

 

In 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.

CSC 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.

 

Text Box:

Revenue 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.

Profitability (3 Medals)

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.

Operating 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.

Sales 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!

Bob Djurdjevic

NOTE: The print edition of this report contains additional charts and tables not included here.  To subscribe, click here:




 

 

 

Volume XVI, No. 2000-11
April 17, 2000

Editor: Bob Djurdjevic
Published by Annex Research;
e-mail: annex@djurdjevic.com

5110 North 40th Street,      Phoenix, Arizona 85018
TEL: (602) 824-8111        FAX:

|Annex Research | Annex Bulletins | Quotes | Workshop |

Feedback | Clips | Activism | Columns |