Datacraft NZ's parent bought by Japan telco

Dimension Data acquired by NTT

Datacraft NZ was itself the subject of a takeover when its parent company Dimension Data was acquired by Japanese telecommunications giant NTT for $3.2 billion.

Ovum consultant Jens Butler says the sale to NTT poses questions around how the combined organisations will fare as a single entity.

“Is this a game-changing move that is in line with a new world order of IT and telecoms convergence, or a mismatched reactive marriage prompted by a land grab?” he asks.

“This move could make other deep-pocketed telcos sit up and act on some of their existing plans more proactively, than they had originally planned. And it will more than likely make DiData’s current partners rethink the extent of their existing programmes. As always, will the sum of the merged parts really bring value beyond the individual parts during the coming years?

The parties claim the merger will enable them to “offer new IT services worldwide in the age of cloud computing”, combining NTT’s network and hosting capacity with DiData’s systems integration capabilities.

Butler says that given DiData’s substantial footprint and rates of growth, the merger certainly provides NTT with access to some previously relatively untapped and expanding geographies ($1 billion in revenues in each of Africa, Europe, and ANZ), as well as greatly expanding its network integration, IT and managed services capabilities.

“However, the combined entity will still be no more than a buzz within the North American market,” he suggests.

“To date, NTT has been noticeably quiet in the global services space and one of the few large, global telcos not to have such a pronounced, global strategy. Then again, maybe it has just watched as its peers have more often than not stumbled in this arena and has waited to pick up the “cheaper” pieces.

“What’s in it for DiData? Access to NTT’s extensive hosting capacity, a strong balance sheet to invest in its cloud vision and an end-to-end stack to bring to market. Interestingly, DiData was making progress in transforming itself from a purely Cisco-centric network integrator to a more mainstream, multi-vendor systems integrator. Clarity around the future of this programme will be a top priority.”

Butler says there are historic warning signs that must be heeded in such a cross-cultural, cross-industry marriage; with the respective headquarters so widely separated by miles, time zones and cultures.

“Such trysts have not had the greatest success in terms of globalising, integrating and delivering a common vision: Fujitsu’s acquisitions [for example ICL and Amdahl] and NTT’s Verio acquisition highlight the difficulties in creating such an integrated entity.

“And with a history of less than successful telco acquisitions of services organisations [Telstra/Kaz, KPN/Getronics], it does raise the question of whether the cultures of “big pipes/product/incumbent sales” can combine with a “consultative/dynamic/solution approach” to create the craved-for market success.”

Ovums’ Butler says such a deal has a wide-reaching impact across industries and geographies and ensures a large set of critical eyes will follow the progress closely, so any integration needs to be well planned and executed.

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