Capgemini Looks to Opportunities in Australian Government and Industry with Empired Buy

Summary Bullets:

M. Rogers

• Capgemini’s recent acquisition of Empired caps off a spending spree on Australian applications and data specialists that suggest a shift in focus to grow its business in Asia Pacific

• Capgemini’s broad capabilities paired with Empired, a Microsoft specialist strong in Western Australia with many clients in minerals, energy, and government, offers unique opportunities for growth in areas like industrial IoT

Capgemini Sets its Sights on Australia

French systems integrator, consultancy, and IT services provider Capgemini announced plans to purchase Empired, an Australian cloud and digital services provider based out of Perth. The acquisition brings over 1,000 professionals to Capgemini and augments the IT services provider’s footprint in Australia and New Zealand. The deal is expected to close at the end of 2021 for $233 million. Empired has offices in Sydney, Melbourne, Perth, Brisbane, and Adelaide within Australia. It also has significant operations in New Zealand and a sales office in the US.

Whilst Capgemini has not always had the strongest Australian presence, Empired marks the fourth Australia-based acquisition for Capgemini since March 2020. The recent acquisitions include Acclimation, a Melbourne based SAP cloud specialist announced in July 2021; Melbourne-based RXP Group, a digital consultancy and managed service provider focused on Salesforce, Microsoft, and ServiceNow for $95 announced in November 2020; and Sydney based WhiteSky Labs, a consultancy focused on Mulesoft platform announced in March 2020. Capgemini is a major IT company with annual revenues of over EUR15 billion (A$25.3 billion) but 93% of its business is in Europe and North America. The company is making similar moves as its competitors (e.g., Accenture, Cognizant, Fujitsu, Infosys, Wipro, etc.) in making acquisitions in Australia to shore up local capabilities to capture the growing demand for digital services; as well as to diversify outside of Europe and North America.

However, Capgemini already has capabilities across the specialities of each acquired company. Capgemini is one of the leaders of enterprise application consultancy and management and is already strong partners with Microsoft, Salesforce, SAP, ServiceNow, and MuleSoft. Instead, these acquisitions are more about increasing the number of qualified professionals within Australia across different strategic application environments (the four acquisitions Capgemini have added around 1,800 professionals), further the acquisitions also help to boost Capgemini’s market share and gain customer relationships.

What Empired Brings to the Table

Empired provides advisory, consultancy, and managed services, with a strong focus on Microsoft environments. As a Microsoft Gold Partner, the company has expertise and accreditation across various Microsoft solutions especially Azure and Dynamics 365. It had achieved the Microsoft Azure Expert Managed Services Provider (MSP) in late 2020. The company offers solutions across enterprise application management, app modernization, data and analytics platforms, cloud migration, and customer engagement. Empired’s business is focused heavily in Western Australia, where it has a history of supporting clients in the government, resources, energy/utilities, construction, education and healthcare verticals. Key customers in Western Australia include Main Roads Western Australia, Rio Tinto, Western Power, Horizon Power, and Eni Australia.

The company has been expanding eastwards into New South Wales, South Australia, and Victoria; and is gaining some momentum. For FY2021 around 35 to 40% of its revenue is expected to come from Western Australia (including NT operations), with another 35-40% coming from New Zealand and US operations, and the remaining 20-30% from the rest of Australia. The company recently announced a four-year $52 million deal with Environmental Protection Authority in Victoria, to manage their cloud platform and applications, as well as a two-year $9 million contract with the South Australian Department of Innovation and Skills. In April 2020, Empired also won two contracts with Western Power worth $61 million – the largest for the company in its 21-year history. Overall, for FY2021 (ended June 30, 2021), Empired has a forecast annual turnover of between $186 million and $188 million. These new deals further strengthen the company’s credibility and market position.

Capgemini and Empired Growing Together

Both Capgemini and Empired have a strong focus on the public sector which could see the company making greater inroads into the sector. Capgemini recently helped Service Australia to develop an automated document processing using optical character recognition and natural language processing. The company is also supporting federal government organisation in Salesforce and SAP projects. Empired will also give Capgemini a stronger presence in the natural resources and utilities sectors. This is the largest industry for Empired contributing 32% of its revenue in H1 FY2021. These sectors remain resilient despite the pandemic.

Empired is pushing to grow sales from Victoria, NSW, and SA and the acquisition by Capgemini gives it the financial backing and sales organization to help win more deals in those regions. Whilst the company has been gaining momentum on its own, the backing of a major international service provider like Capgemini will help give credibility when going after accounts where they might have limited mind share.

What Could the Future Hold?

Empired has been developing industrial IoT solutions and client references in key verticals. Empired is developing new solutions leveraging Microsoft’s technologies. For example, Empired has been working on developing low-code AI-application services for industrial customers using Microsoft platforms like Azure Cognitive. This will enable customers to embed services like computer vision and speech recognition into applications via APIs without the need for in-depth machine learning modelling skills. Further, the company has been working with Microsoft on its Project Bonsai, a platform using machine learning to train industrial control systems to work autonomously. The ability to offer low-code AI for industrial applications will help Empired in guiding clients in its target verticals towards industry 4.0 and address skill gaps that many customers face.

Meanwhile, Capgemini recently announced a partnership with Qualcomm around 5G private networking. The companies plan to develop off-the-shelf 5G private network solutions for industrial verticals. Capgemini will bring its integration capabilities whilst Qualcomm will supply hardware including its 5G RAN portfolio. Empired’s work to develop industrial IoT solutions, as well as its existing customer base in minerals and energy in the remote Western Australia offer an opportunity for Capgemini to find early customers for its new private 5G ambitions. Paired with Capgemini’s capabilities in IoT and edge and ambitions for private 5G, the company will have a compelling story for the Australian market soon.

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