Segment Information

As described in Note 3, effective January 1, 2018, the company adopted the requirements of Topic 606 which resulted in an adjustment to Technology revenue and profit of $53.0 million in the first quarter of 2018. The adjustment represents revenue from software license extensions and renewals, which were contracted for in the fourth quarter of 2017 and properly recorded as revenue at that time under the revenue recognition rules then in effect (Topic 605). Topic 606 requires revenue related to software license renewals or extensions to be recorded when the new license term begins, which in the case of the $53.0 million, is January 1, 2018.

Effective January 1, 2018, the company changed the grouping of certain of its classes of services. As a result, prior-periods’ customer revenue by classes of similar services have been reclassified to conform to the current-year period.

The company has two business segments: Services and Technology. Revenue classifications within the Services and Technology segment are as follows:


•	Cloud & infrastructure services. This represents revenue from helping clients apply cloud and as-a-service delivery models to capitalize on business opportunities, make their end users more productive and manage and secure their IT infrastructure and operations more economically.


•	Application services. This represents revenue from helping clients transform their business processes by developing and managing new leading-edge applications for select industries, offering advanced data analytics and modernizing existing enterprise applications.


•	Business process outsourcing (BPO) services. This represents revenue from the management of critical processes and functions for clients in target industries, helping them improve performance and reduce costs.


•	Technology. This represents revenue from designing and developing software and offering hardware and other related products to help clients reduce costs, improve security and flexibility and improve the efficiency of their data-center environments.

The accounting policies of each business segment are the same as those followed by the company as a whole. Intersegment sales and transfers are priced as if the sales or transfers were to third parties. Accordingly, the Technology segment recognizes intersegment revenue and manufacturing profit on hardware and software shipments to customers under Services contracts. The Services segment, in turn, recognizes customer revenue and marketing profits on such shipments of company hardware and software to customers. The Services segment also includes the sale of hardware and software products sourced from third parties that are sold to customers through the company’s Services channels. In the company’s Consolidated Statements of Income, the manufacturing costs of products sourced from the Technology segment and sold to Services customers are reported in cost of revenue for Services.

Also included in the Technology segment’s sales and operating profit are sales of hardware and software sold to the Services segment for internal use in Services engagements. The amount of such profit included in operating income of the Technology segment for the three months ended March 31, 2018 and 2017 was zero and $0.1 million, respectively. The sales and profit on these transactions are eliminated in Corporate.

The company evaluates business segment performance based on operating income exclusive of the service cost component of postretirement income or expense, restructuring charges and unusual and nonrecurring items, which are included in Corporate. All other corporate and centrally incurred costs are allocated to the business segments based principally on revenue, employees, square footage or usage.

A summary of the company’s operations by business segment for the three month periods ended March 31, 2018 and 2017 is presented below:



	Total			Corporate			Services		Technology
Three Months Ended March 31, 2018
Customer revenue	$	708.4		$	—		$	568.5	$	139.9
Intersegment	—			(10.0		)	—		10.0
Total revenue	$	708.4		$	(10.0	)	$	568.5	$	149.9
Operating income	$	101.8		$	2.7		$	17.1	$	82.0

Three Months Ended March 31, 2017
Customer revenue	$	664.5		$	—		$	585.3	$	79.2
Intersegment	—			(5.3		)	—		5.3
Total revenue	$	664.5		$	(5.3	)	$	585.3	$	84.5
Operating income (loss)	$	21.8	*	$	(18.5	)*	$	27.3	$	13.0



*	Amounts were changed to conform to the current-year presentation. See Note 3.

Presented below is a reconciliation of total business segment operating income to consolidated income (loss) before income taxes:



	Three Months Ended March 31,
	2018			2017
Total segment operating income	$	99.1		$	40.3
Interest expense	(16.6		)	(5.7		)
Other income (expense), net	(22.6		)	(32.9		)	*
Cost-reduction charges⁽ⁱ⁾	2.9			(20.1		)
Corporate and eliminations	(0.2		)	1.6			*
Total income (loss) before income taxes	$	62.6		$	(16.8	)



*	Amounts were changed to conform to the current-year presentation. See Note 3.
⁽ⁱ⁾	The three months ended March 31, 2017 excludes $5.3 million for net foreign currency losses related to exiting foreign countries which are reported in other income (expense), net in the consolidated statements of income.

Customer revenue by classes of similar products or services, by segment, is presented below:



	Three Months Ended March 31,
	2018		2017
Services
Cloud & infrastructure services	$	318.4	$	337.4	*
Application services	192.9		199.4		*
Business process outsourcing services	57.2		48.5
	568.5		585.3
Technology	139.9		79.2
Total	$	708.4	$	664.5



*	Amounts were changed to conform to the current-year presentation.

Geographic information about the company’s revenue, which is principally based on location of the selling organization, is presented below:



	Three Months Ended March 31,
	2018		2017
United States	$	286.5	$	333.8
United Kingdom	114.8		78.9
Other foreign	307.1		251.8
Total	$	708.4	$	664.5