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Paul Hermelin, chief executive of Capgemini, on Thursday said it would take a “very significant” reskilling if Europe’s largest IT services company was to avoid large scale lay-offs among its European workforce.

The French company will almost double its Indian workforce over the next year as it expands its outsourcing business, now the largest contributor to revenues.

Mr Hermelin also said Capgemini would consider acquiring an Indian company because he feared organic growth would not be able to keep up with demand.

Outsourcing has become an increasingly sensitive issue in the US and Europe as companies seek to reduce costs by employing Indian workers, especially in the IT sector. Last week ABN Amro announced a record $1.8bn outsourcing deal with a number of Indian companies.

Mr Hermelin said attitudes would have to change in countries such as France and Holland if Europe was to face up to the new challenge India presentsed.

“The way to avoid massive job lay offs will be through a very significant reskilling exercise,” he said. The process of reskilling that began in the US and spread to the UK was now under way in Europe, he said.

Capgemini has shed 14,000 jobs in the last three years and restructured its operations to raise operating profit margins, which have lagged rivals.

Mr Hemlin, speaking after the company revealed its first profit for three years, said its operating margin would rise to 6 per cent by 2008, compared with a consensus target for this year of 2.9 per cent.

Jonathan Crozier at WestLB said that historically, Capgemini’s margins had been tiny and added: “I think the market would now be slightly disappointed if they did not beat the new implied forecast.”

The company also raised its full-year revenue growth target from 10 per cent to 12 per cent. For the first six months of the year group revenues rose 20.8 per cent to €3.47bn ($4.31bn).

Net income was €58m compared with a €157m loss for the year-ago period, largely due to the sale of its US healthcare business earlier this year to Accenture. Capgemini shares closed 3.7 per cent higher at €28.78.

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