Q&A: Capgemini's Pierre Danon on restructuring

The company yesterday reported a 16% jump in Q1 revenue

By Thomas Hoffman

May 5, 2005 12:00 PM ET

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Computerworld - Consulting and IT services firm Capgemini S.A. yesterday reported a 16% jump in first-quarter revenue to $2.2 billion and also released details behind plans to restructure its North American business. The Paris-based firm's Booster Transformation Plan, which began in late March under the guidance of Pierre Danon, chief operating officer and executive chairman of Capgemini's North American business, is expected to yield $162.1 million in annual savings once the effort is completed by early July.
The savings will be generated, in part, by a 30% reduction in administrative and support costs, largely achieved by eliminating 45% of its North American office space. But the moves aren't completely cost-focused: By placing greater autonomy in the hands of its 10 senior business leaders, Capgemini expects to get closer to customers on pricing and project requirements, said Danon.
Computerworld's Thomas Hoffman spoke with Danon this morning. Excerpts from that interview follow:
What are the business drivers for the restructuring plan? What we want is to make North America successful. We think that we will be one of the few companies in the IT world to support companies in Europe and in the U.S. equally well. Even compared with EDS, our balance in North America and Europe would be better.
Of course, it's not better than IBM and, of course, it's not better than Accenture. But this could help put us on equal footing.


Capgemini COO Pierre Danon

How will the restructuring lead to a simpler operating model for consulting and technology services? There are three dimensions of the Booster Plan. The [$161 million] cost savings is absolutely needed to make the unit immediately profitable so that we can be very competitive on pricing. This is 75% complete.
No. 2 is that there had been only one [profit and loss center] across North America, so there was no accountability. What we are doing is creating five regional units, each with its own P&L, so the accountability will be clear.
We are also placing the decision-making for [contract] pricing and recruiting in the hands of our 10 business leaders. By making them responsible for who to recruit and how to price a customer's contract, this will bring us closer to our customers.
So there have been job reductions in administration and support? Yes, but most of the consolidation has been in facilities. By the time the restructuring is completed, we will have gone from 40 offices in North America to fewer than 20. We've also consolidated some of the systems that we have in place, suchas our accounting systems.
Overall, we've only removed 200 out of 9,000 workers in North America. This includes 25% of our VPs who left as of March 1. We discovered that we were top-heavy with VPs.
Will these cost savings be passed onto customers? Some of the savings will be passed onto customers and some of it will be profit. This is a growth strategy, not a shrink strategy.

Read more about management in Computerworld's Management Knowledge Center.

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