IT services and consulting group Cap Gemini Ernst and Young (CGEY) will lay off about 700 staff over the coming months in the UK as demand for its services continues to fall.
The redundancies will aim to slash around 10 per cent off the company’s UK salary bill following warnings back in June that layoffs were inevitable after the company suffered unusually high cancellations of orders.
The company says the restructure is in part a legacy of the merger between Cap Gemini and Ernst and Young’s consulting arm in 2000, and will remove some of the duplication of support and centralised functions including marketing, HR and finance.
But CGEY also said the layoffs are also a result of falling demand for its services around the world – although it admits the UK has been more badly affected than other regions.
A spokeswoman from CGEY told VNU News Centre that although few client-facing roles would be affected, it was inevitable that some higher paid consultants would lose their jobs as part of the shake-up.
‘We need to reduce salaries by about 10%. There’s no way you can do that without looking at some of the senior people. Some higher paid people will go. From January we are moving to a much more simplified structure, focusing on consulting, outsourcing and technology services and a small professional services division.’
In a statement, Paul Spence, UK and Ireland chief executive said: ‘This decision although regrettable is absolutely necessary to significantly reduce our costs and therefore align ourselves with the market place.’Georgina O’Toole, an analyst at industry watcher Ovum Holway, said the acquisition with Ernst & Young’s consultancy arm in 2000 had caused the company to take its eye off the ball. “Following the E&Y acquisition the company is seen more as a high end consultancy and it’s much harder to get deals on that basis.”The sale of its business processing outsourcing (BPO) business to Vertex in exchange for a 12.5 per cent minority stake in March 2001 was a case of “throwing the baby out with the bathwater,” O’Toole said. “There are signs recently that it regretted the move away from BPO and it’s increasing its partnership activity with Vertex.” But only time would tell if that would be enough to turn the company around, O’Toole added. “It needs to strengthen the message it is giving to the market about plans to get back into BPO.”In October the company said it expected group revenues for the second half of 2002 to decrease by around seven per cent compared with first half figures. For the six months to 30 June 2002 the company posted a group net loss of Eu256m compared to a net profit of Eu111m for the for the same period in the previous year, with revenue down 15.9 per cent to Eu3.7bn.