article in the New York Times states that Cap Gemini, an international provider
of IT services, has recently been removed from a total of almost $150 million
dollars worth of projects. The United States Chamber of Commerce, The United
Way and the French Government have all expressed extreme dissatisfaction with
Cap Gemini's performance; in at least one of these cancellations involving the
Chamber of Commerce, the companies are suing each other. On the other side of
the equation, International Micro Systems sued Cap Gemini America for backing
out of a contract to develop custom software.
In a published statement Cap Gemini stated that their policy of respecting client
privacy would not allow it to comment on most of these matters. The company
did confirm that it is engaged in litigation with the U.S. Chamber of Commerce
over an issue of non-payment of $5.3 million for a system that Cap Gemini built
and delivered but which new management at the Chamber no longer wants. However,
according to the Chamber, "Cap Gemini couldn't do the job, the software has
to be scrapped, and they fired any number of their own employees working on
the project The new system doesn't work -- it never did what Cap Gemini said
Gemini America is a $623 million company and points to its "strong track record
for delivering quality services," with a satisfaction rating of 4.63 out of
5.0 from 2,035 engagements so far this year and an on-time delivery rating of
98%. The larger ($4.4 billion) European parent company was chosen European Company
of the Year by the European Business Press Federation.
Gemini is the largest IT service provider in Europe and has a significant U.S.
presence. No company likes to have problems with its contracts, but it does
occasionally happen. It may simply be that these disputes, coming closely together,
follow the same statistical law that predicts that independent events with low
probability will tend to cluster. It may also be that these events are not independent
- see User Recommendations.
Regardless of who is at fault, this is not good news for Cap Gemini. The IT
services market is intensely competitive, and some companies would rather choose
another equally capable vendor than have to think twice about the possibility
of a multi-million dollar disaster. Expect Cap Gemini's current customers to
hold its corporate toes closer to the fire on schedules and performance guarantees,
and we expect to see a short-term dip in its new contract signings in the Spring
What we find disturbing about the Times report is the indication from three
of the four companies that the problems were due to Cap Gemini being unable
to keep staff on their projects. The current E-commerce boom has created an
employment scarcity throughout the IT marketplace. Every company feels the pinch
in terms of being unable to hire and of its talent being hired away. On the
other hand, someone contracting for a large development of integration project
has the right to expect its vendor to weather these problems and manage them
in a reasonable way. When United Way claims that an independent systems audit
discovered 400 "large problems", and the French Government blames Cap Gemini's
failures for employee discontent and a strike at the National Library, it is
obvious that management has not been successful. In this environment, a technology
company's number one priority is making its staff want to stay. If Cap Gemini
can not do that - and we do not claim that these particular problems are proof
that it can't - it has serious trouble ahead. We do want to point out that Cap
Gemini claims that their employee turnover rate is lower than for the industry
as a whole.
So what do you do when the Cap Gemini salespeople come calling? First, ask them
about this story, how the company is addressing it, and see whether you find
their response open and credible. But, regardless of who is choosen, the organization
should consider the particular risk of the project being derailed due to the
seller's market in technology recruiting? What will the vendor do if key people
on your project leave in mid-stream? What are the risks to you if those people
can't be replaced? What does the vendor do to make its employees want to stay?
Answers to these questions should be part of your evaluation process with every
vendor, and the final negotiations should include a way to mitigate these risks.
It may be wise to add another ten to fifteen percent on the estimated cost of
the project to hire a third party firm to monitor compliance with development
schedules, delivery standards, and overall quality every step of the way. This
way, if the project has a serious problem you may be able to negotiate coverage
of some of these costs with your chosen vendor, especially if the vendor appears
vulnerable to staff loss as a result of your evaluation.