Just months after it was considering buying DXC Technology, Atos is reportedly looking to sell some of its legacy business operations, including its data-center and communications businesses. If true, it’s a further sign that the on-prem consulting business is falling out of favor.
Bloomberg reported on Tuesday that Atos is exploring a sale of its legacy information technology business, including some outsourcing operations. One day later, Atos CEO Elie Girard said during its earnings call with analysts that the company is definitely looking to make some kind of changes to its businesses.
Girard noted that in the first half of 2021, the Resources and Services group faced severe headwinds on two legacy activities, classic data centers and classic unified communications, where the drops were, “respectively, higher than what we experienced in the last years and larger than what we expected.”
On the flip side, the acceleration of its cloud-migration business is proving beneficial to Atos. “First, the most complex migrations are yet to come. And as the future remains hybrid-, multi-cloud, the acceleration requires more cloud orchestration,” she said.
Girard said that with so much business moving to the cloud, utilization of the company’s on-prem infrastructure is dropping faster than Atos can shut down and consolidate those data centers. So the company sees a strong business case of finding partners to take over those data centers and offload the responsibility for running and consolidating those centers to the partners.
In short, Atos is getting out of the on-prem services business one way or another.
On-Prem Losing its Appeal
That’s quite an about face from earlier this year when Atos was rumored to be interested in acquiring DXC Technology. A merger of Computer Sciences Corp. and HPE’s old EDS consultancy, DXC is heavily invested in the on-prem business. The deal was called off after investors opposed it. DXC is reportedly still looking for a suitor.
Atos isn’t the only company souring on the on-prem business. Late last year IBM announced plans to spin-off its entire Global Technology Services division, with 90,000 employees, under the name Kyndryl with a focus on managed infrastructure services and modernization efforts.
Other players are investing in other areas. Accenture, the largest IT services firm, has done more than 40 acquisitions in the past year, almost all cloud-oriented companies. And Deloitte has acquired five cybersecurity firms this year.
All of which bodes badly for the on-prem consulting business. If the top tier players don’t want to have anything to do with it, what are we left with?
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