The Technology Consulting And Engineering Market (TCE)

ALTEN's market covers the full range of consulting services, technical assistance, performance of fixed price projects and outsourced platforms in the field of Technology Consulting and Engineering (TCE) well as Information Systems and Networks (ISN).
The rate of outsourced R&D from industrial corporations to TCE companies is estimated at 27-30% in France and at more than 15% in Europe, demonstrating customers' desire to refocus on their core businesses. According to the Pierre Audoin Conseil consulting firm, the expected growth in ALTEN's available market in France can be summarized as follows:

Developments in the French market

Purchasing Departments continue to curtail their short lists in accordance with a listing policy based on :

• a broad range of capabilities,
• comprehensive and diversified packages (R&D consulting, project, fixed price, work package, offshore),
• international support,
• a capacity to demonstrate productivity gains.

In certain sectors, Purchasing Departments intend to rely on no more than three companies for each area of operation over the medium term, which should benefit the major players in the sector where ALTEN is the leader.

In 2008, ALTEN confirmed the nearly comprehensive nature of its listings and partnerships in Europe, and is now included among EADS' listed E2S engineering service providers throughout the world.

Technical and R&D Divisions are responsible for increasingly complex projects with a growing demand for productivity and the need to take sustainable development issues into account. Their efforts are increasingly focused on project management and project design.
The subcontracting of research and integrated or outsourced platform (work package) projects is an effective answer to their need for productivity and adaptability. It enables the deployment of complete teams, led by project managers according to strict procedures, in a far more flexible framework than that available under a fixed price arrangement with detailed specifications, which both customers and engineering subcontractors find restrictive to implement.

The shift from Consulting to Work Package mode will continue in the coming years and will favour companies such as ALTEN:

• Multi-specialist
• With a broad, multidisciplinary work force
• Capable of transferring good practices from one business sector to the other to benefit customer productivity

As for international deployment, it enables us:

• To provide, through off-shore structures, a response to our customers' concerns about controlling research costs.
  In practice, the need to provide detailed specifications - often in a foreign language - as well as geographic distance from the project team truly limit the use of these types of resources.
• To locally support customers in their international growth with a view toward a global partnership.

Competitive environment

The market for outsourced R&D is fragmented, made up of approximately ten major players and a multitude of local players.The 10 leading companies currently make up only 48% of the market (source PAC).
Curtailed short-lists and the economic crisis will likely intensify the trend toward concentration that has been occurring over several years.
In 2008, ALTEN played a significant role in market consolidation, acquiring eight companies in France and overseas which represent 1,100 consultants and annual turnover of ?86.2 million:

• 2 companies specialising in project management (PMO) in France, first quarter
• 1 company specialising in on-board / real-time software in the Netherlands, first quarter
• 1 company specialising in documentary engineering in Romania, second quarter
• 1 company with expertise in Microsoft technology in France, third quarter
• 2 companies specialising in information technology in Spain, third quarter
• 1 company specialising in mechanics, electronics and scientific calculations in Sweden, fourth quarter

ALTEN also continued to win market share as compared with its direct competitors and confirmed its position as market leader in Technology Consulting and Engineering.
The current market situation should enable ALTEN to continue its targeted acquisition policy in 2009 and strengthen its growth through acquisition under favourable terms, especially overseas.
In the first quarter, ALTEN acquired three companies:

• In France, a company specialising in the design of vehicle systems: engine control and motorisation systems, on-board and real-time software and a company specialising in Banking- Finance
• In Italy, a company specialising in telecom and on-board software.

(source Pierre Audouin Conseil - march 2009).

Growth strategy

The international development is strategic for the ALTEN Group.

Since 2000, ALTEN has chosen to turn to international markets to support its customers in their strategic projects.
First organic, this expansion accelerated by the acquisition of local players. The acquired companies are all profitable and have a similar business model to ALTEN's one.

On a local market, involving the development of local players, this strategy has enabled the ALTEN Group to gain significant market shares in Europe.
The rate of outsourcing of R&D in Europe is estimated between 6 to 15%  vs 27% in France. Moreover, the purchasing structures are less mature, and margins higher than those of France.

Therefore, we expect an important growth of our activity outside France over the coming years.
ALTEN's goal is to exceed 30% of activity outside  France within 3 years, and to reach the critical size of 1000 people per area in Germany, Spain and Benelux.