Datacraft's mega deal

Computerworld examines the deal that has created one of the largest systems integrators in the country.

When Datacraft announced this month that it had made a conditional offer to acquire Integral Axon Computer Systems, it brought to a conclusion discussions that had been taking place for almost a year.

Timing, it is said, is everything. Axon had been acquired in May by Integral. A source close to the deal says there was a lot of activity late last year – “more than three potential bidders” – focused on Axon.

“Datacraft had had discussions at various times over the years, so it was bad timing for them when others were expressing interest. They came back a bit late,” the source says.

“It then became a logical progression for them to talk to Integral. When you get to a certain point in negotiations, people want exclusivity.”

Datacraft managing director Robin Hartendorp won’t comment directly about the purchase till it goes unconditional, probably in a few weeks.

He was on holiday in Israel when it was concluded. “I did the final deal on the phone, having a cup of coffee in an Arab café with a donkey walking past.”

Neither party will disclose the purchase price. Integral Axon has gross assets of nearly $38 million.

The source says the Datacraft and Axon cultures are a tighter fit than with those of Integral, which is backed by the Open Brethren church.

“The Axon staff didn’t like the Integral culture but the only way Datacraft was going to get there was by having Integral as well,” the source says.

Computerworld is aware of one organisation that formerly used Axon as a supplier but switched to Gen-i because its staff didn’t enjoy engaging with Integral.

Datacraft has pitched the acquisition as one of capability, combining Integral Axon’s integration resources with Datacraft’s system integrator capabilities.

“The transaction more than doubles the Datacraft New Zealand business in size and scale,” Hartendorp says.

Datacraft’s turnover last financial year was $55 million. The combined turnover of Integral and Axon is estimated at around $150 million.

Integral Axon is one of only five Microsoft large account resellers and the only tier one IBM licensing reseller.

The acquisition positions Datacraft strongly in the Microsoft space, adding to its already substantial practice. There will be more than 90 Microsoft developers and 200 professional services staff.

At a press conference to announce the acquisition, Datacraft CEO Bill Padfield talked up the opportunities presented by the cloud.

“This represents a compelling cloud proposition for our clients and rapidly accelerates the execution of Datacraft’s medium and long-term strategy in this space.”

The cloud is all that CIOs he has dealt with wanted to talk about.

Hartendorp suggested there was $25-30 million of business to be had in outsourcing over the next five years.

Padfield was also bullish about future acquisitions. He spoke of a strong balance sheet with no debt and said Datacraft was working on a pipeline of acquisitions in Asia Pacific.

“We will continue to hunt in New Zealand also.”

Datacraft is a wholly owned subsidiary of Dimension Data, a $US 4 billion company with more than 60 offices in 13 Asia Pacific countries.

Japanese telco giant NTT went unconditional this month to purchase Dimension Data. NTT is a $US100 billion company.

A source says that it is been very clear over the past nine months that Datacraft wanted to be branded Dimension Data in New Zealand. However, Hartendorp says a brand change won’t happen for at least two years because of the NTT acquisition. Rather, Datacraft will carry the tag line “A Dimension Data Company”.

Hartendorp will manage the transition. He says he hopes to rapidly merge the sales staff and bring the businesses together in common premises.

Initially, both companies will continue with their existing client and partner engagement strategies. “Where it makes sense to our clients, we will offer the opportunity to engage in an integrated client management solution,” he says. “With partners, we will jointly evaluate each agreement, and contact partners individually to ensure we maximize our existing relationships. Over time we plan to consolidate our partner agreements.”

He says there is very little overlap of the client base of 400 companies.

At the press conference Hartendorp said Datacraft had selected four companies as potential acquisitions before deciding on Integral Axon. No jobs will go as a result of the acquisition. Rather, Datacraft is still in hiring mode, he says.

IDC estimates that the new entity will have a market share of close to 2.5% in IT services, and an overall headcount of close to 580 employees, just surpassing Fujitsu.

Government’s wide area network

It’s nearly a year since Datacraft launched one.govt, a managing wide area network service for government agencies that replaced the ill-fated Government Shared Network (GSN). So far, the news has all been good.

Beginning with eight agencies, the customer base has grown rapidly to 18.

Government Technology Services general manager Stephen Crombie says the service is very robust and the transition from the former GSN was well executed.

“There are now 400 connections compared to 120 when GSN was at its peak,” he says.

“We see one.govt as fundamental to government shared services. There is huge potential for agencies to interconnect securely. Most of those collaborative services are available now.”

He confirms acquisition savings of more than 30 percent when compared to competitive services.

“These savings will increase as more agencies join.”

Datacraft managing director Robin Hartendorp says he decided to bid for the business after discussions with FX Network managing director Murray Jurgeleit. FX Networks is sub-contracted to Datacraft to provide the infrastructure

“The large telcos were leveraging the size of their revenue into business we wanted to win,” he says. “We focused on two things: price and simplicity. We knew what didn’t work. For us, it was purely a technical bid.”

One.govt performs on a par with the commercial market and is competitively priced, he says.

“Users are achieving savings of around 35 percent compared to using a private network.”

One.govt stands for Open Network Environment for Government. Agencies choose the services they need from a suite that includes a wide area network capable of transferring voice, video and data traffic; high-speed internet access; a secure WAN providing encryption for sensitive information; and an inter-agency service to connect with other participating organisations.

As more government agencies come on board, prices should fall. The service has a flat-rate pricing model.

Datacraft has signed Sky Television as the first client for its one.biz commercial network.

WHO’S ON BOARD ONE-GOVT

Archives New Zealand

Department of Labour

Ministry of Health

Department of Internal Affairs

National Library

Parliamentary Service

Police

Trade and Enterprise

Ministry of Education

BOPLASS Ltd

Department of Conservation

SPARC

GCSB

Public Trust

Ministry of Fisheries

Reserve Bank

Open Polytechnic

Department of the Prime Minister and Cabinet

Comments

Tony

1

An interesting piece of fiction. The Open Brethren Church has nothing to do with Integral and they have had the Sky account for years. Your name isn't Lewis Carroll by any chance

INK

2

This is a web article. Where is page 17 that is referenced when talking about NTT?

at the very least a link would be nice.

Anon

3

We are so happy that the Integral Directors are no longer involved.

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