Unisys’ focus on select industry segments such as government, healthcare and travel could help the software company out of its financial doldrums, but will it happen fast enough to outpace its peers?
The US-based IT services, software, and technology vendor reported its 11th consecutive services revenue decline in its latest quarterly results.
Technology revenue, which represented 14 per cent of total revenue, was down 32 per cent year-over-year to US$91 million. In the previous year, the company reported a 31 per cent growth for the same period.
In the words of Technology Business Research professional services senior analyst, Elitsa Bakalova, the company’s financial performance “remained lumpy and unsatisfactory”.
"The company experienced ongoing challenges across all services segments, with notable revenue declines in application services as well as cloud and infrastructure services, which collectively accounted for 91 per cent of services revenues in 2017," said Bakalova.
Part of the problem, according Bakalova, is that while Unisys is realigning its go to market approach and organisation to provide vertical and IP-led solutions, and integrating security into everything it offers to clients, the initiatives have yet to generate results for the company.
Moreover, ongoing restructuring, accelerated initiatives around expanding next-generation solution sales, and increased hiring of specialists continue to offset the potential benefits to be gained from shifting its business mix toward higher-margin offerings, such as its software-enhanced solutions.
However, as Unisys continues to transition from a hardware-centric vendor to more of a software provider, the company has been targeting specific industry verticals, in a move that may eventually see it reap the rewards of its efforts, according to Bakalova.
“Recently launched solutions across Unisys’ focus industries, such as government, life sciences and healthcare, and travel and transportation, indicate the company is actively expanding its portfolio to benefit from recurring software and subscription-based models,” she said.
But the company is not the only vendor taking such steps.
According to Bakalova, while Unisys transforms its portfolio, companies such as Cisco are moving in a similar direction by combining services and software into solutions that often target industries to increase value by generating specific business outcomes.
"For example, Cisco continues its transition to a next-generation solutions provider and derives a higher percentage of revenue from recurring software- and subscription-based services sales in growth segments, such as security and analytics," said Bakalova.
For Bakalova, monetising its industry-specific solutions sooner rather than later will be “critical” for Unisys as it continues to rebuild and return to revenue growth and profitability.