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Capgemini Exec Debunks Automation Cost Savings Hype, Reports 23 Percent Global Digital And Cloud Sales Growth

Capgemini CFO Aiman Ezzat said despite big promises from Indian competitors, clients should expect to see no more than a 10 percent cost savings from automation.

Capgemini CFO Aiman Ezzat said that, despite big promises from Indian competitors, clients shouldn't expect to see a cost savings of more than 10 percent from automation.

The Paris-based company, No. 6 on the 2017 CRN Solution Provider 500, said the big hype from rivals predicting 40 percent cost savings from automation has disappeared as client skepticism has increased, Ezzat told financial analysts Thursday.

"We're doing a lot of work because we do consider value creation around automation, but it's not necessarily cost reduction," Ezzat said. "I think that's where the big difference is."

[Related: Capgemini CEO: We Had Been Eyeing Ciber's U.S. Assets For Years]

Capgemini has therefore shied away from large-volume automation projects, Ezzat said, focusing instead of automation specific, high-value processes and security protocols.

The solution provider has enjoyed considerable success in its approach to automation, particularly in the banking verticals, where Ezzat said Capgemini has displaced not only Indian players, but also famous Western competitors thanks to its unwavering focus on quality and value.

"We are quite bullish on the work we're doing today for clients," Ezzat said.

Since launching its automation drive last year, Capgemini has developed upwards of 2,500 robots for more than 270 customers, according to Chairman and CEO Paul Hermelin. The company additionally has more than 4,000 employees dedicated to robotic process automation, cognitive technologies and artificial intelligence, Hermelin said.

Thus far, Capgemini has enjoyed the most success around robotic process automation in the financial services vertical, where Hermelin said the solution provider has deployed robots to automate back-end processes for banks. The company's work in automation has allowed Capgemini to increase its operating margins despite continued pressure around large contract renewals, according to Hermelin.

"We are winning a growing number of engagements in this domain," Hermelin said during the company's earnings call. "The appetite for automation is there, and we have delivered external services to clients."

Capgemini saw sales for the six months ended June 30 jump to $7.5 billion, up 2.5 percent from $7.32 billion in the same period last year, driven by massive growth in the company's digital and cloud practices. Net profit, meanwhile, climbed to $438.7 million, or $3.29 per share, up 3 percent from $428.1 million, or $2.95 per share, the year prior.

Capgemini's North American revenue climbed 3.5 percent to $2.29 billion thanks to dynamic growth in the financial services and manufacturing sectors, as well as a recovery in the energy and utilities sector.

Application services revenue – which represents 62 percent of Capgemini's business – climbed by 5.6 percent after factoring out changes in foreign currency exchange rates, thanks to nearly double-digit sector growth in France, Germany, Sweden, Italy and Asia.

Revenue from other managed services – which represents 19 percent of Capgemini's business – tumbled by 6.6 percent on a constant currency basis due primarily to declines in infrastructure services and the company's U.K. public sector business.

Technology and engineering services sales – which represent 15 percent of Capgemini's business – increased by 3.5 percent on a constant currency basis, bolstered by strong growth in France and Scandinavia. And consulting services – which make up 4 percent of Capgemini's business – skyrocketed by 10.7 percent on a constant currency basis thanks to strong growth in continental Europe.

Digital and cloud sales – which represented 35 percent of Capgemini's business across all units – grew by 23 percent on a constant currency basis thanks to robust support capabilities in digital transformation and process industrialization, as well as expertise around robotic process automation, cognitive technologies and artificial intelligence.

For all of 2017, Capgemini said it expects sales to grow by 3 percent on a constant currency basis.

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