Capgemini to limit hiring in India, says CEO Paul Hermelin

As French IT services firm Capgemini looks to focus on both digital and traditional managed services business, it finds itself in a tricky situation, says CEO Paul Hermelin.

“It creates a difficult situation because of feeling of a two speed world. At Capgemini, there’s what we call new, which is digital and cloud, and what we reported in Q1 was 42 per cent of revenues, growing at 20 per cent. But the group only grows at 7 per cent which means the rest does not grow,” Hermelin told BusinessLine .

Shrinking margins

“It means volume grows because when we renew clients, we renew clients with price concessions. The only way to sign a renewal goes with a price concession. So the nominal prices are going down and you have to compensate it with market share,” he added.

With shrinking margins at managed services business, the company is trying to master both digital and traditional services and that’s where it’s trying to revamp its 100,000-odd employee base in India.

As Hermelin prepares to step down after spending about 17 years at the helm of the Paris-headquartered company, he’s identified two executives as his possible successors, both of whom — Thierry Delaporte and Aiman Ezzat — have been appointed as Chief Operating Officers to take the company forward in both digital as well as managed services.

“I have tasked them with two complementary priorities. Aiman is in-charge of overcoming a historical fragmentation of the group, which is account-centric unification. We will very soon have an organisation with a unified go-to-market with a clear intent of increase the number of strategic accounts. It was historically 60. We want to more than double that,” Hermelin said.

“Thierry is in-charge of portfolio and capabilities and he has India under his remit. His two priorities are innovation and competitiveness automation. His responsibility in India is to grow innovation and productivity, the two drivers for the group,” he added.

What this means is that the company will focus on retraining existing employees and would limit its external hiring in India.

“With 100,000 people, we have the kind of stature we need in India. We are not in India looking for more stature. We added some Indian platform through some acquisitions which are far more targeted,” Hermelin said.

He said while the company has acquired companies with large employee base in India in the past, future acquisitions will be focussed purely on new skills. “There will be new acquisitions, where we will target new skills in India and not volumes,” Hermelin said.

He also cleared the clouds around recent employee protests on social media where Capgemini employees complained about biases in the way hikes were given, prioritising those with digital skills while completely leaving behind the ones working on traditional technologies.

“This year, we had a strange structure of business, but base salary on an average has grown by 6 per cent. We have moved from just volume that created room for everybody to value growth. We intend to be a winner in the value race and be at our side, we are ready to invest in you so that you are a winner personally in the value race,” Hermalin said.

No large hiring

He also indicated that the India employee strength has plateaued now and there may not be large hiring going forward at India centres.

“We’ve progressively replaced a lot of French, Dutch and Americans with Indians. Even if the group was not growing that much, in India we were growing at 20 per cent. Today, we’ve reached the level of Indian sourcing that we need. So, we are now in India at what I would call as a cruising speed.”

In order to improve its engagement with customers for digital projects, Capgemini is building new innovation centres called Applied Innovation Exchanges (AIE) where it is building next stage of digital solutions for clients. These centres will also help the company co-innovate with clients.

Capgemini already has 12 of them including the largest one in San Francisco and others including those in London, Singapore and Mumbai. The 13th AIE will come up by end of this year in Hyderabad with a capacity of about 100-120 people in a new facility that’ll be about 10,000 sqft in area.

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