ICL has merged three services business to form a single unit, in what analysts believe is just the first in a series of consolidations.
The aim behind the latest move, and the sale of ICL's final remaining manufacturing operation, D2D, earlier this month, is to "reduce the complexity of ICL". This is likely, ICL watchers believe, to lead to further units being merged or sold off, with job losses and premises consolidation likely to follow. "ICL's modus operandi is as much about hiving off non-qualifying parts as it is about building up credentials in its chosen market space," commented George O'Connor, an analyst at IDC.
The new ICL Services arm consists of three units - CFM, which consist of the outsourcing business of that name plus distributed systems and managed services operations taken from the ICL Sorbus services subsidiary; the ICL Network Services unit; and ICL Education and Consultancy, which includes the Power of Four operation. The merged group is headed by Nigel Hartnell.
Sorbus still exists as a separate entity but, with the spin-off of two of its areas of coverage into ICL Services, its role has altered. In fact, Sorbus has reverted to its original core business of hardware and software maintenance and support, after several years of attempting to branch out into more consultancy-based business IT services.
An ICL spokesperson said the moves "put more weight behind our well detailed strategy of becoming a services company in the front rank", but O'Connor believes that, while the consolidated organisation will make it more focused and efficient, it now needs to work on raising its profile. "The remainder of ICL still needs to work overtime to convince prospects of its prowess, ability and track record in the services market," he said. However, the sheer size of the combined operation should stand up better than several isolated units against more high profile or larger services organisations.
ICL claims initial user feedback has been "positive" although analysts question whether corporate sites, in particular, would be happier with a vertical strategy that provide products and services tailored for particular customer sectors. However, "there is no sign that the latest changes will lead to revolt among users," said IDC.
The latest reorganisation reduces the total number of ICL units to eight, compared to 23 in 1995, which should be less confusing for customers and resellers.
This is unlikely to be the last move to reduce the number of ICL units, however. Those that are probably under consideration for sell-off are those with no services component and those that are highly capital intensive, such as D2D and the already divested Volume Products. Some analysts are already raising questions over Sorbus because of its stock-intensive nature and the fact it has been left out of ICL Services.
ICL was cautious about making financial predictions and would not even estimate the revenues it expects from the new services arm. However, the sale of D2D alone will contribute significantly to pushing the company back into profit for the fiscal year. Its sale has removed 20 per cent of the ICL workforce and the loss of its $1 million a year revenues will not be felt until next fiscal.
In addition to likely further divestments later this year, ICL's plans for flotation remain alive, which could boost both its access to capital and its reputation as a global heavyweight. Traditionally, service companies are more attractive in terms of P/E ratios than systems vendors.
The executive line-up in other parts of ICL now includes Torsten Vieth, managing director of ICL Enterprises, northern Europe; Tim Gibson at the helm of ICL Enterprises (western and central Europe, Middle East and Africa) which includes the UK; and David Palk as the new MD at Sorbus. Nigel Hartnell heads the services strategy board at the head of the new ICL Services unit. The remaining business units are Financial Services, TPLC (distribution), ICL Retail, ICL Interactive, Technology Businesses and ICL Pathway. The heads of these units remain unchanged.
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