Unisys Unwraps Services Strategy

Unisys Corp. last month said it will retool its services business to cope with declining integration revenue and problematic outsourcing contracts.

On Oct. 18, the company disclosed preliminary third-quarter results showing a loss of $54.3 million. Unisys’ revenue declined 4 percent in its September quarter compared with the same period last year. To jump-start the top line, company officials said Unisys will focus on four high-growth service areas: outsourcing, enterprise security, open source and Linux services, and Microsoft services and solutions. Unisys management also disclosed efforts to improve outsourcing contracts that have proved to be a drain on earnings.

Last week Unisys officials began to shed light on how exactly the company plans to get its service business back on track. Services, after all, account for more than 80 percent of the company’s revenue.

As for the Microsoft effort, Unisys on Wednesday said it will devote 2,500 consultants to a practice targeting Microsoft’s enterprise technology stack. That thrust will emphasize business intelligence, analytical processing, enterprise application migration and other SQL Server-based solutions, according to the company.

Unisys, meanwhile, has linked up with Oracle Corp. on the outsourcing front. The companies plan to target clients with network and security management, asset management and call center support requirements.

Other service areas are works in progress. Janet Haugen, Unisys’ chief financial officer, described the company’s open-source capability as less mature than other service lines such as outsourcing.

That said, Unisys has alliances in place with Red Hat, SUSE and JBoss, according to a company spokesman. The company also works closely with MySQL and Postgres SQL, he added.

As Unisys refines its go-to-market approach, the company also seeks to boost its ability to screen new business opportunities. The idea: identify and weed out potentially problematic projects before the company commits to bidding on them.

Unisys has adopted a new deal review process, noted Haugen, who spoke on Thursday at the Morgan Stanley Software, Services, Internet and Networking Conference. Previously the company had scrutinized business opportunities above the $100 million threshold. Now, Haugen said, the company reviews deals of $30 million or greater and will also assess opportunities with financial or risk characteristics considered to be above the norm. Unisys’ global bid review board provides legal, financial and operational oversight.

In addition, Unisys is building a profile for accounts in which the company has done well and one for accounts in which it has struggled. Unisys will “add that filter into the bid/no-bid decision making process,” Haugen said.

Overall, Unisys’ services strategy seems straightforward: Select bid opportunities with greater care and invest resources in fields with growth potential. What’s less evident is how Unisys plans to differentiate its approach. Microsoft-centric service units have been done before. Avanade, the 5-year-old Accenture-Microsoft joint venture, focuses on business intelligence and enterprise application migration, the same areas Unisys now pursues.

Haugen, however, cited Unisys’ ability to pull together a full portfolio of services as a plus. That breadth combined with a long-standing focus on the public sector and financial services could help the company stand out. How Unisys fares in executing its services vision is a story that will unfold in 2006.