TietoEnator’s performance improvement programme to deliver over 100 million euros of cost savings by the end of 2009
In October 2007, TietoEnator’s Board of Directors approved the company’s revised strategy, which aims at restoring the company’s profitability and securing a sustainable basis for future growth. The elements of the new strategy include separate regional and global strategies, repositioning the repeatable solutions business and a performance improvement programme.
The company has decided on an accelerated performance improvement plan that covers all of TietoEnator’s business areas, horizontal units and group operations, all of which have committed to specific targets, activities and a rapid implementation timeline.
TietoEnator estimates that the plan will generate annual cost savings of more than 100 million euros by the end of 2009. The benefits are expected to materialize with an over 50% run-rate effect by the end of 2008 and a 100% run-rate by the end of 2009.
The profit improvement plan consists of three components
* Restructure, discontinue or divest underperforming or unsustainable operations and projects
* Accelerate profit improvement across the company: Improve the utilization of staff and facilities, reduce administrative costs, and accelerate offshoring
* Increase focus on the quality of services.
The impact of the programme on TietoEnator’s personnel will be announced as specific decisions are taken.
The actions are expected to improve TietoEnator’s profitability significantly. The company’s results have been volatile over the past 18 months, due to project overruns mainly in TietoEnator’s international operations of the Banking & Insurance and Healthcare & Welfare business areas.
The cash flow effect of the performance improvement programme is approximately 100 million euros of which around 40 million euros will be booked during the fourth quarter in 2007 and the rest during 2008 and 2009. Approximately 20 million euros of these costs are provisions for project risks. In addition to these, the company will book impairments and provisions of approximately 60 million euros during the fourth quarter in 2007, of which 40 million euros are goodwill-related.
In addition to preparing performance improvement plans, TietoEnator has continued to evaluate strategic growth paths to be able to fulfil customer demand and to promote customer intimacy. TietoEnator’s global growth initiatives will focus on few selected businesses. The company is planning to invest in expanding its leading position as a Telecom R&D partner, as well as strengthening its strong market position in Forest and Oil & Gas businesses.
The regional strategy is based on TietoEnator’s strong position in the Nordic countries. The aim is to even further strengthen the company’s leading position as a full-scale IT service provider to Nordic-based core customers.
Given the large size of TietoEnator’s business in Sweden and the market potential of the Swedish ICT sector, the company has launched a specific initiative to enhance the competitiveness of its Swedish operations. This initiative aims at repositioning TietoEnator as a profitable market leader in IT services on the Swedish market.
The quality of services and delivery capability are key elements in maintaining customer satisfaction and winning new customers. As part of the performance improvement plan TietoEnator is implementing strong actions in risk management to secure high-quality services and building a more performance-oriented organisation to better meet the increasing customer needs. To secure the right kinds of competencies and delivery capability, TietoEnator will continue recruiting new talent during 2008 according to business needs in both onshore and offshore locations.
“The accelerated performance improvement programme is the most significant change in TietoEnator for many years. We are putting extraordinary effort into this programme and I am certain that the programme will deliver the expected benefits. Planning has proceeded ahead of the timeline communicated earlier and management commitment is very high,” states Åke Plyhm, Interim CEO.
“Over the past few weeks, I have had the opportunity to review TietoEnator’s improvement plans. I am convinced that this is the right direction for the company to significantly increase customer satisfaction and add shareholder value. Going forward, these actions will be combined with significant investments in growth, people and quality,” says Hannu Syrjälä, President and CEO from 15 February 2008.
TietoEnator will publish its fourth quarter result and financial statements for 2007 on 6 February 2008 at 8.00 am EET/ 7.00 am CET.
For further information, please contact:
Åke Plyhm, Interim CEO
Tel. +46 7056 58631
Timo Salmela, CFO
Tel. +358 9 8626 2213 or +358 400 434 974
TietoEnator is among the leading architects in building a more efficient information society and one of the largest IT services providers in Europe. TietoEnator specializes in consulting, developing and hosting its customers’ business operations in the digital economy. The Group’s services are based on a combination of deep industry-specific expertise and the latest information technology. TietoEnator has about 16 000 experts in close to 30 countries.
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- TietoEnator Corporation
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