CGI/Logica – the 'first 100 days’

Actually it was more like 115 days since Montreal-based CGI completed its acquisition of Logica (see Logica RIP) when the company updated analysts on ‘the story so far’, but let’s not be picky. The ‘story’ was glossy and impressive, as you would expect from CGI’s global head of marketing, Jame Cofran. He was also very diplomatic in observing that prior Logica management “might have lost their way a little bit”. But he was effusive in his praise for Logica’s professional workforce – our view too, by the way (though we have not always been quite as diplomatic!).

Cofran’s messages were totally consistent with those we heard when we recently met with new CGI UK president, Tim Gregory (see CGI UK - Tim Gregory’s big challenge). It’s very clear that CGI have a well-established and finely tuned formulaic operating model which has served them well integrating their many (and until now, mainly North American) acquisitions, and I think there is a great willingness among the CGI UK professional workforce to make it work for them.

But (yes, there’s always a ‘but’) a great model and great good will are not guarantees of success. Indeed Logica lost money (I assume unexpectedly) in its first 60 days under CGI’s wing (see Logica halves margins at ‘flat’ CGI). Unless CGI really does have the ‘magic touch’, management will find that they have underestimated integration effort and costs and overestimated ‘synergies’ as that's just how life is with major acquisitions.

When I first commented on the rationale behind the acquisition (see CGI/Logica - Can We Deliver and Be Brilliant Together?) I proffered the view (only partly tongue-in-cheek) that CGI believed they were buying one company. I think the ‘real reality’ is that CGI knew what it was buying, at least in broad terms. But I fear what management did not know (and is still learning) that it will be far more difficult to fix than anything else it has ever acquired.