By Alexander Simkin, Senior Analyst

Capgemini, a major French company doing business in the United States and all over the world, has announced a new Application Lifecycle Services (ALS) line. The 'newness' of this line may not be obvious to clients and prospects; it resembles the old.

The messaging around the line needs refining. That said, we believe Capgemini's go-to-market strategy for the line is sound and is adaptable to the ongoing changing economic conditions.

Last month Capgemini announced a so-called 'new' Application Lifecycle Services line for 2010. However, it's not immediately apparent what is different about the line. After all, Capgemini has offered a comprehensive range of application services for years. Only by digging beneath the surface do you discover that Capgemini now coordinates its best practices and has refined its process methodologies.

This differentiator of the new from the old is lost in a sea of largely extraneous detail and Capgemini needs to bring this to the fore in its messaging.

What is also new and noteworthy is the go-to-market strategy. Application services lines that were formerly disparately brought to market are now presented as a unified, comprehensive portfolio covering the application lifecycle from its beginning in development through testing, implementation, maintenance and optimization.

Capgemini's commitment to the new strategy is not in question. Behind the scenes, the new line is being supported by half of Capgemini's 20,000 India-based employees plus 5,000 specialists elsewhere. Training of application consultants, engineers, architects and managers to provide a more unified service is already under way and will continue into 2Q10. The new service line will be available across all mainstream technology platforms and in all major geographies.

It appears to us that the go-to-market strategy for the new ALS line has two stages. Stage one will address demand for application services in the current economic environment, while stage two will leverage the upturn as the global economy picks up.

Capgemini's pitch of the newly unified ALS line is currently aimed primarily at customers and prospects that 'under-outsource' their ALS functions, i.e. those organizations that keep some or all of their application services in house. Capgemini has stated that the new ALS line is intended to rationalize and simplify sprawling application landscapes.

This streamlining should help to drive down costs - a high-priority concern of CIOs and CFOs in the prevailing economic environment. Of course, cost takeout is high on the agenda for all organizations, not just 'under-outsourced' ones. But it is public and private sector organizations that are wrestling in-house with complex application landscapes that will experience the greatest cost reduction from the type of rationalization that Capgemini is promoting.

As the economic tide turns, we expect Capgemini to leverage the upturn by shifting its go-to-market strategy. When the economy improves, end-user requirements will go from small, tactical contracts with limited functional scope - such as for testing services alone - to sizeable ones that span the entire application lifecycle. Capgemini can draw on the breadth of its application services to follow the dynamic of the changing market.

In Ovum's view, the shift from stage one to stage two of Capgemini's go-to-market strategy will be an indicator that Capgemini is seeing an improvement in market conditions.

With its wide range of application services, Capgemini is positioning itself with the new line as a single ALS vendor - or at least as the lead vendor in multi-vendor contracts. Either way, if contracts turn sour, Capgemini will be the 'one throat to choke'. As the single (or lead) ALS vendor, Capgemini will be more accountable to clients that will, as a result, be tightening SLAs around business outcomes.

The flip side is that if application services contracts run smoothly and SLAs are met or exceeded Capgemini will be 'the back to pat'. The company has a relatively solid record of meeting client expectations, with no major contracts turning awry in 2009. It needs to grow its reputation for service delivery in markets such as North America, Germany and Asia-Pacific, where the company lacks brand visibility. ENS