India will be even more important in the new world: Rodolphe Belmer of Atos

In a Q&A, the CEO of the French IT behemoth talks about the transformation at Atos, the firm's growing business from cloud and digital, and India's role in this transformation

Rodolphe Belmer, the chief executive officer of Atos, is known as the turnaround CEO in France. He has successfully steered companies when they have faced tech obsolescence or are going through a transformation. Now at the helm of Euro 11 billion French IT services firm Atos, he is responsible for getting the company back on the growth trajectory as it focuses on driving its cloud and digital business. On his first visit to India since he took over, he talks about the transformation at Atos in an interview with Shivani Shinde, and dwells on the firm's growing business from cloud and digital and India's role in this transformation. Edited excertps:

You joined Atos last year in October and since January, you took on the role of Group CEO. How is the transformation going on for Atos?

Atos has historically been a strong player in the infrastructure business and was created around that line of activity-- outsourcing infrastructure and managing it for customers. Due to the technological evolution and changing customer demand, Atos decided to accelerate and build capabilities in two areas—digital & AI and cloud, and all the related applications. Among the business lines that we have further strengthened our play is BDS—big data and cybersecurity.

We believe that digital is a very powerful avenue of growth and I also believe that when it comes to technology hardware and services, there is a lot of value to be created and we're trying to transform the company and accelerate expansion into new areas of business. Any transformation is associated with some difficulties as you have to make sure that you are balancing your performance while you are transitioning, which also comes with incremental investments. We're exactly trying to navigate that moment.

But this transformation is not specific to us, we have been helping our customers do this for them for years now.

Any timeline by when you think the company will get back to growth? It has already given 2-3 profit warnings over the past few quarters.

We will be releasing our turnaround programme in a few months, around May, and will communicate to the financial markets about our new objectives, which will give a sense of when the growth is going to come back. At this stage, we think the year 2022 will still be one of transition for us, but we should have more positive trends starting to show in the middle of the year.

The transition is already in progress, decisions regarding change in leadership have already been put in place, certain measures to control cost have been put into action, which we think should start bearing fruit by the mid-year. This is still not the full scale turnaround programme, but we will have a sort of inflection point in terms of restructuring.

One of the biggest aspects of any transformation is customers and that they continue to see merit in the process. How have you managed to restore confidence among them so that they do not leave?

We have not seen many concerns from customers, and one of the reasons for this is our relationship and the value we bring. We have regularly been carrying customer satisfaction surveys and the ratings have been very good so far.

Second, everybody can see for themselves that we continue to invest massively into our business. We invest in M&A, we've made more than 20 acquisitions during the past 18 months, which enrich our skills and capabilities and also build IPs that we are bringing to our customers. We have rather successfully added thousands of people into the company.

We added 5,000 people last year and are continuing the trend this year with very strong and ambitious objectives in India. We continue to invest in our people, we're training many of them and are also adding several certifications.

Yes, I agree there were some concerns about our financials as the company gave profit warnings for the past few quarters. But the financial condition of the company is very strong, at the end of December 2021 we had a cash balance of Euro 3.5 billion. Even though the company is going through transformation, all transformation comes with some pressure. I think that there is absolutely no reason why there should be any question on the stability of the company.

Do you think the transformation process should have happened a year or two early then now, since the demand for IT is so huge and focusing on growth should have been the focus?

Has our transformation started a bit late? The answer is, yes. We would probably have been better off if we had done this before, which would have enabled us to do that transformation progressively. Now we have to accelerate, which sometimes can be difficult, and of course, because the company was pretty much engaged in the incumbency business there was a tendency to resist transformation instead of accepting it.

Is it too late? No. The digitalisation of the world economy is just at the very beginning. When it comes to basic services like migration to public cloud, it represents just 20 per cent of the global economy. Can we catch up? I think for sure we can.  

How significant is India in this transformational journey?

India is very important for us, more so now. It represents almost 40,000 colleagues in India who contribute to a third of the company's revenue. India will be even more important in the new world as we focus on digital, AI and applications. In all these areas, India has strong competencies. High Performance Computing (HPC), which is a unique offering from Atos is also a big focus in India. Over the past four years, we have expanded our HPC operations in India.

HPC for us is a very interesting line of business because it's very innovative and is clearly a highly differentiated factor. But we want to continue to expand in that area because we think it can emulate our growth in other segments, which are much more valuable in terms of profit margin generation. Like AI. It increasingly will look at large sets of data, which will require HPCs at scale. We are developing capabilities to train AI algorithms through our HPCs and we have been offering this to our customers.

Atos has been working with European institutes and governments in building what is called sovereign cloud for data privacy. Would you also look at working with the Indian government, which is coming out with its own data protection bill?

Sovereign Clouds is about making sure that the public cloud that is used is respectful of European regulation and the citizens privacy and making sure that all the data that is used in Europe. We can certainly work with the government and bring some of our expertise from our experience in Europe.

Do you also want Atos to increase its revenue from India?

Yes. Even though India is still a relatively small business, we see some interesting opportunities for us notably in the HPC segment because of the super computer program that the country has. We have also built our manufacturing capability for HPC, which aligns with the Make in India initiative. We have sold our HPC to over 15-16 educational institutions. We also want to expand our presence in the public sector. Cybersecurity is another area of interest; we have recently set up our fourth security operation centre in India.

In terms of expansion into the country, we plan to hire 15,000 this year. But as with peers, we are also worried about supply side issues.

What is the impact of Russia-Ukraine conflict on operations?

We have not seen any sizable impact on business. We are not present in Ukraine and have no resources on the ground. We do have colleagues in Russia, over 2,000. We have a SAP competency center in Russia that has over 1,000 people. It is a unique center and difficult to substitute. Having said that, we are preparing ourselves to exit Russia. Unless the EU Authorities do not ask us to leave we can stay. In terms of business, revenue from Russia is around Euro15 million, which in the Euro 11 billion landscape looks very small.

But this invasion of Ukraine has created a lot of tension within the country and a lot of pressure from colleagues, especially from Eastern Europe. Employees want us to leave as soon as possible.

In terms of the shift due to the loss of this centre, we have moved work to India, Bulgaria and we are also setting up a new centre in Turkey.

How significant will acquisition be as you ramp up?

We have three main focus areas—first is cybersecurity. We are the second largest worldwide player in the cybersecurity services space. The second focus area is AI. Though we have grown organically as well, acquisitions have played an important role in acquiring IPs as well as competency in algorithm development capabilities.

In the cloud segment we want to integrate new capabilities, especially people with knowledge. We recently closed an acquisition of a company called Cloudreach, which gave us access to 600 highly skilled engineers, and cloud architects. And we probably want to do more of those acquisitions because we're a bit too small in the cloud sector.

How much of the future growth will be driven by inorganic play?

Most of the growth of the company will be organic, we will continue to make bolt-on acquisitions. We have stated that annually we will invest Euro 300-400 million in acquiring assets and capabilities. But organic growth will be what drives the growth.

What made you take this role?

My first stint as CEO was in 2003, almost 20 years ago, for Canal Plus (television giant in Paris). Then I headed satellite operator Eutelsat Communications. Both at Canal Plus and Eutelsat I was heading turnarounds and both were transitioning due to technological disruption, which is similar for Atos as well.

What do you think is different this time than the last two transitions that you managed?

The difficulty this time is probably the pace of transformation. We are also a truly global company with a presence in 71 countries. At the same time, we have a huge talent base and hence it makes it a bit easier to transform the business.