For Capgemini Germany, 2020 is a year of far-reaching change - and for once this has nothing to do with the coronavirus. A transformation deal won with Bayer at the end of 2019 and the acquisition of Altran, both of which took effect in 2020, are shifting the service and sales structure of Capgemini Germany towards infrastructure and engineering services. This became clear at this year’s analyst briefing by Capgemini Germany.
The broad-scoped Bayer deal focuses on the transformation of Bayer’s infrastructure towards the cloud, including the migration of ERP, BI, and communications applications. The transformation is scheduled to be completed by the end of 2021, which means migrating a server to the cloud every 10 minutes, and an application every 90 minutes. The partnership has been agreed for a period of six years; after the transformation, it will become an operating service. Capgemini took on approx. 450 Bayer employees for this purpose, which means that the German workforce will grow by around 10 percent. Already back in 2012, Capgemini had, as part of a service contract, acquired an IT center operated by Bayer Business Services in Mumbai, India, with around 550 employees.
Not all employees that were taken over now will be needed for the operation of Bayer’s infrastructure in the long run, as Capgemini will automate operations wherever possible ("machine first") in the course of the transformation. The impact that the new colleagues will have on the local Capgemini business will therefore go beyond Bayer’s commitment, as about half of them are specialists in cloud transformation (or they will be after the successful completion of the Bayer transformation), the other half are SAP specialists, and all of them are life science specialists, so Capgemini will endeavor to increase its footprint in these markets and win additional customers. In our opinion, prospects are good as experts in cloud transformation and SAP migration are currently rare, and Capgemini can enrich local skills with international teams, given that, on a global level, the group’s infrastructure-related skills have always been much more pronounced than in Germany. The Bayer deal will therefore change Capgemini’s local services and sales structure, bringing it into line with international standards.
The acquisition of Altran was completed in 2020 and has given Capgemini an even stronger presence in the manufacturing industry and in the engineering services segment. According to Capgemini, synergies between the incumbent Capgemini business and the acquired Altran capabilities have been achieved in the segments of autonomous driving, 5G, and IoT. The customer base in Germany largely overlapped, but the nature of the services did not, so Capgemini can use Altran to provide its customers with a more comprehensive range of services, from process and back-office integration to product development services in manufacturing. With the integration of Altran, engineering services will become the second largest revenue contributor of Capgemini Germany.
One example of the realignment of Capgemini’s organization is the cooperation with Audi. Together, the partners have launched the XL2 joint venture, in which Capgemini holds a majority stake, and which is to conduct innovation projects for Audi and other manufacturing companies. The portfolio includes production-related topics (IoT, intelligent solutions for the connected shop floor), SAP platform services, cloud services (primarily on AWS), and digitization services.
A detailed view at the revenue structure of Capgemini Germany shows that business with application services (application-related C&SI, application management, SAP migration, etc.) is the largest and most important activity in Germany, and will remain so even after the integration of the Altran and Bayer deals. The great internal importance of this business was further strengthened by several (not yet disclosed) interesting deals in the SAP S/4HANA migration environment. For example, Capgemini was able to win an SAP S/4HANA project at a large, family-owned German global retailer, which could serve as a blueprint for the industry in the future as the migration templates might be transferred to an SAP Industry Cloud Version.
This example also very clearly shows the requirements regarding subsequent operation, because after successful S/4HANA implementation, the solutions are transferred to Application Management Services from Capgemini. Since a large number of the customer’s independent local subsidiaries, various subcontractors and cloud providers have to be integrated, Capgemini has implemented a detailed governance template and clearly defined release management. Furthermore, Capgemini Germany’s Application Management Business was able to win a number of remarkable deals with major German customers, resulting in above-average growth. The scope of most AM deals typically includes extensive transformation services, usually involving a technical migration to the cloud.
Capgemini’s German organization has been undergoing major change. The incumbent management consulting business – actually the nucleus of Capgemini Germany, which goes back to the acquisition of Ernst & Young Consulting – has lost importance in relative terms due to the acquisitions made and deals won in the segments of engineering, cloud transformation, and application services. In sum, Capgemini Germany might perform better than many of its peers during the current crisis – thanks to organic growth, but also pushed by the acquisition of Altran and the big deal with Bayer. Subscribers can access the profile of Capgemini Germany here.