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By | Paul Kunert 20th March 2012 14:58

Integrator Tieto slashing 1,300 jobs

Plans to save €50m to compete with services rivals

Finnish IT services house Tieto is axing 1,300 jobs in a bid to wipe €50m from its overheads.

The cuts, equating to 7 per cent of the workforce, come weeks after the firm flogged its UK operation to Sopra Group for an undisclosed sum and amid plans to expand the consultancy and system integration (CSI) practice.

Kimmo Alkio, president and CEO at Tieto, said feedback from "customers, employees and shareholders" is that the firm lacked clarity in its direction was carrying a cost burden that made it uncompetitive.

"Naturally, it is challenging in the short term to conduct the necessary cost reduction activities, which are necessary to create better price competitiveness and an overall competitive cost structure for the future," said Alkio.

The aim is to cut €50m worth of expenses by 2014: roughly one-quarter of these are expected to affect operating profit this calendar year.

This translates into cuts of some 500 roles in its homeland, close to 300 in Sweden and roughly 500 in operations across other countries. Negotiations with union reps have already begun in accordance with local legislation, the firm added.

The actions include reducing "non-customer centric work, overlapping tasks and improv[ing] productivity".

Tieto said it plans to deliver full IT lifecycle managed services and raise the revenues from its CSI unit to the point where they represent one-quarter of overall turnover, up from 20 per cent. The Finnish firm expects that taking this action will make the business "more resilient towards price pressure".

The business sold its UK operation on 1 March in an all-cash deal to Sopra Group, whose services include business intelligence, cloud, CRM and SI to seven core customer markets such as public sector and manufacturing.

At the same time, Sopra also snapped up London-based consultancy and SI house Business & Decisions.

Tieto said it will focus on markets where it can be a top three player including Finland, Sweden and Russia. Operations in Germany are currently under review.

The firm is eyeing up EBIT margins of 10 per cent and EPS growth of over 15 per cent between 2012 and 2016. ®

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