Unisys: Who Do You Want To Be When You Grow Up? Part 1 of 2

DALLAS: It’s one of the IT industry’s best-kept secrets, but Unisys is hosting its second annual (although the company, in one form or another, is more than a century old) user — and partner — event, Universe 2014.  With less than 400 customers, partners and staff, it’s also one of the most intimate industry events I’ve ever attended.

It was also strange that two of the other companies hosting events in this hotel were Ericsson and Honeywell. The last time I talked to Unisys, both companies were still selling computers, and that was a long, long time ago.

Unisys is a strange duck, neither fish nor fowl. At one time a member of the group known as  “IBM and the  Seven Dwarfs” in the 1960s, it became one of the — Burroughs, UNIVAC, , Control Data Corporation, and Honeywell — in the ‘70s after RCA and General Electric stopped making computers. IBM outsold all of the others combined, but Unisys moved up to second when Burroughs purchased Sperry (Univac’s new owner) in 1986.

In the following 28 years the company tumbled from $10.5 billion in revenues and 120,000 employees to $806 million for its last quarter, ($3.5 billion 2013 revenues) with a net loss of $12.1 million, and just over 23,000 staff. Minus one. Less than a week before this conference it announced that CEO and Chairman Ed Coleman was being let go, effective the December 1.  After years of lower sales and recent weaker-than-expected profits, lead independent director Paul Weaver said in a statement that it was time to search for a new leader

Year over year, Q2 revenue dropped 10% in North America, and 3% for the rest of the world. Services revenue was down 4%, but the backlog was $4.7 billion, down 2% from December. Technology revenue was down 20% YoY, driven primarily by lower sales of ClearPath enterprise servers and software.

Unisys sells primarily to large enterprises and governments, and generates most of its revenues from services, including building and integrating hardware and software systems, providing ongoing hosting and management of data, Business Processing Outsourcing, outsourced help desks and End User Services, Secure Cloud, planning operational processes and changes, and providing security services. The company’s current product lineup includes:

Stealth secures data-in-motion and controls the information sharing within or across networks by employing an innovative data cloaking technique; for Mobile enables authenticated and secure access to application processing environments in the data center from mobile applications; and for Amazon Web Services is designed to leverage the cost-savings benefits of using the public cloud, but have been reluctant to do so due to security concerns

Edge Service Management is a framework and cloud-based SaaS solution that simplifies core service management processes;

VantagePoint delivers real-time personalized access, visibility, and enhancements to the business services enterprises – anywhere, anytime to the screen of their choice;

Choreographer is a Cloud Management Platform (CMP) that automates the management of infrastructure that hosts development, testing, and production in an elastic, scalable, highly-secure manner using private, public, and hybrid cloud deployments;

-based on a Unisys Intel platform, with Secure Partitions provided by s-Par, a capability already used by many Unisys ClearPath clients, Forward! is a based infrastructure that provides integration of hardware, software, and networking with virtualization and automated unified management; and,

ClearPath Systems, mission critical systems for the most demanding businesses.

On Tuesday the company announced an OEM agreement with SAP and plans to provide managed cloud services for the HANA platform. Unisys stated that these agreements strengthen its capabilities to provide clients with real-time analytics solutions based on software on the Forward! by Unisys enterprise computing platform.

Unisys is one of the first SAP partners authorized to deliver a hosted implementation of SAP HANA for the U.S. federal government market.“ Through these new agreements with SAP, we intend to provide modern mission critical solutions that enable clients to exploit the power of information to drive their business forward,” said outgoing CEO Ed Coleman.

This morning it announced a converged infrastructure solution that integrates the Forward! by Unisys platform – which runs mission-critical Linux and Windows workloads in an Intel-based fabric architecture using secure partitioning (s-Par) software – with NetApp FAS and storage , storage, networking and application resources, boosts performance, increases reliability and security, and lowers infrastructure costs, stated Unisys.

“This new joint solution (available now) will fill the gap in a rapidly expanding market,” said Coleman. “Forward! with NetApp storage systems provides clients with a powerful alternative wherever they need predictable, economical performance, security and scalability for their mission-critical workloads.”

So if Unisys isn’t what it used to be, what is it now? Like most things, that appears to depend upon who you ask.

According to one recent report, Unisys is an acquirer’s or activist’s dream. ‘The company is significantly undervalued, under-levered, and awash in cash.’

While the company operates two business segments: services and technology, services is king, with 87% of total revenue. The technology segment is a seller of hardware, mainly high-end mainframe servers for small and medium-sized businesses. Total services were $713 million, split between IT Outsourcing ($295M), Systems Integration ($216M), Infrastructure Services ($89M), Business Process Outsourcing ($67M), and Core Maintenance ($46M).

Elitsa Bakalova, an analyst with Technology Business Research, recently wrote that while Unisys is facing challenges in its shift to the cloud, it is positioned for a successful transition, with demonstrable results from its restructuring starting after the next two years. ‘Despite the obstacles ahead Unisys has a clear strategy to reignite revenue growth including investing in IP to bolster its cloud portfolio, expand its channel partner network and boost investment in marketing to raise market awareness around its marquee solutions such as Stealth.’

She noted that the company is also implementing a strategy to achieve sustainable margins in the 8% to 10% range by consolidating its non-U.S. federal services businesses into one organization, rationalizing its services portfolio, continuing the shift toward cloud-based delivery models and moving its headcount to low-cost locations. ‘TBR believes Unisys’ position as a leading public sector cloud services provider and strong services offerings for the air transportation and mortgage segments will carry the company through this difficult period, allowing it time to transition to become a next-generation IT services provider.”

A month ago Unisys was positioned in the Leaders quadrant of the 2014 Gartner Magic Quadrant for End-User Outsourcing Services, North America. The company said it handles 6.5 million North American IT service events for its clients annually, and its end-user services professionals support more than 3.6 million devices globally and handle more than 14 million contacts per year from 15 global service desk locations.

Another recent analyst report, from Forrester Research, gave bragging rights to Unisys for IT Service Management. It named Unisys a “Leader” in the June 2014 report “The Forrester Wave: North American ITSM Implementation Services Providers, Q2 2014.”

Forrester noted that “an emerging trend for firms is the agenda of business technology (BT), which differs from the IT agenda. IT focuses on delivering internal technology-based services, while Forrester defines BT as [the] technology, systems, and processes to win, serve, and retain customers.” The report stated, “Forrester believes that going forward, the firms that will succeed will be the ones that focus on BT and deliver customer experience improvements rather than just internal processes.”

I believe the evolution from IT to BT is significant, representing the maturation from the ‘boys with toys’ environment that has dominated the industry to the means of enabling organizations to be more effective, and not just more efficient. And that is something that Unisys may be able to build upon going forward.

“Unisys states that IT has been the ‘engine room’ of the organization but now needs to be the innovator of the business by leveraging technology to differentiate the business’ product offerings,” according to Forrester. “As part of the preparation for this transformation, Unisys brings best practices and prebuilt IP to optimize and automate current processes and to create more self-service channels for users.”

In Part 2 we’ll hear from Unisys executives on where the company is and where it wants to go.

DISCLAIMER: Unisys looked after airfare and hotel expenses for this event.

Author: Steve Wexler

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