CGI Group

Through FY2018, CGI Group generated approximately 70-75% of revenue from custom systems integration and consulting — building bespoke software and managing IT projects for government and enterprise clients. While this work was steady, it was labor-intensive, geographically constrained, and subject to project-based revenue volatility. Custom SI work carried gross margins of approximately 28-30%, limited by the linear relationship between headcount and revenue. CGI's portfolio of proprietary IP-based solutions (software products sold as managed services) was underweight relative to peers like Accenture and Capgemini, representing less than 20% of total revenue.

Starting in FY2019, CGI accelerated a systematic shift toward IP-based solutions across its government and enterprise verticals:

• IP portfolio investment: Invested in expanding proprietary software solutions across core verticals — tax and revenue management for government, claims processing for insurance, and trade finance for banking. These IP solutions were sold as managed services with recurring revenue rather than one-time project fees.
• Client conversion: Actively migrated existing custom SI clients onto CGI's IP-based platforms, converting project-based relationships into multi-year managed services contracts. Government clients were particularly receptive, as IP-based solutions reduced their procurement risk.
• Managed services bookings push: Prioritized managed services deal pursuit, resulting in a 26% increase in new managed services bookings in Q4 FY2023 compared to the prior year.
• Cost Optimization Program: Launched a company-wide efficiency program that redirected savings from delivery optimization into IP development, funding the portfolio expansion without increasing total R&D spend as a percentage of revenue.

• IP revenue contribution: IP-based revenues grew to represent approximately 25-28% of total revenue by FY2024, up from less than 20% in FY2018, with the government vertical showing the strongest adoption.
• Margin improvement: Adjusted EBIT margin expanded primarily due to savings from the Cost Optimization Program and profitable organic growth within the government vertical, including higher IP-based revenues — per FY2024 annual report commentary.
• Revenue scale: Total revenue reached C$14.3 billion in FY2023, with managed services representing a growing share of the revenue mix.
• Recurring revenue increase: Managed services (including IP-based) bookings grew consistently, providing greater revenue predictability versus project-based custom SI work.
• Revenue per employee: Improved as IP-based solutions required lower delivery headcount per dollar of revenue compared to custom development.
• Timeframe: FY2019-FY2024 (5-year shift, ongoing).

• CGI's long-standing government client relationships (40%+ of revenue from public sector) provided a receptive market for IP-based solutions where switching costs are high
• Proprietary IP built over decades in specialized domains (tax, insurance, banking) created differentiation that generic SI competitors could not easily replicate
• The managed services commercial model aligned CGI's incentives with client outcomes, reducing procurement friction for government buyers
• Disciplined M&A strategy focused on acquiring IP assets and client relationships in target verticals rather than generic headcount