Unisys has swung back to profit in the second quarter after sinking to a $34m net loss in Q1 (see here). Revenue continued to head south, down 7% to $859m (down 6% in constant currency), and net profit was $20.4m, albeit less than half the $46.6m achieved this time last year.
While services revenues continue their downward spiral (-9% to $739.7m), technology actually delivered 13% growth, thanks to strong demand for ClearPath servers. In the conference call with analysts, CE J. Edward Coleman was quick to point out that performance of this business ‘is best measured on an annual basis’, which is up 3% year to date. He said Unisys is focused on ‘stable annual technology revenue’. Q1 technology revenue was after all down 18%.
Services are of course the far bigger part of the business, and here revenue and margins declined due to lower demand for outsourcing and systems integration services. Services operating margins were just 4% for the quarter, up sequentially, but below Unisys’ 8% to 10% target range. To counteract some of this decline, Coleman said that Unisys is making additional investments for growth in mission-critical computing, cybersecurity, cloud computing, IT outsourcing, and building its reseller channel.
With regards the UK market, Coleman said Unisys is now looking to deliver its Unisys financial services system (UFSS) mortgage processing platform on a Software-as-a-Service (SaaS) basis. The aim is to address a larger share of the market. He said Unisys has already received a contract to move several new financial services clients to the SaaS offering. Opening the platform up in this way has clear risks for Unisys’ existing mortgage BPO operations in the UK.
Unisys’ challenge will be convincing existing BPO customers to continue with a BPO solution versus moving to SaaS. Without a compelling proposition, customers are likely to head to the cheaper, more flexible SaaS alternative. This is a fundamental challenge facing the BPO market we explore in detail in our BusinessProcessViews research stream.