Unisys

Through 2019, Unisys generated approximately $2.8 billion in revenue, with roughly 60% coming from legacy IT outsourcing and infrastructure services — managing data centers, end-user computing, and network operations for enterprise and government clients. This business was in secular decline as clients migrated to cloud infrastructure, with IT outsourcing revenue declining 5-8% annually. Margins on legacy infrastructure work were thin (mid-single-digit operating margin) due to pricing pressure and declining volumes. Unisys' proprietary security software (Stealth) and digital workplace solutions existed but were subscale, representing less than 15% of total revenue.

Under CEO Peter Altabef, Unisys executed a multi-year transformation to shift from declining IT outsourcing to a software-and-services model:

• Segment restructuring: In 2020, reorganized the company into three focused segments — Digital Workplace Solutions (DWS), Cloud, Applications & Infrastructure Solutions (CA&I), and Enterprise Computing Solutions (ECS, including the Stealth security platform and ClearPath Forward operating environment).
• Stealth security platform investment: Doubled down on Stealth, a proprietary zero-trust microsegmentation platform, positioning it as a subscription SaaS product for enterprise and federal clients. Stealth provided recurring license and maintenance revenue with 70%+ gross margins.
• ECS subscription conversion: Migrated ClearPath Forward clients from perpetual licenses to subscription and consumption-based models, converting one-time revenue into annual recurring streams.
• Legacy portfolio managed decline: Allowed unprofitable IT outsourcing contracts to run off without renewal, deliberately shrinking total revenue to improve margin mix. Revenue declined from $2.8B (2019) to $2.0B (2023) as legacy contracts expired.

• Revenue mix transformation: ECS segment (software, security, subscription) grew to represent approximately 25% of total revenue at 60%+ gross margins, up from approximately 15% in 2019.
• Recurring revenue: Subscription and recurring revenue streams grew as a percentage of total, providing greater predictability despite overall revenue decline.
• Margin expansion: Non-GAAP operating margin improved from approximately 5% on legacy-dominated revenue to approximately 8-10% as higher-margin software revenue replaced low-margin outsourcing.
• Stealth adoption: Stealth zero-trust platform gained traction with U.S. federal agencies and defense contractors, benefiting from federal zero-trust mandates.
• Strategic positioning: Unisys repositioned from a declining IT outsourcer to a focused digital workplace and security software company, improving its competitive narrative and multiple.
• Timeframe: 2020-2023 (3-year managed transition with deliberate revenue decline).

• Proprietary Stealth security platform provided a differentiated product that legacy outsourcers could not replicate
• ClearPath Forward mainframe environment had high switching costs, giving Unisys leverage to convert clients to subscription without attrition
• Federal zero-trust mandates created structural demand for Stealth capabilities
• CEO willingness to accept short-term revenue decline in exchange for long-term margin improvement signaled credible commitment to investors