Tuesday, 22 October 2013

Is CSC's past catching up with it? or Where is CSC's growth?


In a week or two CSC will be announcing its Q2 results. This will be an important report for Mr Lawrie and his management team as not only have they via previous quarterly reports set high expectations in the market they have given a very strong message about CSC's future growth. We expect the upcoming report to be professional with many positive statements about the reported quarter but judging from employee posts in various blogs and from reports in the media we think there is an underlying and as yet undiscussed decline occurring in CSC's performance. 
Why do we say this? Here's why:
The UK Government has closed down CSC's cash cow, the NHS National Program for IT. The reasons for this are thoroughly documented in the media, on the internet, in various UK government committee meetings, and in this blog.
There are few if any sizeable new contracts announced. In fact Allianz Insurance, a company with which CSC has a long standing relationship, has recently signed a multi-million dollar long term outsourcing agreement with IBM even though it was in close discussions with Mike Lawrie and his Executive Team at CSC. 
A former CSC employee now with a large IT user witnessed CSC bidding on a major contract has posted a comment; I am ex CSC and the company I moved to (massive UK company) was considering CSC as part of a large outsourcing deal. The issue was that the CSC sales team came in and delivered by far the best pitch, everyone was very impressed. We then went to see the operation in the flesh and it didn't add up. All that was promised was not visible on the ground and we walked out of the session and left. This is due to the issue that I saw every day within CSC; a chronic lack of investment in the operational ability of the company.’
Employees report confusion about structural changes, the people who actually deliver services are being decimated in what are obviously badly managed staff reductions, thus reducing service quality. They also report that the senior technicians who fixed technical failures before they became customer problems are being made to leave before suitable replacements are found. 
As a result of all the above morale is reported to be at an all time low which again must impact service along with the manner in which employees engage with customers. This may be one reason why Allianz walked away from negotiations. Or maybe it was because Allianz was not comfortable with CSC's recent track record of laying off staff who had cut over to them as part of an outsourcing contract.
We would comment that there seems to be a vicious spiral of decline occurring at CSC. Cost cutting is needed as is new investment and renewed skills and leadership, all of which creates a tricky balancing act for management. CSC's seems to be dropping a lot of plates.
Thus, although the financial spinmeisters in CSC may be able to conjure up a positive Q2 financial report for the market analysts, it still needs to show there is new revenue and growth from innovative services (not the much hyped and under invested in cloud computing), while ensuring that contributions to the bottom line are not just the results of the CSC trademark slash and burn cost cutting, tax management, and rescheduling of revenues.
The call on 30th October should be fascinating.


5 comments:

Anonymous said...

The hype inside the company regarding Cloud Computing just isn't reflected in anything I see reported in the Market or Computing press. As an example:

http://seekingalpha.com/article/1770512-cloudy-skies-for-cloud-computing?

I'll be watching the results carefully. I'd place a bet that "Cloud Computing" is mentioned five or less times in the earnings call transcript. Any takers?

Anonymous said...

CSC have made some necessary changes which have been painful but I think this highlights the key reason why CSC will struggle to turnaround any time soon (if at all):

"This is due to the issue that I saw every day within CSC; a chronic lack of investment in the operational ability of the company"

I am almost glad that CSC were not successful in their pursuit with Allianz as this would have put huge strain on existing resources who already cover several jobs amid the stress of redundancy after redundancy. TUPE'd staff would have soon faced redundancy, the sales assumptions would fall apart, senior management would leave with massive bonus and employees would be left to take the kicking from Allianz when the service is so poor, with absolutely no reward for it.

Unless CSC stop treating employee's like cattle they will fail to become the company they want it to be (unless execs just wantto sell the company for short term profit of course)

Anonymous said...

That's growth: Computer Sciences Corp. shedding hundreds of jobs in Prince George’s County
www.washingtonpost.com/business/capitalbusiness/computer-sciences-corp-shedding-hundreds-of-jobs-in-prince-georges-county/2013/10/31/c34e2de8-4175-11e3-8b74-d89d714ca4dd_story.html?tid=hpModule_99d5f542-86a2-11e2-9d71-f0feafdd1394

Anonymous said...

The reason Allianz gave the deal to IBM was because they dropped their pants and wiped millions off their software bill... CSC has since signed a multi ($300m+) agreement with Allianz to provide services. IBM have yet to sign the contract.

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