Capgemini brings new focus to U.S. markets

French company invests in health care, ERP

A relative newcomer to the U.S. public sector, Capgemini Government Solutions has invested several million dollars in the past two years to expand its footprint into domestic markets such as health care, verification and validation systems, and enterprise resource planning.

“Frankly, up to about 18 months ago, we had not really focused on the U.S. public-sector market, the federal level or state and local,” said Joe Moye, who was named chief executive officer of Capgemini Government Solutions toward the end of 2009, about one year after he joined the company.

Capgemini had developed what he called “a little bit of a cornerstone portfolio of work” in the United States but nothing approaching the scale that the Paris-based company has established globally.

Now Capgemini wants to emulate its overseas success in the United States.

“We have developed a heightened focus around a couple of key areas of the [U.S.] federal space,” he said, citing in particular the Defense, Homeland Security and Treasury departments.

Capgemini has made initial inroads into the state and local market, too, earning $50 million in contracts the first year.

Moye said the decision to expand in the U.S. public sector market was prompted by Capgemini’s new business plan, “which recognized the fact that, with the assets we had in the public sector globally, to not focus on the single largest market in the world was a bit short-sighted on our part.”

According to the latest company annual report, Capgemini revenues worldwide in 2009 were 8.3 billion euros, or $10.3 billion. Forty percent came from technology services, and another 6.7 percent from consulting.

The federal market represents about two-thirds of Capgemini’s U.S. business, with the state and local market accounting for the rest.

“We’re building out both [sectors], but because of the natural concentration of the work here in Washington we’re able to, I think, accomplish a little quicker momentum in the federal arena,” he said.

As a foreign-owned company, Capgemini operates under a special security agreement that limits how much say the parent company can have over its U.S. unit, which has its own board of directors.

But there is collaboration with the company's Paris headquarters on business strategy and program initiatives, Moye said.

The company’s government work includes a five-year Army blanket purchase agreement contract worth about $88 million to provide independent verification and validation support for the service’s enterprise resource planning implementations.

“The Army was looking to bring in a firm that had commercial credentials of having implemented these sophisticated [ERP] technologies to kind of bring a bit of a fresh perspective,” he said.

Capgemini also was named as a prime contractor on the multibillion-dollar Tricare military health care contract vehicle, which involves joint military health initiatives among DOD and the Veterans Affairs and Health and Human Services departments.

Moye called the Tricare work important for extending what Capgemini has done in the global health arena to a growing presence in the U.S. military health care system.

Capgemini has a $1 billion a year contract with its single largest public-sector client, Britain’s HM Revenue and Custom, to manage and outsource most of its applications and computing environment.

The U.S. unit will take advantage of much of what the parent company has done at HMRC in hopes of finding similar opportunities with the Internal Revenue Service, Moye said.

To handle the continued growth that Moye expects, Capgemini more than doubled the Herndon, Va., office from about 40 full-time employees to more than 100 in the past few months.

Capgemini Government Solutions also has doubled its revenue in the past year, from $30 million to $60 million. And contract bookings over three years have tripled in the same time to $135 million.

“Our three-year plan from 2010 to 2012 is to take the revenue to $165 million, completely organically, and the bookings north of $400 million,” Moye said.

He said he is looking into some possible acquisitions, particularly in the areas of cloud computing and cybersecurity.

“But as much as anything, [we’re] trying to find a platform that has a good complement, a good stable of contract vehicles, where we can take the broader capabilities of our firm and really plug them into those contracts,” he said.

That acquisition strategy reflects the fact “that we’re here to stay, and this is a market that we intend to make a real important cornerstone of our North American business,” he added.

Asked about Capgemini’s competition in the federal arena, Moye said, “The competition is a little bit different in each scenario, but obviously, if you look at the capabilities of the firm, our major competitors are the likes of Accenture, Deloitte, Northrop, IBM Global Services and Booz Allen [Hamilton] to some extent because we do quite a bit of the management consultant work as well.”

In general, Capgemini competes against all the major systems integrators and partners with them as well, he said.

Although teaming is an important part of the strategy, Moye said what he finds exciting is “we’ve gone from kind of having to resort to partnering to now having developed a level of capability and a level of track record performance to bid on some major contract vehicles as a prime.”

He said the company will seek to become a prime contractor on upcoming contract vehicles, such as DHS’ Enterprise Acquisition Gateway for Leading Edge Solutions II and the Tricare Evaluation, Analysis, Management and Support contract.

In addition, Capgemini is offering IT services to state unemployment agencies through a partnership with Oracle Corp.

Nevada recently became the first state to sign on, giving Capgemini a $28 million contract funded by the U.S. Labor Department to update the state’s antiquated unemployment benefits system through 2014.

“Our applications are 30-plus years old,” said Dave Haws, administrator of the Information Processing and Development Division at the Nevada Department of Employment, Training and Rehabilitation in Carson City.

“We wanted to modernize our applications [and] bring in new technologies and newer business processes that would improve unemployment claims processing efficiencies,” Haws said.

Haws said the existing system cannot adopt new applications or expand, making it difficult and time-consuming to enter data and pinpoint errors.

In addition, Nevada has a higher number of unemployed people than the national average, and the federal unemployment benefits extensions are adding stress to an already-overloaded system.

“We’re struggling to keep up with those extensions,” Haws said.

The project, now about five months old, involves two stages, or releases.

“Release 1 will introduce imaging and workflow to our business environment,” Haws said. “That will occur within the first 18 months of the project.”

Release 2 will complete the core unemployment benefits portion of the upgrade. That will occur toward the end of 2013, or about six months before the contract expires.

The statewide project involves about 40 programmers and subject-matter experts from the state department and another 20 technicians on-site from Capgemini.

“That [number] may ramp up a little bit higher as we get into more hard-core design and installation,” Haws said.

Moye said Capgemini has been able to take advantage of the Nevada project to gain a foothold on a number of other state bids, and he added, “We expect to capture a number of very, very key states in the next 12 to 18 months.”

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