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The IT firm's support services boss talks turnarounds, turmoil and the Olympic Games.
Tim Burke, CFO Europe Magazine
December 8, 2008
It's been both a demanding and varied year for Atos Origin, what with a wide-ranging turnaround plan, negotiations with activist shareholders and the task of running the technology behind the Olympic Games. Life won't get easier for the €6 billion Paris-based IT services company yet. "Atos Origin is changing," says Eric Guilhou, its senior executive vice president of global support services including finance, as a transformation plan continues apace. Launched in February 2007, the three-year restructuring programme has three goals: to improve operational efficiency, boost organic growth and help the group break free from its old decentralised business model to keep up with global competitors. There have been distractions. In mid-2007, the company came under heavy fire from two unhappy activist shareholders, Centaurus Capital and Pardus Capital, leaving it under a cloud of uncertainty — would the shareholders push for control of the group or press it to make a deal with a rival? In May 2008 Atos Origin's chairman resigned amid pressure from the two funds, and each put a representative on the company's supervisory board. Some observers called it a capitulation on Atos Origin's part, although the company itself insisted it was "very good news." Centaurus and Pardus said they now had faith in the management team and had no plans to buy or break up the business. But there's been further change since, with CEO Philippe Germond replaced by Thierry Breton in November.
Amid all this, the firm has continued in its role as a technology partner to the Olympic Games. Involved in the Games since 2002, it is signed up for the 2010 winter Games in Vancouver as well as the summer Games in London two years later. Guilhou, who has been with Atos Origin since 1990 and was CFO until 2007, says the Games provide the company with valuable lessons about financial flexibility and risk management. As the company heads into 2009, it might need those lessons more than ever.
What makes working on the Olympic Games interesting from a financial point of view?
It's a complex financial project because you deal with the International Olympic Committee (IOC) without knowing which city will hold the next Games. For example, we finalised negotiations with the IOC in Singapore two days before the decision to award London the 2012 event. So when we bid with the IOC, we do so with our sights on several cities for which the cost structures can be different — but we bid with one price. You need to be able to alter your financial management according to the final location.
Once the Games are underway, you're working alongside other technology partners, including Kodak, Lenovo and Samsung. Part of our role is to manage those partners. As a result, we oversee about 4,000 people during the Games, a significant number of which are not from Atos Origin. The big risk from the financial point of view is not the technology, but the danger of failing to manage those people.
Apart from the Games, how would you define recent events for the company?
Between 1998 and 2005, the group's objective was to move from being a French company to an international group, and today France accounts for less than 25% of revenue. We achieved that largely through acquisitions. But we were decentralised. In 2004 the markets started to become more globalised. It wasn't enough just to have operations in several countries. You had to be able to operate on a global basis. We were a little late in that process because we'd been building up our position in each country with big mergers and acquisitions. So in 2007, we started a transformation plan.
What changes have you put in place in the support functions you oversee?
One has been to launch shared-service centres. Another has been to implement double reporting, so divisional CFOs and HR managers report to their country CEO, as in the past, but also to the group CFO and group HR. Additionally, purchasing, internal IT, and audit and legal functions have been centralised. The biggest challenge here is people management. You need to have people thinking differently. Having a CFO in a subsidiary reporting to the country CEO only, and having one reporting to the country CEO and the group CFO is not the same.
You're not speaking about the same objectives — with the new reporting lines, the divisional CFO is focused on realising the financial objectives within the country, of course, but also participating in group projects and meeting group targets.
So you have to assess whether a CFO who joined a division has the capability and capacity to change and manage those objectives. To that end, we changed more than 50% of the country CFOs and HR managers over about 18 months, either by promoting people internally or by external recruitment.
Where does the group stand today, amid market turmoil?
The group has been able to deliver good earnings growth in the past 12 months. Our revenue structure means we have more than 50% through contract work such as outsourcing or application management, so when there's market turmoil this is quite a defensive business. But the challenge for Atos Origin is to keep pressure on the operation, delivering profits and maintaining cash flow, at the same time as handling this restructuring project. The transformation plan is a big opportunity for us to change.