CSC fails to secure BEE lifeline

By Martin Czernowalow for CSC
Johannesburg, 08 May 2009

Questions about the sustainability of ailing IT services outsourcing group Computer Sciences Corporation (CSC) in SA have again been raised.

This follows the collapse of a potential black economic empowerment (BEE) deal, which would have been a vital lifeline for the company.

This week, ITWeb received a tip-off from a former CSC employee, who claims his services, as well as that of several other employees, had been terminated as a result of the deal`s collapse.

CSC previously stated it was searching for potential BEE partnerships to secure public sector contracts to offset the loss of its biggest outsourcing contract. Project Rosa was a R1.8 billion contract with Old Mutual and was awarded to T-Systems about a year ago.

The contract, described as the biggest outsourcing deal in the history of the local financial services sector, was previously held by CSC from 2005 to last year. It accounted for between 55% and 60% of the group`s local annual revenue.

About a year ago, country manager Alan Hardiman said he was tasked with developing a new country strategy for the company and vowed it would bounce back from its loss.

However, some 12 months down the line, the company seems to be struggling to claw its way into the public sector and is tight-lipped about its current market position.

In a brief reply to ITWeb`s questions, Hardiman this morning would not comment specifically on the failed BEE deal, saying the company remains under strict confidentiality agreements with its contemplated BEE partners.

"Therefore, I am not in a position to discuss any aspect of the arrangement," he explained.

Regarding retrenchments at CSC, Hardiman says "a small number of roles have already been restructured as a part of our revised planning activity". However, these, he states, account for a small percentage of CSC`s workforce, primarily in back-office functions.

Committed to SA

While refusing to be drawn on specifics of the effect the collapsed BEE deal could have on the local future of the company, Hardiman states: "We remain committed to both SA and BEE, but have decided to progress our business plans at a pace more appropriate to the current global economy.

"This has led us to make some adjustments to our organisation. However, we will continue to manage the business applications, BPO and infrastructure for a number of global, offshore and South African clients."

The company has remained cagey about its local position since Hardiman took over as country manager from Martin Vergunst in April last year. At the time, Hardiman admitted the company was under financial pressure, brought on by the loss of the Old Mutual outsourcing deal.

Hardiman stated the company would implement a three- to five-year streamlining exercise of its operations and cut costs in an effort to keep its local office open. Furthermore, as part of the turnaround strategy, Hardiman explained the company would seek new business in the country and pitted his hopes on a foray into the public sector. However, it seems the strategy has failed to materialise, as the company has not announced any new contracts in the past year.

In terms of its workforce, CSC`s head count is reported to be below 300 at this stage. The latest rounds of retrenchments follow a large-scale transfer of staff to T-Systems last year.

As part of losing its Old Mutual contract, CSC was required to transfer 220 employees to T-Systems, under Section 197 of the Labour Relations Act. This stipulates that if a business is transferred as a going concern, the employees are automatically transferred along with the business, unless agreed otherwise.

It further resulted in the transfer of another 20 employees to T-Systems, who provided IT services to retail client Woolworths. The retail group was sharing mainframe hosting with the Old Mutual Group, and Haridman said, at the time, that it was not viable to keep Woolworths as a standalone contract.