Consolidation killing job prospects: CGI

MONTREAL — The ability to contract out major components of any project anywhere in the world could have serious consequences on employment levels in this country, according to Serge Godin, chairman and CEO of CGI Group Inc.

“”With today’s

technologies, from 40 to 60 per cent of any given project can be carried out from just about anywhere in the world, provided you have the right resources,”” he said Monday during a speech to the Canadian Club of Montreal.

As an example, he cited a bank developing a new trading system with half the work being done in India. That half would only cost 30per cent of what it would cost to do in the U.S. and half the cost of the work done in Canada.

Godin said it is the drive to increase productivity that is forcing many IT companies to set up operations in India, including CGI which recently hired 100 new employees in India from 7,000 applications.

“”Each year, between 60,000 and 70,000 students graduate from Indian universities with IT degrees, many with PhDs. There are over 500,000 professionals working in India in the IT export market.””

Faced with these numbers, Godin said it was imperative that universities, industry and government work together to develop centres of excellence across the country to compete on the world market. He cited the example of Alcan Inc. and CGI jointly creating the Oracle Technology centre of excellence in Jonquière, Que.

“”I also think we should encourage more young people to study science in school.””

In addition, Godin is concerned that many companies to achieve critical mass in order to compete for new contracts. He noted that many Canadian IT companies such as SystemHouse, DMR and Atkinson Tremblay, have all been acquired by major players in the U.S. and Japan, because they were too small to compete for major contracts.

“”In Canada alone in the last 10 years, hundreds of companies in our sector have either merged or were sold. The same thing is happening around the world and in my opinion, this consolidation will accelerate in the next few years.””

Apart from achieving critical mass, consolidation is happening to increase productivity and to reduce costs. As a result, many companies are outsourcing their IT functions, including two-thirds of the Fortune 500 companies, noted Godin.

“”According to a study by the firm IDC that we commissioned in the fall of 2002, the information technology market that is not yet outsourced represents a potential annual market of US$41 billion in Canada, US$778 billion in the United States and US$701 billion in Europe.

“”Even if only 10per cent of this potential market is realized in the coming three years, the amount — US$150 billion — would be the equivalent of the total annual sales of the 10 largest IT services companies in the world that qualify to bid on these contracts.””

As a result, the market’s poten

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