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Unifying Unisys

Soon after he was named CEO of Unisys in 2005, Joe McGrath went to the board with an ambitious plan …

Soon after he was named CEO of Unisys in 2005, Joe McGrath went to the board with an ambitious plan to transform the company. The changes he outlined were formidable-requiring a three-year commitment to major bets on five sectors identified as high-potential growth areas well-suited to the company’s technological capabilities.

 “It took three strategy sessions to get them to buy into it,” recounts McGrath. “We launched it in 2006, and there’s essentially no one in our company who hasn’t been touched by the changes we’ve made over the last 18 months.”

 The company began by targeting segments of the IT industry growing in the double digits. Security-a market whose growth was being driven largely by the creation of the Department of Homeland Security-was the first area of focus. Tapped to roll out the billion-plus infrastructure for the Transportation Security Administration, which was formed immediately following September 11, Unisys developed a software risk management engine used to target containers for inspection.

 “It’s an automated targeting system that looks at the financials of the shipper and uses complex algorithms to determine which ones are targeted,” explains McGrath, who notes that Unisys created a similar program for air cargo, and also built and ran an RFID network for the Department of Defense. The projects came with a side benefit: Some systems and software developed for the U.S. government proved applicable in the private market as well.

Outsourcing and infrastructure services were McGrath’s second bet, followed by the IT markets of Microsoft enterprise software, open source and Linux support and solutions, and real-time infrastructure. “We had been in far too many portfolio areas,” says McGrath. “So we looked for markets with a minimum size of $1 billion and double-digit growth where we felt demand would be greater than supply.”

Realigning the company around these high-growth areas also involved cutting back on those that were less profitable. “We were in 50 countries but 80 percent of our business came out of 10,” says McGrath. “Large multi nationals tend to cookie-cut-rolling out the same strategy across 50 countries when only 10 can support the full portfolio.”

Unisys pared down investment in smaller markets, cutting 15 percent of its employee base, moving jobs overseas and retraining employees on its top five agenda. Today, 10 percent of its employees are offshore in countries like India, China and Hungary. “Our goal is to have 20 percent of our people offshore by the end of 2008,” says McGrath, who acknowledges that the dramatic and rapid change required careful management. “Every Friday we have a Change Management Office Program where we go over what happened last week and what we’re going to do next week.” Progress on goals is tracked with a red-yellow-green color-coding system shared with managers, and separate monthly meetings look at the financial metrics of the transformation.

Unisys declined to offer financial guidance during the initial phases of the program. But McGrath is now optimistic about achieving the company’s current goal of delivering an 8 to 10 percent profit margin, excluding retirement expense, in 2008. “A lot of the heavy lifting is behind us,” he says. “Now we just have to deliver on our commitment.”

About Jennifer Pellet

As editor-at-large at Chief Executive magazine, Jennifer Pellet writes feature stories and CEO roundtable coverage and also edits various sections of the publication.