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AtoS – Great Expectations, a Franco German melodrama

AtoS – Great Expectations, a Franco German melodrama

15th December 2010 – the announcement came that Atos Origin and Siemens IS were to merge into the third largest IT service provider in Europe. It got off to a bad start. Slide 4 of the Analyst pack trumpeted a “€8.7Bn combined revenue!”. Slide 5 downgraded this figure to €8.2Bm but hey what’s half a billion between sweethearts! A seven year minimum spend contract ($5.5Bn) from the Siemens’ parent company was an extra sweetener – the markets welcomed the deal.

The foundations were laid. What was less clear is the deal around staff retention, guaranteed jobs. The first rule of outsourcing, the new groups primary skill and major service offering, is “do it with less people”. The only statement about the 78,500 combine staff, was expect a €125m saving for combining management levels 1,2 and 3. A drop in the proverbial ocean. Two other quoted synergies were combined procurement cost savings and combining headquarters. Not exactly awe inspiring for two specialist companies who making their livings from telling clients how to save costs. The €1Bn pension fund arrangement for 28,100 German staff is deserving of more scrutiny too.

Fast forward to July 2011, and the announced approval by the shareholder to consummate the deal. Hooray! Now the real battle begins. AtoS needs to start strongly, the market needs confidence that the existing executive and senior management are capable of hard decisions. A commercially lacklustre number of years need to be consigned to the dustbin of history. A broad sweeping away of middle management, know in the trade as the “business prevention ministry”, needs to happen immediately. The TOPS programme launched to integrate the two entities has high expectations of success and a hostage to fortune objective increasing margins to 7-8%. Above all the new AtoS needs to listen to its client base, such as the BBC. Secure existing customer loyalty ahead of the increasingly competitive new business captured by increasingly expensive tendering and reducing margins.

This aside, Franco-German vying for internal position and political dominance will prove a huge challenge. Get this wrong and the fight turns inward and, as in the HP takeover of EDS, we can expect two to three years of introspection, disappointed existing customers and desperately few new deals.


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