Hey Atos, I am disappointed

As an Atos investor you should be disappointed. The good news is that it is probably a temporary feeling; at least that is what I am telling myself every day since Atos announced they will split the company. 

Unfortunately, ‘telling’ is not what Atos is doing; most of the communications is either vague or not telling at all. 

I can obviously deduct information from circumstantial evidence, and being a former employee helps in understanding and interpret these data tidbits. 

So why do I care? The obvious reason is that I hold some Atos shares. I show this in my footnote with every blog posting. But the other reason is curiosity about how this split-up of one of the biggest IT firms in the world, or at least Europe, will play out.  

It has been a nail-biter when you look at the senior leadership’s spectacle of promotions, demotions, new hires, failures, and new names rising to fame. Mix this with a (un)healthy suspicion of political maneuvering and we have gotten ourselves a very wild journey in the past 24 months. 

We saw activist shareholder takeover bids. We have been shown interesting investment plans from allies that are then dropped unexpectedly. And opinions by outsiders that have been both insightful and sometimes unexpectedly missing the point. 

I believe there is enough information and, with some imagination, plenty of boardroom drama to create a European version of Succession when this is all over. 

Nevertheless, the latest quarterly financial information gives us hope that the ship is sailing in the right revenue-direction; once again evidence to support the question if the split of this great company is really necessary. 

There must be people in the boardroom that are also thinking about this, and possibly already putting this on the agenda. I’d love to talk to them and to encourage them to speak up. I found it suspicious that Atos recently announced several changes to the board. Why would you do that if you also announced the company will end in its current form in the next couple of months? My human side, with a need for conspiracy theories, kicked in. 

To be clear, I have no information that would support any such a theory, but I can see why my mind is trying to fill in the blanks. There are so many, and it would serve Atos and my curiosity, if their communications team would be more forthcoming on the ongoing processes. Something more than the boring and not very insightful strategic transformation updates we got at the Q1 2023 results press release please. 

(BTW I know you all work hard and congrats to all employees on the turnaround until now)

Disclaimer: Paul, who is the author of this blog post, holds at time of writing a small amount of stocks in Atos SE. All information in this blog post is believed to be public information, enriched with the authors personal opinion. No confidential information is being shared.

Atos – I got many messages, but not the ones I wanted

In the past days I received a flurry of messages on LinkedIn telling me many people are starting in a new postion at Eviden. All of these were from former Atos employees that have been selected to be part of the company’s carve-out entity for “Digital, Cloud and Cybersecurity”.

The part left behind stands with the name Atos, offers clients “reliable and responsive digital foundations”, and bringing expertise in hybrid cloud, employee experience, AI, and decarbonisation (quote from techmarketview.com).

congratulations, but what about the ones left behind

I want to congratulate the Eviden employees as they have been chosen, were invited or have chosen to be part of the exciting and (expected) profitable part of Atos. Eviden, a play on the word “Evidence”, will start with 57,000 employees and a 2022 indicated revenue of 5bn€.

I have written about the Atos split in various publications (here, here, and here) and have discussed the proposed split in many conversations with investment firms, consultancy companies and various parties that wanted to remain anonymous.

My opinion is and was that the split is a waste of capital and that Atos as a unbroken company has enormous potential; with the right strategy.

Nevertheless it must be exciting for the employees of Eviden to be part of the company that has great potential and growth upside according to the current leadership.

Interesting enough the part that is left behind, now also becomes a new company, stripped of many services, employees and customers. But I am yet to see “I am happy to announce…”-messages from the remaining employees. If the “new positions” messages on LinkedIn are part of an orchestrated marketing, I would have suggested that Atos had chosen to communicate in a more balanced way. The remaining part of Atos employees could and should have communicated to the world of Linkedin with the same pride as their former colleagues about their role in the “New Atos”.

All in all, I am sad that the proposed split is moving forward. In my opinion, with the amount of money that is being invested to carve up the company, a lot of growth could have been created in the old Atos company. Today I see investments that result in a loss.

Disclaimer: Paul, who is the author of this blog post, holds at time of writing a small amount of stocks in Atos SE. All information in this blog post is believed to be public information, enriched with the authors personal opinion. No confidential information is being shared.

Atos SE FAQ: 3 key questions about the split 

It is 2023. I wish you all a prosperous new year. 2023 is the year that Atos will split in 2 seperate companies. Since the announcement last year it has been very quiet, and key questions about the split have yet to be answered by Atos. In this blog post I will list 3 questions that are key to understand what will the new Atos and its spin-off “Evidian” look like. For people unfamiliar with the topic I would recommend looking at the presentation by Atos done on the Capital Markets day on June14, 2022.

Some of the details have already been floating around. In particular I read some interesting information in a recent post by The Register. Next to the already known information, the article mentions that Evidian will employ 59.000 employees. based on the Atos website, this would mean that about 5.300 employees (112.000 – 59.000) will stay with the Tech Foundation part; representing the more traditional IT services. Given the size of this Tech Foundation part, it shows clearly what Atos’ current challenge is in the area of headcount.

Question 1. What about the Managed Application Services?

Managed Application Services is a big part of the Atos business. According to the Atos website, this includes application management of ERP software (SAP, Microsoft) and other key business applications (Oracle). We also cannot disconnect this from services for various database systems. In earlier presentations by the company it is not clear if this part of the current business is considered as foundational or to become part of the new Evidian perimeter.

If these services will be moved into Evidian, then Atos will have to disciple applications from underlying infrastructure, which will a very delicate task. I am also unsure if customers would favour their services coming from 2 different companies; 1 bill from Atos Tech Foundations nd 1 bill from Evidian.

If Atos decides that Application Managed Services stays within the Tech Foundation perimeter, the benefit of upselling this service into business intelligence or data analytic services will be harder. These higher value services will then be with a separate company, opening up these account to competition in this area and removing scaling and efficiency benefits.

Question 2. How will Atos fund the split?

Atos provided limited information about the way it would secure funding for the massive operation to split the company. During the last 6 to 7 months some information became available. Selling their remaining ownership in Worldline was one part. The surprising sale of the Atos activities in Italy to Lutech (as announced in November 2022) was the second part. In total Atos said they would raise about 700 millions euro. Based on the available information they are still 240 million euro short.

Many sources have said that Atos is still to sell their Unified Communications & Collaboration (UCC) legacy activities, but no news is available on that till today. With the self-imposed deadline for the split in mid-2023, time is running out.

Question 3. Who are the investors?

Recently Airbus became known as having an interest in a minority stake in the Evidian perimeter and Atos has indicated it is actively discussing with other minority stakeholders in the new parts of the company. Interest in Evidian is obvious; this is the part of Atos with growth potential and contains the Coll parts like Data Analytics and Cyber Security.

But what about the Tech Foundation part; Atos themselves has indicated that this is the ‘problem child’ and it will take many years to be successful (if at all…). Although Tech Foundation will receive a sizeable investment injection, partly through the sale of its 30% stake in Evidian, it remains to be seen if investors appetite will still exist for this remaining part of Atos.

Next steps

According to the presented plans we will see more announcements from Atos in the next months and a completion of the split details in the second part of 2023:

  • The General Meeting of Atos shareholders
  • The listing and distribution of Evidian shares
  • The partial spin-off of 70% of Evidian to Atos shareholders (the remaining 30% to be kept by Atos Tech Foundation)
  • The remaining 30% stake in SpinCo to be monetized to refinance part of TFCo’s turnaround costs

Certainly an exciting year for Atos. And for me I remain unconvinced that this split is the best way forward.

previous articles:

Disclaimer: Paul, who is the author of this blog post, holds at time of writing a small amount of stocks in Atos SE. All information in this blog post is believed to be public information, enriched with the authors personal opinion. No confidential information is being shared.

Explain your IT work to your children and parents in simple terms

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Explain your IT work to your children and parents in simple terms. In this blog post I explain the main concepts of the IT Services industry using simple terminologie. I find this useful when explaining my work to children, parents and grandparents. It is sometimes also useful to explain the IT market when I am discussing it with my clients. Especially when they are in a totally different type of work environment. Please also read the disclaimer at the bottom of this text.

What are IT Services?

IT-services are services that help businesses with their technology needs. This can include things like managing computers and networks, installing software, and providing technical support.

IT-services are important because they help businesses use technology effectively. For example, if a business has a lot of computers, they might need help managing them and making sure they are all running smoothly. An IT-services company can provide this help, which can save the business time and money.

IT-services can also be helpful for businesses that don’t have their own IT team. Instead of hiring and managing their own IT staff, they can use an IT-services company to provide the help they need on an as-needed basis.

Overall, IT services are services that help businesses with their technology needs, which can save them time and money and help them use technology effectively.

What does an IT Services company do?

An IT-services company is a business that provides IT services, like managing computers and networks, to other companies. This is different from a regular company, which might use IT-services, but doesn’t provide them to other businesses.

An IT-services company can help other businesses with a wide range of IT needs. For example, they might manage a company’s computers and networks, help them install new software, or provide technical support if something goes wrong with their technology.

IT-services companies are often helpful because they have specialized expertise and resources that other businesses might not have. This can be particularly helpful for small or medium-sized businesses that don’t have the budget or the need for a full-time IT-team.

Overall, an IT-services company is a business that provides IT services to other companies, which can be helpful because they have specialized expertise and resources.

What is IT Outsourcing?

IT-outsourcing is when a company uses another company to provide IT-services, like managing their computers and networks, instead of doing it themselves. This is different from having an in-house IT-team, which is when a company has its own employees who handle its IT needs.

Outsourcing IT can be helpful for companies because it allows them to access specialized expertise and resources without having to hire and manage their own IT staff. This can be more cost-effective and flexible than having an in-house team.

For example, if a company doesn’t have a lot of IT needs, it might not make sense for them to hire a full-time IT-team. Instead, they can use an outsourcing company to provide IT-services on an as-needed basis. This way, they can get the help they need without having to pay for full-time staff.

Overall, IT-outsourcing is when a company uses another company to provide IT-services, which can be helpful because it allows the company to access specialized expertise and resources without having to manage its own IT team.

What is Cloud Computing?

Cloud computing is a way for people and businesses to use technology services, like storing data and running programs, over the internet. This is different from using a computer or phone that has all the programs and data stored on it, because with cloud computing, the data and programs are stored on servers that are managed by other companies.

This means that people and businesses can access their data and programs from anywhere, as long as they have an internet connection. This is convenient because they don’t have to carry around a physical device, like a laptop or hard drive, to access their information.

Cloud computing is also often more secure than storing data on a personal device, because the servers that store the data are managed by professionals who make sure that the data is safe and backed up in case of any problems.

Overall, cloud computing is a way to use technology services over the internet, which is convenient and often more secure than storing data on a personal device.

What is Data Analytics?

Data analytics is the process of using data, or information, to understand patterns and trends. This can help people and businesses make better decisions by providing them with insights that they might not have seen otherwise.

For example, a company might use data analytics to understand how their customers are using their products. This could help them figure out which products are most popular, and where they can improve their products or services.

Data analytics can also be used to predict things, like how many people will visit a store in the future, or how much money a company will make in a year. This can help people and businesses plan for the future and make better decisions.

Overall, data analytics is the process of using data to understand patterns and trends, which can help people and businesses make better decisions and plan for the future.

What is ERP Software and what does it do?

ERP software, which stands for “enterprise resource planning” software, is a type of program that helps businesses manage their operations. This can include things like keeping track of inventory, managing finances, and planning production.

ERP software can be helpful for businesses because it allows them to keep all of their important information in one place, instead of having it spread across different programs or systems. This makes it easier for employees to access the information they need and helps the business run more smoothly.

For example, if a business uses ERP software to manage their inventory, they can see how much of a certain product they have in stock at any time. This can help them make better decisions about when to order more of that product, and avoid running out of stock.

Overall, ERP software is a program that helps businesses manage their operations, which can make it easier for employees to access important information and help the business run more smoothly.

Full Disclosure – I did not create this text

All text above explaining different aspects of IT Services were created by an AI service called ChatGPT (login here). The whole process of creating this blogpost took me 10 minutes using ChatGPT. In its own words, ChatGPT is:

I am Assistant, a large language model trained by OpenAI. I am a computer program that uses artificial intelligence (AI) to generate human-like text based on the input I receive. My purpose is to assist people with a wide range of tasks, including answering questions, providing information, and generating human-like text.

I operate by analyzing the input I receive and using my training data and AI algorithms to generate a response. My training data comes from a wide variety of sources, including books, articles, and websites, and I use this data to learn the patterns and structures of human language. This allows me to generate text that is similar to what a human might write or say.

Overall, I am a large language model trained by OpenAI, and my purpose is to assist people with a wide range of tasks using artificial intelligence. I operate by analyzing the input I receive and using my training data and AI algorithms to generate a response.

Atos SE FAQ: 3 reasons why Atos is splitting up (and 1 why not)

Why would you want to split a company with +/- 11 bn Euro revenue and +/- 112.000 employees? It is not a small undertaking and for sure not a decision a leadership team would take lightly. What are, in my opinion, the key reasons behind this decision?

As a regular analyst and commentator on Atos’ strategy, and the IT Services industry in general, I speak often with 3rd party advisors, investment firms and other interested parties. These conversations address a wide spectrum of topics, ranging from financials, competitors, and unique selling points, all the way to how to build the right sales or delivery teams.

There are however some questions that frequently pop-up in these conversations. So, I thought I might spend some time answering them in a new series of blog posts.

Today we will look at 5 reasons why Atos is going to split the company in 2 new public companies.

On June 14, 2022 Atos announced a plan to study “a possible separation into two publicly listed companies to unlock value and implement an ambitious transformation plan“. And in the communications on the third quarter results, confirmed that “The separation project is well on track to be completed in H2 2023 as initially planned“.

1. Declining revenue and margins in IT infrastructure services

Mostly due to the rise of public cloud providers such as Amazon, Microsoft and Google, a lot of software is moving to the cloud. This results in a steep decline in the cost of running these applications. In the public cloud the infrastructure can be shared. Management can be highly automated. And locations can be transparent allowing for even more flexibility in costs. Cloud computing also takes away the need for local, privately owned, data centers. And companies are embracing cloud computing en masse. In 2018 Gartner predicted that “Around 10% of enterprise-generated data is created and processed outside a traditional centralized data center or cloud. By 2025, Gartner predicts this figure will reach 75%”.

Atos’ problem is that a significant portion of their IT services revenue and assets are still not cloud-based. Atos owns and operates still many datacenters and needs customers to fill those with hardware and software.

This “move to the cloud” is not only a problem for Atos. In recent history also IBM decided to split off their IT Infrastructure Services in a newly formed company Kyndryl. And in April 2017, HP performed a similar action when it split-merged their infrastructure services with CSC.

2. Create a clearer strategy

The one company that Atos is today is a bit of a collection of IT topics that not necessarily work together. In some cases, they might even be competitive. This makes it harder to create a single strategy across all offerings of the company. By splitting the company in two, the two components can focus on their respective strengths without (negatively) impact the other. E.g., the part that offers infrastructure services can focus on customers that have a need for local and/or physical datacenters.

3. Workforce challenges

There is a very big difference between the attributes of a workforce oriented on traditional Infrastructure Outsourcing Business, versus the more innovative oriented business of Digital and Data Analytic services. While the workforce for the services provided in infrastructure come most of the time from the customers of Atos that outsource their business to Atos, the growth business in Digital is dependent on recruiting new talents.

When the traditional outsourcing services are dwindling, and the Digital Services are growing, Atos’ needs to hire and/or educate more and more people in a market that is already short on potential candidates. At the same time a growing part of the workforce, that is most of the time local (meaning ‘not in off-shore countries’), is generally not immediately fit to move into this new technical territory.

Recruiting new staff, both off-shore and local, will be easier if the profile of the company is not about traditional services, but instead radiates innovation and ‘cool’ technologies.

… and why should Atos not split the company?

Ever since I have been made aware of the strategy of Tesla, I believe firmly that ‘verticalization’ is a very strong asset for any company. If Atos can bring in verticalization in its offerings, it could build some very strong offerings.

Atos can combine their scale, their own hardware, software, services, and consulting skills into a mix that allows customers to work with them, instead of Atos being a contractor if separate IT services. Today Atos has all these assets under one roof and that sets the company apart even from their biggest competitors. I consider this to be a huge opportunity. And it can be implemented gradually, with a focus on the most profitable business topics first. And I think that such a program would cost less that the investment that Atos is currently raising to pay for the split.

It seems to me that previous Atos leadership teams, most notably their former CEO Thierry Breton, understood this. And it is a shame that recent leadership by Elie Girard and later Rodolphe Belmer, were unable to build on his legacy and vision.

Disclaimer: Paul, who is the author of this blog post, holds at time of writing a small amount of stocks in Atos SE. All information in this blog post is believed to be public information, enriched with the authors personal opinion. No confidential information is being shared.