Capgemini: 'Building a Global Powerhouse'

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Do you expect this rapid growth in offshore workers to continue?

The plan is to go from 20,000 to 45,000 in two years.

Is there any truth to the reports that India's Reliance Communications is seeking to buy Capgemini?

There's a journalist in India, from the Economic Times, who loves this kind of story. It's the third time he has written about us talking with an Indian company. I don't know why he has a Capgemini obsession. The thing is, Reliance closed a major alliance with Accenture. So if there's one Indian company that would never even talk to us, it's Reliance. The guy is not aware.

You have been working hard to get your outsourcing contract with Schneider Electric (SCHN.PA) on the right track. Where did that deal go wrong, and what are you doing to fix it?

It was a long process of renegotiation that was closed on [Feb. 8]. The initial contract was flawed. They had one obsession, which was building a globally integrated system, based on nearly every module of SAP's (SAP) software, to create the backbone of their company. That we knew. But it's a company with many baronies, and when we tried to build the system in order to overcome the resistance of some of their baronies, we had to design something significantly more complex than we had at first planned. To get buy-in of the different business lines, we agreed on something more complex and comprehensive, and we thus delayed the savings that we both hoped to achieve. The whole contract became unbalanced.

We now have a new contract. The system is nearly ready. We have delivered the first pilot in India. We'll deliver the second pilot in Europe about midyear. We're rolling out the solution, and the contract is more flexible to acknowledge some adaptation. We took some adjustments on price points, but if there are adjustments on volumes, it will be their responsibility. If they have more PDAs and BlackBerrys, for example, we'll track the volume of hardware and applications, and make adjustments.… Both parties are happy.

Why have business consulting services been relatively weak for Capgemini? Your revenues there only rose 4.5% last year. What are you doing about that?

In Europe, we had a nice ramp-up; it was 9% in the second half. In the U.S., we're lagging behind. We created a dedicated consulting entity in the U.S., which can be attractive for talent, and we may buy a company. It's a big differentiation against the Indians, because they don't have any consulting. In Europe, we're No. 1. We're big in France, Germany, and growing in the U.K. So I'm quite pleased. But in the U.S., we can't be at the level we need without an acquisition.

What new business initiatives will Capgemini launch in 2008?

It's still back on the onshore transformation. We don't want to make the Indians into a back office. We have to get our front-end people to understand that with a truly global delivery system they can gain market share. We have a program we're working on. This is the most demanding thing we're working on.

The other part is to monitor a quite unstable economic environment. If there is a downturn, the first thing people cut is consulting. The second is IT programs. We're exposed to a downturn. We're highly cyclical. We're in the people business, so we have to monitor this very carefully. In a recession, companies will try to get savings from handing over operations to a big outsourcer. They'll keep some projects that target cost savings. But they'll stop all projects that are related to their customers. Today there are a lot of customer management and marketing support projects. That will probably be frozen or sliced or delayed in a recession. In the last recession, people kept investing in their systems—upgrading applications. But they delayed things like new supply-chain engineering. That can be delayed a few quarters without harming the business.