the changing face of the global high-tech industry · 6 the changing face of the global high-tech...

The Changing Face of the GlobalHigh-Tech Industry

2 The Changing Face of the Global High-Tech Industry

The Global High-Tech Industry 3

Challenges Facing the High-Tech Industry 5

Key Levers to Manage the Challenges 8

Solutions that Meet these Changing Business Needs 9

Select Case Studies 15

The Collaborative Business Experience™ 18

About Capgemini 19

Contents

The Changing Face of the Global High-Tech Industry 3

The Global High-Tech Industry

In the high-stakes quest for leadership, companies inthe global High-Tech industry are in a constant contest,jockeying for market position. Innovation is at theheart of numerous strategic initiatives to developcompetitive and first-mover advantage - breaking newground in product and service offerings, forgingcross-boundary partnerships, sometimes even withformer competitors, and bringing on-stream, newcapabilities through mergers, acquisitions and jointventures.

The global High-Tech industry has a broad reach, soit can be defined in a number of ways. Capgemini’sdefinition of the industry comprises ConsumerElectronics, Computer & Peripherals, Print/Imaging,Telecom Equipment, Medical Equipment,Semiconductors and Software. All of these industriesare shaped and defined by the advances in technologythat are themselves defining the emerging business,economic and social landscape.

While the shape of the industry may be constantlyshifting, analysts have predicted that the sector ispoised to grow to over a trillion Euros by 2012, witha continuing growth rate of 6.2% over the period2009-20121. Factors driving demand will includespikes in medical and pharmaceutical technology,mobile devices, virtual security applications andconsumers’ attachment to laptops, iPods and cellphones, together with the speed of technologyinvestment and new product launches.

Capgemini’s High-Tech Practice helps companies torespond rapidly and intuitively to changing marketdemands. Based on our experience of working incollaboration with the largest manufacturers andsuppliers in the High-Tech industry, andsupplemented by our analysis of the specificchallenges of this highly competitive market, oursolutions help companies to develop successfulleadership strategies and optimize operations to sustainstrong earnings and a competitive positioning.

1 Source: CC India Analysis, Datamonitor 2008, Gartner 2008-2009.

4 The Changing Face of the Global High Tech Industry


Challenges Facing the High-Tech Industry

The fast-paced global High-Tech industry is notwithout its own distinct and complex challenges.Every player in the industry is striving to gain andmaintain competitive differentiation by adopting newapproaches or by realizing latent sources of success inexisting operations.

However, while each of the sub-segments face specificchallenges, the High-Tech industry is being shaped bythree shared, fundamental and pervasive trends: n Increasing globalization: more and more, High-

Tech firms are moving towards a ‘buy anywhere,make anywhere and sell anywhere’ concept;

n Rapid product innovation: companies arecontinually and rapidly upgrading their productportfolios to meet ever more demanding customerand regulatory requirements;

n Increasing revenue and margin pressures:manufacturers are resorting to production cuts andrestructuring initiatives as demand in certain areasfalls and inventory levels increase.

While these industry trends are not new or unique,the combination of these challenges and theopportunities they potentially offer means thatorganizations cannot be complacent; they need tobe particularly attentive to market dynamics if theyare to continue to generate the level of shareholderreturn that the market has come to expect.

Increasing globalizationThe ‘buy anywhere, make anywhere and sellanywhere’ concept is most aptly demonstrated inthe increasing globalization of R&D andmanufacturing functions. The strategy of migratingthese key facilities to low-cost offshore countries,ranging from Russia and Mexico, to India andChina, is now well-established as a necessary, ratherthan optional, element of operations.

Together with a rise in sub-contract manufacturing,this situation is generating significant reductions inlabor costs, as well as leveraging the benefits ofproximity to raw materials and a better


understanding of local market buying preferences.However, this is not without its own complications;highly complex supply chains, extended management ofdispersed operations and quality and counterfeitingissues all contribute to the need for proactive andfast-moving operations.

With traditional markets slowing down, emergingmarkets in Asia, Eastern Europe and Latin Americaare driving High-Tech sales growth. But indigenousplayers, particularly from China, are starting to posetheir own serious competitive threat both at homeand in western markets, which is leading to theerosion of the multinationals’ share in developed andeven developing markets.

Accessing these emerging markets and segments hasmeant adopting a multi-channel strategy to reach endcustomers more effectively. One channel is no longerenough. Embracing retail outlets, own company retailstores and other direct-to-customer channels,companies are exploring every option, adapting tochanging customer buying trends and ensuringmaximum sales penetration.

Rapid Product InnovationA constant stream of new products and fasterobsolescence of the existing manufacturing pipelineis the reality of commoditization andstandardization of today’s markets. This situation isalso subject to the impact of rapid technologicalmodifications. The impact of shrinking productlifecycles, is increased pressure to gain ‘first tomarket’ advantage and leverage this myriad oftechnological advances.

And the days of a simple product portfolio havegone forever. The bundling of content, services andapplications with their device offerings has addedan additional layer of complexity. For High-Techbusinesses, it means constant innovation anddiversification of the product portfolio, keeping afocus on convergence opportunities and threats andmanaging a network of content and applicationpartnerships across multiple markets.

Product proliferation and mass communication channelsgive rise to more knowledgeable and demandingcustomers. And as the cost of buying replacementsoutweighs the cost of repair, customers are morelikely to switch brands to benefit from new features.


Retaining consumers requires more and moreinvestment, as does meeting the increasing regulatoryrequirements for greener products. Environmentalregulations, such as the Kyoto protocol, REACHdirectives and other governmental requirements,oblige manufacturers to comply and look for newmaterials and design techniques to deliver greenerproducts.

The economic downturn has intensified the focus onadditional revenue generation through the provisionof managed and maintenance services as the demandfor a company’s core products falls. For many, thismeans channeling management attention to increasethe efficiency and capability of these ancillarymanaged services.

Increasing Revenue and Margin Pressures The economic slowdown has inevitably put a sharperfocus on protecting margins, managing positive cashflows and maintaining revenue levels, as its impact oncertain sub-sectors makes itself felt. Demand forconsumer products in the retail segment has fallen,due to a reduction in disposable incomes, corporateclient delays and the cancellation of new projects,leading to lower demand for capital-intensive

products, such as mobile and enterpriseinfrastructure and medical equipment. The result?Unrelenting pressure on cost reduction to keepprofitability levels stable.

As distributors and retailers throughout the supplychain respond to the credit squeeze by cutting backon inventory, manufacturers are making similarmoves, by cutting production to avoid a pile up ofinventory that could become outdated withinmonths.

Finally, management has to consider operationalrestructuring to sustain growth amid thechallenging market environment. Measures includereductions in capital spending, general overheadsand overall headcount, as well as the restructuringof business units and a withdrawal from non-corebusiness areas. Restructuring initiatives requiresignificant management attention if they are to beeffective.


Key Levers to Manage the Challenges

To address these challenges, there are six keymanagement levers that High-Tech companies canuse – separately or together – in the short-, medium-and long-term.

The key levers are: n Product innovation: Bundle product offerings

with value-added services, leverage technologypartner relationships and build close collaborativeties with both customers and suppliers earlier inthe product lifecycle and across the value chain;

n Cost reduction: Establish or increase theoutsourcing and/or offshoring of manufacturing,and undertake restructuring initiatives;

n Sales growth: Reassess market entry and go-to-market strategies and develop multi-channel salesand distribution plans;

n Operational excellence: Optimize the supplychain, rationalize the supplier base and undertakeintegrated business and inventory planning;

n Customer centricity: Provide highly efficient after-sales service and collaborate with customers and

suppliers to better understand buying behavior; n Green initiatives: Devise and deploy sustainable

products and implement a green IT strategy.

Leading High-Tech companies are already using acombination of these levers with significant success.For example, some have acquired additional R&Dand software development capabilities, while othershave set up discrete joint ventures to distributedevices in emerging markets. Green modes oftransport are being adopted, and online customercommunities developed to encourage user feedback.

The options are almost limitless, which means thatrecognizing which levers will be the most effectivefor any given market context, business model orproduct portfolio is a complex decision. Also relyingon just one lever is unsustainable or suboptimal,and therefore, a non-competitive response.

Solutions that Meet these Changing Business Needs

Capgemini offers a number of tailored solutions forthe High-Tech industry, based on the expertise ofboth our specialist sector teams and the widerCapgemini organization. We have developed theseinnovative solutions, often in close collaborationwith our High-Tech clients, to ensure that results aredelivered quickly and cost effectively.

Our services are grouped around six key levers forshort, medium- and long-term change, and these arealways customized to meet the specific industrycontext or company needs.

1. Product InnovationProduct innovation is the lifeblood of the industry,demanding a continual well-managed product funnelof concepts and products in development. Therefore,selecting the right projects at the right time presentsa huge challenge for firms operating in such difficult-to-predict markets. Two recurring questions are: Howto undertake better portfolio management inuncertain markets? And what is the best way tomanage investment resource allocation?


Capgemini’s High-Tech solutions aligned to the six key

levers for short-, medium- and long-term change

Product Innovation

C apgemin i So lu tions

to H e lp C lien tM anage Top C ha llenges

C ost R eduction

Sa les G row th

O perational Exce llence

C ustom er C entric ity

G reen In itia tives

1

2

3

4

5

6

10 The Changing Face of the Global High Tech Industry


Our PLM services encompass a variety of techniques forcreating and managing products and servicesthroughout their lifecycle, including: Innovation &Lifecycle Management, TechnoVision Mapping,Accelerated Solutions Environment®, scenario-basedRAIN2 centers, and M&A strategy and integration.

We have successfully conducted ASE sessions withover 600 international clients, including over 50% ofthe Fortune 100 and 44% of Business Week’s Top 100Global Brands. Capgemini’s ASE combines a patentedmethodology with a unique, open work environmentto deliver large scale facilitated sessions geared ataccelerating timelines, gaining alignment and mitigatingrisks. We have also helped clients evaluate and visualizethe commercial possibilities of their pipeline througha variety of insightful scenario techniques.

2. Cost ReductionWith significant investment in product innovation,High-Tech companies need to manage their operationaland investment expenditure very closely. Preservingmargins and lowering the cost of production are criticalto ensuring the final product is competitively priced. Inmany instances this means adopting a differentmanufacturing model or re-evaluating support services.

Capgemini’s cost reduction solutions include:Outsourcing and offshoring strategy, Capgemini’sRightshore® managed services; BusinessTransformation; shared services and BusinessProcess Outsourcing (BPO); and cost reductionplanning.

3. Sales GrowthOptimizing customer interactions across multiplechannels, departments, business lines and regionsresults in measurable improvements to sales revenues,yielding increased cash flow and higher earnings pershare. The key foundations for sales growth includesuccessful channel management and selectiveinvestment in sales initiatives that deliver the mostuser value, drive customer acquisition and buildretention.

Multi-channel Optimization strategy, Sales andMarketing roadmap development, Price andRevenue Optimization, and Sales Effectivenessprograms are some of the solutions that we can deliverto improve market penetration for maximizingprofit margins and improving asset utilization.

2 Short for RApid INnovation, RAIN is a physical and virtual environment dedicated to transforming organizations into Service-OrientedEnterprises (SOEs). The RAIN centers are operated by Capgemini and Intel.


Using segmentation analysis and realistic cost/benefitassessments, we have helped clients both rationalizeand expand their global channel structures particularlyin developing markets, and focused clients’ initiativeson adding value throughout the sales lifecycle.

4. Operational ExcellenceIn a culture dominated by R&D and marketing andsales, High-Tech operations has never had theprominence it deserves and has been taken forgranted. Yet this is an essential component forcompetitive success, especially now, with suchextended supply chains and distribution networksacross the world.

Capgemini solutions help organizations to improvethe performance of their processes and achievegreater efficiency, agility and control throughInventory and Supply Chain Optimization andTransformation, Sales and Operations planning,specialist operational excellence techniques andERP/IT solution deployment.

Collaborating with clients to develop a highlytailored, integrated end-to-end approach, we havebeen able to enhance value chain effectiveness,

achieving benchmark inventory levels, greatercategory domination and increased financialpredictability.

5. Customer CentricityUnderstanding the essentials of the customerexperience and their impact on purchasersatisfaction and retention is critical in such adynamic market when ‘second chances’ are rare.More than just the smooth functionality of a serviceor product purchased, it is the consistent userexperience at each point of contact in the customerexperience chain that is important.

In today’s environment, customers have abundantopportunities to switch, and brand loyalty is transitory.Capgemini’s solutions address these challenges withservices including CRM selection and optimization,call-center strategy and sourcing, service and partsmanagement strategy, and business intelligence.

We have helped clients to bridge the gap betweenmarketing, sales and service functions, acceleratetheir return on CRM investment, introduced device-led self-diagnostics and repair, and have developedoutsourcing call-center strategies.


6. Green InitiativesHigh-Tech companies are increasingly aware of theircorporate responsibilities to the wider environmentand sustainability in general, with the need to reducewaste, conserve energy, encourage recycling or reuse,and improve raw materials management. Fortunately,improvements in green technologies often equate toimprovements in efficiency.

Capgemini has developed specialist services such ascarbon-neutral IT solutions, particularly green datacenters and desktop strategies, as well as sustainableproduct development. We also collaborate withspecialists on solutions to reduce the impact of IT onthe environment through energy efficiency,virtualization of data centers and IT asset reuse anddisposal.

We have worked with expert suppliers to developstate-of-the-art data centers that reuse waste heat,procure energy-efficient product replacements andthat both virtualize and consolidate infrastructure.Using ASE facilitation, we have also helped clients toprioritize technological developments for greenerproducts.

Helping High-Tech Companies Respond MoreRapidly and Intuitively to Changing Market Demands

Capgemini works for: n 90% of the largest manufacturers and suppliers in

the High-Tech industryn 8 of the 10 largest networking and telecom

equipment manufacturers in the worldn 8 of the top 10 consumer electronics

manufacturers.

Our suite of solutions is geared toward developingsuccessful leadership strategies, optimizingoperations and growing revenue in this highlycompetitive market.

We are aligned with many service providers that areat the leading edge of technology. Working togetheras an integrated team, we can deliver a collaborativeand tailored, best-in-class, business solution for thebenefit of the client.

Our 16,000+ strong practice delivers solutions toHigh-Tech companies around the world, with expertsdrawn from the industry sector, with specialist

technology expertise. We continue to contributesignificantly to industry thought leadership andtechnology advancement, including research andstudies.

The High-Tech division of our sister company,Sogeti, is among the top five market leaders inEngineering and Technology Consulting Services.With over 20 years of expertise, Sogeti undertakesmajor technical and engineering innovation projectsfor the R&D departments of global industrial firms.Their expertise includes Research and Development,requirements, design, development, testing,integration and operational maintenance of complexsystems, focused on three business lines:n Systems and Software Engineering (SSE) n Physics Engineering and Testing (PET)n Industrial Engineering (under the brand name

‘Sinfor Automation’).


Accelerating Global Integration for a Division of a Global Manufacturer

The SituationThe semiconductors market is truly global. Productdevelopment and manufacturing span all continents,and relocating labor-intensive manufacturing activities toAsian countries is an economic imperative. Flexibilityin working with third-party suppliers and jointventures are key. The client’s semiconductor division hada diverse systems architecture in place to support itsclassic ERP functionality. To regain a top 10 positionin the industry, it needed to pursue a strategy ofgrowth and cost reduction. An integrated system forthe client’s manufacturing environment on a globalbasis was seen as a prerequisite for the execution ofthis strategy.

The SolutionThe client decided to phase-in an SAP system for allof its worldwide manufacturing sites. Theimplementation program included ADEXA, SAP-Business Warehouse, SAP Plant Maintenance andEnterprise Buyer Professional standard applications -all highly integrated, and supporting manufacturingbusiness processes. The program was rolled out siteby site across the world, with a set of common

interfaces enabling each site to communicateeffectively with the rest of the client’s network. Oncompletion, all remaining legacy ERP systems weretaken out of service.

The ResultThe SAP implementation has achieved a number ofbenefits, most notably the establishment of a singleglobal Business Control Model for manufacturingsites, together with standard systems, procedures,processes and documentation. This has resulted inimproved delivery reliability and speed at themanufacturing sites. And with more accurate demandplanning techniques, there is now better scheduling,reduced cycle times and inventory levels, as well asaccurate, timely and complete management information.

With the replacement of a multitude of ‘end-of-life’local legacy environments, the total cost of ownershiphas fallen, and efficiency and data quality haveincreased by minimizing multiple keyboarding.Overall, business control has increased due to moretransparent, fully integrated processes andmanagement information.


Select Case Studies

The SituationThe client wanted to understand the rate and timingof end-of-life product failures for several of its keyproducts as its own historical analysis was not robustenough to predict the rate and timing of futurefailures. Faced with revenue challenges, the clientplanned a marketing campaign focused on promotingthe replacement of equipment, predicted for end-of-life failure in the near term.

The SolutionCapgemini assessed the client’s data systems toidentify the necessary customer purchase andequipment failure data required to perform detailedanalysis. A predictive model was built based onhistorical data and statistical techniques thatexamined patterns in the data. The statistical resultswere analyzed to develop recommendations for keyproducts and customers that could be the focus ofnear-term marketing initiatives.

The ResultThe Capgemini team identified primary salesopportunities based on marketing equipment thatneeded to be replaced at key customer sites. It alsoprovided a data infrastructure and statisticalmethodology that could be leveraged to performperiodic analysis for future marketing campaigns.Finally, the team identified products with a highfailure rate during the first few years followingproduct launch, and developed recommendationsfor the New Product Introduction process to addressthis issue.


Analyzing and Mitigating Product Failure for a Manufacturer ofPrecision Products

Transforming a Supply Chain Strategy for a Global Solutions Leader

The SituationThis global solution provider’s huge product scope hascreated one of the largest and most diverse supplychains in the world. The existing supply chain portfolioof programs was developed as a result of ‘adopt and go’strategies, pursued as a result of a merger. The portfolioneeded to be refined as its markets had changed andgreater opportunities for increased leverage hademerged. The company needed to redefine its next-generation supply chain strategies and portfolio.

The SolutionCapgemini worked with the company to realign itsdesired supply chain capabilities with the strategicneeds and direction of its various businesses.Capgemini, through its Accelerated SolutionsEnvironment® methodology (ASE), initially helpeddefine the company’s next-generation supply chainvision and a set of key capabilities, together with agovernance model. The team then worked to definetwo further key capability areas, end-to-end visibility

and sourcing collaboration, as well as to define areasof commonality in terms of process and capabilities.In addition, Capgemini helped to implement adashboard capability in measuring and managingkey supply chain fulfillment metrics. A majorsupply chain transformation allows the technologycompany to better leverage its businesses, reducecosts and enhance its competitive positioning.

The ResultThe new direction – vision, set of capabilities andcommonality definition – has helped the clientachieve a higher degree of cross-functional leverageand energy across its various business units andgeographies. The ASE workshop helped thecompany bring its supply chain leadership together,from various business divisions and geographies, todevelop a common direction. Capgemini’sintervention has helped the client to definestrategies, as well as rationalize its budget andsaving the company millions of dollars.



The Collaborative Business Experience™

Capgemini works differently from other consultancies. Rather thancoming in to implement a solution that has already been agreed, weaim to get involved at an earlier stage, helping clients to explore theproblem and shape its solution. We share our ideas, suggestobjectives, pool our resources and concentrate on gettingstakeholders to a point where they are aligned and committed to acourse of action that they feel they own themselves. In short, webelieve that effective and durable change comes from teams that aresupported, not led, by their consultants.

Capgemini’s overall approach, the Collaborative BusinessExperience™, is faster and more productive than conventionalconsulting, is particularly suited to the High-Tech industry.

To support our approach, we maintain a range of traditionalconsulting capabilities spanning strategy, demand generation,operations, supply chain and the principal back-office functions. Inaddition, we draw on our own experience and that of ourcounterparts in Capgemini’s Technology and Outsourcing Servicesdivisions. With years of experience behind them, our people have adeep understanding of what makes a course of action both feasibleand beneficial.


About Capgemini

Capgemini, one of the world’s foremost providers ofconsulting, technology and outsourcing services,enables its clients to transform and perform throughtechnologies. Capgemini provides its clients withinsights and capabilities that boost their freedom toachieve superior results through a unique way ofworking, the Collaborative Business ExperienceTM.The Group relies on its global delivery model calledRightshore®, which aims to get the right balance of thebest talent from multiple locations, working as oneteam to create and deliver the optimum solution forclients. Present in more than 30 countries, Capgeminireported 2008 global revenues of EUR 8.7 billion andemploys 90,000 people worldwide. More information is available at www.capgemini.com.

Rightshore® is a trademark belonging to Capgemini

Copyright © 2009 Capgemini. All rights reserved.

Contact Capgemini’s Global High-Tech Practice

Floyd D’Costa+91 22 6755 7000 [email protected]

Guido Kamann+41 44 5602 400 [email protected]

Nick Gill+44 870 904 5699 [email protected]

Gary Baldwin +1 404 806 [email protected]

Kevin Poole+1 415 738 1350 [email protected]

www.capgemini.com

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