Good luck to Atos' 7th CEO and its latest biz transformation

We suspect Philippe Salle will need it, not to mention staff and customers

If at first you don't succeed, transform, transform, and transform again is the corporate motto at Atos these days. The lumbering French-based megacorp has created another blueprint to return to its glory days, and it includes job cuts, offshoring and... AI.

The Paris Stock Exchange listed org has assembled a four-year "strategic and transformation plan" called Genesis – a pathway to "sustainable growth" to generate revenue between €9 and €10 billion ($10-$11 billion) with an operating margin of 10 percent by 2028.

The group is at an "exciting inflection point" with the corporation's financial structure described as "now secure" by Philippe Salle, the seventh CEO at Atos in three years.

Reg readers may remember Atos was thrown a lifeline last year via a rescue package with its creditors worth €1.675 billion ($1.88 billion). The French State has made a non-binding offer to buy 100 percent of Atos' Advanced Computing activities based on an enterprise value (equity and debt) of €500 million ($625 million), rising to €625 million ($700 million) including earn-outs.

The French government had been considering nationalizing Atos, and first scaled this plan back to taking over the Big Data and Security units before later backing out altogether.

Salle said in a statement yesterday:

"Our competitive advantage lies in our highly skilled and committed colleagues, the depth of our technical expertise, our global capability with deep local roots, and our proven track record of delivery to a worldwide loyal customer base.  We fully intend to leverage this advantage over the coming years and thereby deliver significant, growing value for our shareholders, clients and employees."

The tenets of this turnaround plan have multiple aspects, and it will surprise few to learn that "repositioning" Atos as a "global AI-powered technology partner delivering secure end-to-end digital journeys" is one of the main features.

This is despite Gen-AI not yet clearly being a path to profit for all, although the startups that are selling the software and the consultancies pushing it are promising big things around efficiencies and ultimately improved productivity.

What else does Atos have in the locker room? Sadly it is the all too familiar notion that restructuring will equate to better times ahead.

This involves the Atos and the Eviden brands, the latter one created mid-2022 after the problems at Atos became more public via a string of profit warnings earlier in the year.

The IT integrator and services giant said its future didn't lie in bit barn services. It then hatched a plan to sell off the legacy portions of the portfolio – datacenter, hosting, outsourcing and workplace tech – and keep the cyber, big data and cloud units under Eviden (initially called Evidian).

That sale didn't work out too well, the financial situation worsened, and the French government mulled the bailout option, then took the lead from Airbus and itself rethought plans.

Atos confirmed in its statement to the Paris Stock Exchange yesterday: "The sale process for its Mission Critical Systems and Cybersecurity Products businesses has been put on hold."

Now Atos wants its services biz to work under six business lines: Cloud & Modern Infrastructure; Cyber Services; Data & AI; Digital Applications; Smart Platform; and Digital Workplace. Eviden, reclassified as a "product" business, will be organized around Cybersecurity, Advanced Computing, Mission-Critical Systems, and Vision AI.

Atos said:

"With creation of a business line dedicated to Data and AI, Atos Group will fully leverage its expertise to deliver improved, higher-value offerings to clients through a full-stack data and AI engine industrialized for scale, while achieving higher delivery efficiency and lower costs within the Group.  The business line will be a key growth driver, growing from 2,000 to 10,000 employees by 2028 and at the scale of the Group, 100 percent of the workforce will be AI-certified by 2026."

There will be blood, however. We're told a "key element" of this will be "streamlining" Atos' "global network" to "refocus on its most profitable and highest growth territories."

The statement added: "Atos Group will now operate from six regional hubs where it already has a strong and growing presence: France; Germany, Austria & Eastern Europe; Belux & Netherlands & Nordics; United Kingdom & Ireland; North America; and International Markets. In due course it will exit several non-core countries which do not meet its strategic or financial objectives, mainly within International Markets."

There'll likely be heads of the six business lines and Global Delivery Centers, six regional leaders, the bosses of Eviden and Advanced Computing and Head of Group functions. This is deemed to be "simplified governance", intended to more clearly define "accountability and ownership".

Atos will look to cross-sell cyber, data, and AI services to infrastructure, workplace and digital division customers.

And no transformation plan would be complete without obligatory cost-cutting measures, because reducing costs always leads to better service. Right, customers?

"The Group has defined and started to implement a cost reduction program to adapt its cost structure to its current size and reflect the new organization and more efficient operating model.

"It will optimize service delivery through enhanced billability and bench management, increased offshoring, industrialized execution model and stricter contract management. It also plans to reduce G&A (general and admin expenses) to around 5 percent of revenues by 2028, implying a 2-points reduction compared to the current level, through headcount reduction and 10 percent lower discretionary spend."

This is in addition to a wave of offshoring and redudancies the corporation performed in previous years.

IBM and DXC went through similar major workforce reduction programmes over multiple years. After plenty of pain for employees, IBM spun off its Infrastructure Services unit, now trading as Kyndryl, and DXC has found itself billions of dollars and tens of thousands of employees lighter than when it was formed in 2017.

What are the financial prospects for Atos in 2025? It expects to generate €8.5 billion ($9.5 billion) in revenue versus €9.6 billion ($10.7 billion) in 2024. This is "due to perimeter changes, voluntary contract reviews, and low business traction prior to the completion of the financial restructuring."

And the operating margin? Four percent.

This is a big financial hill to climb to reach the summit of Mount Turnaround by 2028, and assumes the French government will buy the bits it has a vested interest in securing – not least for state security reasons.

We wish Atos and its management team, and more importantly its wider employee and customer base, the best of British luck. Actually, looking at the state of Britain these days, we should probably rephrase that.

Bonne chance, mes amis. ®