EuroBusiness Media (EBM): Capgemini, a global leader in IT services and management consulting, just reported full year profit for 2006. Paul Hermelin welcome, you are the CEO of Capgemini. Now that the results for 2006 are known, how would you describe your level of satisfaction with the group's performance in 2006?
Paul Hermelin (PH): I think the group has recorded very solid progress, because we progressed on most fronts. We are growing, we have accelerated our growth all through 2006 and we are delivering a growth of above 13 % in the second half, which shows the confidence of the customers. We have grown headcount, massively offshore but onshore too. So we attract new talent. And our people did a fantastic job that helped us improve our margin and reduce delivery leakages. So quite a good performance that is reflected in our net result, where we doubled our net result, which allows us grow our dividend by 40%, to raise it to 70 cents per share, and returning to the normal pay out ratio. I think we can reward our shareholders, by the way, that accompanied us in our capital increase in December. So solid results and some recognition for everybody. My last word would be we are still not best-in-class, so we can still be more ambitious.
EBM: In recent times the Capgemini story has been mainly a story of recovery. Now that recovery seems to be a given, what would you say is your outlook and ambition for Capgemini in 2007?
PH: The first point is: I wouldn't say its a given because Capgemini used to be one of the most cyclical companies in the IT service segment, and we have improved the situation with more outsourcing, with a greater share devoted to the public sector, but we are probably still a rather cyclical company compared to some others. I have launched a transformation programme last September. The name of the programme is "I cubed" and that "I cubed" transformation programme aims at leading us to a new ambition. A new ambition where we would be an industry shaper. I think today we are the western company that gains market share, that grows the fastest. Compared to our US colleagues, today we grow faster than any other western player. But the Indians are still ahead. Second point, in terms of offshore resources, and the balance between offshore and onshore, if you take the two service lines where offshore is applicable, today our offshore ratio after the Kanbay acquisition, is above 30%, so there too we are ahead. But we have to transform the company, because we have to integrate in a seamless manner offshore with onshore. That will trigger a change of the skill set of the offerings. So we have a lot to do and my goal would be, as I have already said, we have the ambition, and I think we are quite confident to deliver an 8% margin - with Kanbay 8.5% in 2008 -- which is just the confirmation of former objectives. Thanks to the transformation I would like the company to achieve a double-digit margin.
EBM: Could you provide us with a bit more detail about the I cubed expansion plan?
PH: I cubed stands for three I's, actually Industrialisation, Innovation and Intimacy. Industrialisation - we are moving to a very different business model, where we expect and we aim at growing our onshore headcount by a few points, two or three points, no more, per year. We will grow massively offshore, we grew by more than 90% organically last year. We will probably grow by another 70% this year. So that completely changes the model. And it's more than just offshore. You can't limit our Indian colleagues to a back office role. They want to have access to the customers - they will. So we will industrialise the model. Second point: innovation. Innovation drives IT. There were a few levers that we embraced boldly, like SOA. But I think all these new levers -- like web 2.0, open source, software as a service - there is a constant flow of innovation and that new group should be at the forefront of innovation.
EBM: And what about this third I, the 'intimacy' of I-cubed ?
We extracted intimacy as a goal because with the surge of outsourcing within our mix, now our top 20 customers represent more than 35% of the group's revenues, so it requires a different management of these customer relationships, where we will have to leverage all our service lines in favour of one account. So we have put in place five boards, where we gather all our service lines to service a few targeted accounts. So intimacy to cultivate and grow some accounts. So three levers, I think that will provide resilience and superior performance for the group.
EBM: You've announced an 8% revenue growth target for 2007. To some observers this objective may seem too conservative, too prudent. What would you respond to that?
The second half saw a growth above 13%. But we had recorded some mega-contracts that drove outsourcing very fast last year. We did not sign comparable contracts. So now outsourcing will slow down to mid-single-digits or a little more. So outsourcing will no longer be the growth driver for the group. But it's true that the project business today grows at very high single-digits, possibly meeting 10%. So the combination leads to 8. If the market is better, if the Kanbay integration goes very smoothly, we could do more. But today what we see is 8%.
EBM: Paul Hermelin, CEO of Capgemini, thank you very much
PH: Thank you.