Sunday, 27 January 2013

How long will the CSC plane stay in the air?


A plane will continue flying after you switch off its engines due to its forward momentum. But only for a while.   Then gravity takes over and the plane comes crashing down to earth. 

This is our concern for CSC;  that its engines have been burned out, its navigation systems are failing, and that it may soon come crashing down to earth. 


Our view is not shared by many Wall Street analysts,  who remain bullish about CSC.  This month Stifel Nicolaus re-iterated its “Buy” rating with a target share price of $50! Goldman Sachs has upgraded CSC from “sell” to “neutral” due to the actions of CSC’s new management team.

Mike Lawrie and his new team have quickly addressed three major issues they inherited. 

  • Previous CEO Mike Laphen’s senior management team included deadwood whose main characteristic was an ability to flatter Laphen and stroke his ego.  Many of these people have now left CSC.

  • It was known that certain of CSC’s major contracts were failing, helped along by senior managers who seemed to think that if they shouted loud enough, denied reality for long enough and threatened the staff often enough, this in itself would get the problems solved.  CEO Mike Lawrie instigated project and account reviews to understand the status of the projects as a basis of corrective action. 

  • An overly complex operating model was identified by Lawrie as a major contributor to CSC’s woes. But this model was not bad in theory. It had just never been implemented. So in Europe for example there were at least four global operating models, an official Corporate  “powerpoint”  operating model, a French exception, a German difference and a UK reality. Mike Laphen and his top managers dealt with this by simply declaring the problem solved, marking down any manager or employee foolish enough to disagree with them,  and just letting the mess of complexity continue. 

Making progress on these issues was the easy part of Mike Lawrie’s task.  With no personal ownership or responsibility for these issues, he could let the world know he had inherited a tremendous mess. He was preaching to the converted anyway. He was preaching to shareholders who had seen the value of their investment crash, and employees who were tired of seeing all their work undone by top management incompetence. 

It simply took focus and determination to show improvements on these three major issues.  Nobody has suggested Lawrie lacks either focus or determination and the market has been impressed by his actions to the extent of a 60% rise in the CSC’s stock price in the past 9 months.

So why are we so skeptical?   It is because of what we hear from within and around CSC (just read the comments on this blog).

Firstly there is the ongoing bad publicity around botched projects.  Just this week came the latest bad news that a $1 billion ERP project has failed, been cancelled by the US Air Force and referred to the US Senate Armed Forces Committee for investigation. 

We are told the planned review of staffing by management level has been delayed in Europe, as CSC HR seemed to be unaware of European legal requirements around restructuring plans and employee redundancies. 


Employee morale jumped when Mike Lawrie announced his plans but has slumped again in face of unreasonably long periods of uncertainty about employees’ futures (or lack of futures)  at CSC. 

Highly skilled employees feel that knowledge transfer activities are a precursor to their being terminated.  So they ensure they keep vital information to themselves.

Many people perceive an attitude amongst CSC’s new executives that long-serving employees are  incompetent or just not good enough  simply because they were with CSC during the Laphen era.  

Mike Lawrie’s new operating model has been described as incomprehensible, with managers saying they don’t understand their responsibilities, nor the responsibilities of groups they are dependent upon, nor who will be working for them.  We were told that the operating and organization models have been designed by a firm of outside consultants, who even decide who will fill each position. We hear of managers’ frustrations at having their teams chosen for them by outside consultants “3000 miles away who can’t tell the difference between a good performer and a good talker and think that cheapest is best”

These frustrations have been building up over the past 2 or 3 months. In the meantime, managers and employees have continued to handle the backlog of sales and delivery commitments from their “old jobs”.  But the chaos point is getting closer, employee frustrations are growing and many key staff and top performers are looking at outside job opportunities.  If many of these people leave, CSC will suffer. 

That is why we do not share the Wall Street analysts’ optimism.  The stock has run up 60% in 9 months. We are unconvinced about its future growth potential, thus skeptical about the analysts’ hold or buy recommendations.

Mike Lawrie needs to restart CSC’s motors before the plane falls out of the sky. 

Posted by Littlejohn

33 comments:

Anonymous said...

Things are worse than CSC are letting on. Newly recruited Applabs staff are being brought onto a high-security project and the current staff are having to train them before they have even been granted Security Clearances.

A manager from Applabs has been appointed head of testing over the heads of the current managers and contractors are finding that promised 6 month extensions have been reduced to two with a promise that the rest will follow later (after the current financial year ends).
Looks like CSC are aiming to cut costs by any means.

Anonymous said...

With a limited consulting capability coupled with virtually non existent industry know how, things will continue to be challenging.
The UK for example makes no profit and is dominated by 3 accounts.
It is difficult to see how things can change, especially in such a competitive market.

Anonymous said...

Like when CSC UK announced lay-off plan before having worked on it. Result, skilled staff resigned first.

Anonymous said...

CSC definitely believes 'cheapest is best' as they are stuffing themselves on low-level drones from India.

Anonymous said...

UK HR are clueless especially the ones who look after consulting and the company still sits in it's ivory towers in Aldershot. How can they possibly afford that while watching the people who could turn it round walk out the door?

Sell-off time?

Anonymous said...

Come come sell-off time is only a matter of time. The CSC goose is getting fattened up so uncle Mike can walk away with a pot full of cash.

Anonymous said...



CSC have failed continually to deliver on their much vaunted Swiss Re UK project. They blame their failures on management within Swiss Re despite their responsibility for infrastructure. This will be another costly failure to add to their ever growing delivery failure model

Anonymous said...

The greatest failure of CSC's executive management is one of a failure to understand human behaviour.

Laphen introduced a culture of penny-pinching & short-term financial performance at the cost of long-term investment, growth & ultimate results.

Result:
1. Unhappy customers where accounts are pillaged for profits early in the contract lifecycle, leaving teams the difficult task of turnaround in the final year or 2 before contract renewal, with an already damaged relationship.

2. Disillusioned staff working in an organisation where career progress & development, reward & recognition are either non-existing or an insult to intelligent professionals. Is a £50 voucher really a valid reward to a professional on £40-£60k who has just worked a 6 month contract putting in hundreds of hours above her contracted hours?
I've also heard of many staff willingly working roles of increased responsibility above their pay-grade, or extended hours, for months & years, with no promotion or proper recognition of their achievements. In fact, worse, I've heard that many have done so to abject criticism from middle & senior management. Consequently, staff morale has plummeted.

3. Continue replication of this same culture from the top down across the organisation. Culture spreads from the top & is encouraged by the behaviour of senior management & the associated pressure placed upon subordinates.

So.....
What Mike Lawrie really needs to do is to change the short-termist culture that is now pervasive in CSC, before all of the good leadership staff that are capable of re-starting the engines come to their senses and leave. He needs to introduce means by which staff who are willing to take on challenges of all shapes and sizes are recognised and rewarded.

He then needs to simplify the organisation in terms of focus. Not necessarily by grouping together roles of a similar type, but by understanding what services customers really want from IT service providers and aligning service groups focussed on these, with control over more of their own resources, and far less use of global "leveraged" resources.

Leveraged resource models sound wonderful in principle. However, they remove the requirement for any proper day to day staff management, and staff become increasingly removed from the technology teams within which they are supposed to be working, moving from account to account with no real sense of belonging. This leads to a tendency of staff being treated as a "resource" and NOT as people.

Finally, India.
When will CSC wake up and realise India's honeymoon is over? Other service industries came to this conclusion several years ago, with problems of language & culture coming together to reduce the customer service experience.

Many of the more progressive outsources are already using Filipino resources, where the accent is less pronounced, and the culture strongly Christian & much more Westernised than India. It's laughable that CSC manages to get into Gartner's Leaders Quadrant as it does. A little bit of strategic understanding & vision immediately highlights CSC as not a leader but a lagger.

To end, this comment, I'd like to say that in my experience, CSC's greatest asset is it's people & until more than lip service is paid by the excutive board to this fact, then the plane will continue it's downward spiral.

I, for one, am out.

Anonymous said...

Morale in CSC Australia has collapsed. People are being made redundant on a daily basis, teams left manager less and with no direction. We all know that there is a, soon to be announced, mass cull coming, with jobs being moved to India en-masse, yet we still we hear the company drum being banged about us “all being in this together”.

Skill, experience, effectiveness and integrity count for ZERO. All that matters is ‘can somebody do the work cheaper’.

Anonymous said...

It seems to me from the inside of the business that the CEO has some good ideas, and there is no doubt he is persuasive, energetic and enthusiastic. Further, there is no doubt that there are some really good people at all levels of the business.
However, the starting premise appears to be that anyone that existed in the business at any seniority under the Laphen era must have been an idiot – while some of that may be true, it is clearly not true in all cases. Indeed looking at some of the new recruits, I am not sure we are making a huge stride forward in the quality of personnel.
We now appear to be embarked on a process to change everything (people, process, structure, offerings, geographies) simultaneously. The change process is being carried out in peoples ‘spare time’ or by people who don’t understand the business heritage or capability.
Making change is always painful, the problem with changing so much simultaneously is that it is simply taking too long. The change initiatives are not sufficiently thought through prior to implementation. When the initiatives fail in the heat of battle, they are then withdrawn and changed, but it is personnel at the coal-face who are taking all the pain and seeing none of the gain.
The pipeline has dried up completely. The exclusive focus is on selling shrink wrapped capabilities (many of which are either still in concept phase, development or are unproven) to clients who want business solutions to their specific problems, not shrink wrapped generic capabilities. The amusing thing is that CSC has grown and evolved on taking on mega deals, largely in mission critical environments. These are the very contracts that the new organisation seems to be running scared of.
There is no doubt that the change initiative needs much greater buy-in from the staff (we still don’t really know what the objectives are). You can probably change most of the organisation with an enthused, motivated, trusted, 20% of the workforce. Right now, CSC appears to be attempting to do it with 5 or 6 people, because there are only this number of people who understand the strategy, and are trusted / empowered, are therefore enthused and participating.
I still think there is good-will in the business to help and drive through these change initiatives, but it is running out and there is precious little sign of an inclusive, trusting approach. No matter how much employees may want to help, their ability to participate is negated by a lack of understanding of the objectives and importantly a total lack of trust from senior management, most of whom themselves are just worrying about complying with the latest initiative, rather than attempting to explain the lunacy of many of these initiatives in an attempt to stop the business self-harming.
While the share price is looking great right now, when the markets realise we have no pipeline, quality people are leaving in droves, we are attempting to sell things we are not yet finished developing and the overhead in the business is GOING UP not down in spite of the cuts we have implemented, you have to question the sustainability of the current price.
However, there is still time to fix the issue, but not much . . . . .

Anonymous said...

This newsclip from NBC explains why CSC is heading for collapse.

http://www.nbcnews.com/video/nightly-news/50749586#50749586


CSC keeps focussing on internal topics while the real problem is that they are no longer capable of doing the job for the customer.

They should concentrate on employees, skills and competence instead of operating models and such.

Anonymous said...

Anon on 12th pretty well hit the nail on the head. But the big problem with outsourcing to India is a huge lack of experience and willingness to learn (and see outside their checklists). CSC charges 1/3 for Indian based staff as they do for Australian staff, but they take way more than 4X the effort and time to address an issue if they fix it at all AND there are a lot more incident tickets on accounts with Indian based support. With those concerns I would doubt the Philippines would be that much better.

In CSC Australia the perception is that the poor performing areas and projects are the ones with focus and funding where as those that bring in profits and have the talent are ignored (eg mainframe). Morale is low and I do worry that if they keep outsourcing CSC will not exist in 5 years time

Anonymous said...

CSC requires all staff to complete Ethics Awareness training annually. During this training staff are encouraged to report any unethical practices within the company. What a joke this is. Staff are being made redundant so that their jobs can be performed overseas by cheaper, more inexperienced staff or positions are cut as part of the reorganization leaving less staff to do more work. During my time at CSC I was asked by management to bill for all hours quoted for client work requests, even though the work was completed in a lesser time. How's that for unethical! I was recently made redundant which shocked all clients I worked for. The work still needs to be performed but how do you argue with a company hell bent on cutting staffing costs to the bone. I have been saying for months that the aim of top management is to increase the share price to set up for a sale and to get their big fat profits before moving on to the next company to pillage. Pity the clients, staff and the shareholders.

Anonymous said...

The answer is simple, Shareholder companies only care about Share Values not Employees. Dont be a slave. Why train people that are replacing our jobs? after all the years of study and exams to actually understand and support production systems. I dont believe anyone ever gave me a clean handover when I took on a new role lol - Id rather be homeless than work for greedy liars. I Quit!

Anonymous said...

Would have to be one of the worst managment team that what can be seen from an internal perspective. There is no communication on the future of CSC and it's most important assets, its employees. They have cut costing in the most obsurd ways possible, we're lucky that we are not paying to go to the bathroom yet, really pathetic, cost cutting in the WRONG areas.

Anonymous said...

Just wait, soon you will hear of another panicked move to make UK staff redundant in similar numbers to last year with the focus being offshoring to India, although you probably wont hear the word offshore. They have not got a clue what they are doing at the top. We have a situation of many people being pulled off other work to produce a particular ill thought out and rushed system. Targets are being missed, promises broken on projects and work that we have expertise in supporting and producing results within as a freeze on all new development or roll out was introduced. There was lots of money to be made and good customer perception to be had and its all been blown out of the water. There will probably be some more CSC sites being shut down also. The company is being stripped down to the bare bones so a few people at the top can make a killing by selling what looks on the face of it, a lean and efficient company. I have witnessed new offshore staff coming in at a senior level but a lower cost than those working under them and there have been many communication issues on the conference calls and much confusion. In fact, the progress goes much more smoothly when they are quiet and those underneath end up taking over whatever they are there to do. If it wasn't so serious it would be laughable. I have heard time and time again about people saying such and such a person has suddenly been offered redundancy and gone and people saying why have they let one of the best Project Managers go or one of the best Release Managers etc. CSC can ill afford to let its best people go, as there are a few bad ones who make the same mistakes over and over, but then again its a symptom of not listening and that should bode well for them with a future with the higher echelons of the company. Any company buying CSC will simply be buying an order book or the existing contracts, as what is left will be very disgruntled long serving staff and a lot of cheap new staff who have yet to pick up the skills and experience to avoid projects failing, when things could actually have been turned around by listening to talented workers.

Anonymous said...

I hear the results of the 2013 annual CSC employee survey are so bad they won't be published.
Personally I have never worked anywhere that holds its employees in such low regard.
The CFO should go back to Disney Land and take Sunita Holzer (the HR lead) with him.
This time next year CSC will be little more than a Collection of Small Companies heading for bankruptcy.
I write this as an employee of 8 years, most of the 'good' people are already gone, the rest of us are will follow shortly.

Anonymous said...

I have been dumped by CSC after years of hard work and some damn fine achievements that seem to count for nothing. I am now signing on while I look for work. I know of a small number of people who survived the cull, that I know from personal experience are incompetent, but such is life. In my time at CSC, I was once ripped off by a manager when I passed a CV to him and he did not enter it via the referral scheme for me, but in his name. A colleague was ripped off by corporate CSC. I have had an idea stolen where someone higher up took the credit. I was once bullied, or at least the f**wit tried to bully me and had caused several other people to go off on stress related leave. This person actually revealed a colleagues medical complaint in a joke to a stunned audience at work. I left that team because of this nasty ex army thicko. Believe me, he was stupid an I suspect that the bullying was his defence mechanism and the only way he knew to manage. All that aside there are many many good and talented people that I have worked with, but all the good ones absolutely hate the company and the way senior management treat its people. I dont know how the Top Brass, and that smiling woman assassin in the UK can sleep at night with the misery they have caused. CSC had the potential to listen to its people and become great, instead it conducts surveys and makes you listen to conference calls about ethics to tick boxes when the CSC beast has no ethics. I find it astounding that they cull on the basis of the least experienced in a particular team for the current role, regardless of whether an employee has moved around teams and performed very well on numerous different projects. Basically though, managers have abused their position and kept on their drinking buddies. When you get people that cant spell or use correct grammar being promoted because they know how to shout at people ad you get talented problem solvers getting the bullet, then you know something is deeply rotten within the company.

Anonymous said...

Wow, just looked at that report...it sounds like CSC. In Australia they are carving us up, we are loosing more people today, just before Christmas. They are not delivering and project Rose is a croc. The whole project out of India and nothing is working, nothing is built. Its a joke really.

Anonymous said...

After being retrenched, from CSC Australia, I am glad to be free of the toxic environment in which I had to work for the last few years. CSC used to say people were it's greatest asset (due to the nature of it's business) and used to have a pin which said "CSC part of it proud of it".

Anonymous said...

it s the worst company of the word. In prague they replace who really knows and have talent with Young people ready to be shout. yes because they do not experienced people but only Young people who will be responsible on fauts to be fired. they lose contiuosly clients because they want spare about everything and now that Zurich also will leave 75% of employees in Prague will be in the Street. Last mobbing policies are common practise there but fortunally good lawers can protect who is abused because their name is now a farethale in the world

Anonymous said...

Aren't you one nasty piece of work! As if you are designing the next space shuttle for NASA. Get over it and start living.

Anonymous said...

Really, accent is the deal breaker for you! I'm sure your Cockney accent is well understood by all.

Anonymous said...

Some time ago I was retrenched from CSC Australia. At the time I was quite sad about it as I held many of my colleagues in very high esteem and the company had been a great workplace that offered good challenges over a number of years. Now, when I catch up with ex colleagues that have survived the many (weekly, or so it seems) culls I am so glad that I am gone. Clearly the organisational culture is toxic, the people still left are not happy, there is a lack of skilled people available for the small amount of work that is around, no work in the pipeline and the existing major projects are failing. Looking back they actually did me a huge favour. I have a much better job and got a generous payout to boot so I really can't complain. This doesn't make it better for those left behind except I will say just hope that someone comes along and taps you on the shoulder because it doesn't seem like a company that is going to make it in the long run..... at least not without a whole lot more pain in the short to medium term.

Anonymous said...

Csc is a mess. Next generation offerings are a joke. How can you sell and promote products and services that are good in theory. But in reality have little to no chance of delivering any value to existing or prospective clients. Csc's Bizcloud offering must have been designed by monkeys. You don't sell a managed bizcloud service at amazon prices and then wonder why you can't afford to hire any decent support staff to steer the ship. Csc clearly hasn't understood it's own market space correctly. Csc have adopted a "me too" mentality rather than a being a market leader. Csc is putting lipstick on a pig. Would love to be retrenched. The current situation is embarrassing in front of customers and the word "toxic" comes to mind very often.

Anonymous said...

The best people in our project have left, the rest are looking for other opportunities. I suppose that CSC is not doing anything differently from what other companies are currently doing, and is merely following the general trends, such as relocating headquarters from CA to northern VA, cutting benefits, simplifying the management hierarchy, giving preference in hiring to young, inexperienced, cheap college kids (sometimes when I come to work I feel like I'm on a college campus), etc. I'm sure that the bean counters in corporate factored the cost of experienced, productive and expensive employees leaving the company, and deduced from the numbers that it is worth and and the company will still be better off. We shall see if their models match reality. In the meantime, everyone I know who is younger than 60 is looking for other opportunities

Anonymous said...

Low level drones from india. Really? I guess you aren't aware that the world's IT industry is dominated by Indians.

Anonymous said...

From having to work with these people on a daily basis, there are significantly more "low level drones" that do nothing and have very little in the way of skills (for their job title) than skilled staff. There are a few worth their salt, but you're lucky to find one. Low level Indian drones indeed

Anonymous said...

If Mike Laphen was turning a blind eye to problems, the difference in Mike Lawrie's era is managers at bottom of the heap donot give him accurate information. I have witnessed number of restructures over year, however one that was announced as effective mid April 2014 is yet to be effective. No one in new structure seems to understand what they are doing, work is either done by old people if they are around or it suffers is what I have noticed.

Anonymous said...

I do not believe Mike Laphen was turning a blind eye to problems.

He seemed to think that by shooting the messenger and by declaring the problem "unacceptable" it would get solved by itself.

Anonymous said...

Wery welcome to CGI, the opposite of CSC..

Anonymous said...

I was part of CSC India and served more than a decade and was part of the leadership team. I got so frustrated that I had to take a major decission to resign on the basis of an offer from a small company. Luckily for me that I got a very good offer during my notice period and now I started on the new job in a leadership role and am very happy and satisified. Calls from my fellow ex-colleagues doesnt stop to wish me luck and how I found a new job and if there is anything I can help them in find a new job outside of CSC. I really feel pity.
I wish CSC all the best only because it still employes some of the best people and freiends i ever worked with

Anonymous said...

CSC is heaven compared to CGI. If anyone wants to be miserable - go work at CGI.