Axon plans acquisitions, as Gen-i looks offshore

Axon wants to deliver "telco-like" services, while Gen-i plans partnership with Indian outsourcer Tech Mahindra

Services provider Axon hasn’t made an acquisition in 15 years, but chief executive Scott Green says that is about to change.

The company has finalised a three-year “vision” that includes some key buys, including one aimed at providing Axon with the ability to deliver “telco-like” services. Meanwhile across town, at rival Gen-i, plans are afoot to boost capacity by making use of Telecom’s partnership with Indian outsourcer Tech Mahindra.

Both companies are looking to expand their ICT offerings.

Axon’s Green says ICT is becoming a converged market and by the time the company’s three-year plan comes to an end it wants to be able to deliver the full breadth of converged services required to meet the market.

“We can deliver on that without owning the copper or glass in the ground, or the concrete in a datacentre,” he says, making it clear that Axon’s acquisition strategy is about delivering capability rather than investment in infrastructure.

Green says the company plans to target three areas. In order of importance these are: applications, especially skills around application integration; datacentre services; and telecommunications.

Asked if the move to deliver telco services was a vote of faith in the government’s operational separation plan, Green says the telco component will likely be the last area of acquisition. It will be towards the end of Axon’s three-year plan, rather than at its forefront.

Meanwhile, Telecom’s ICT services subsidiary Gen-i is looking to leverage its parent’s relationship with Indian outsourcing company Tech Mahindra, to boost its local capacity.

Gen-i’s chief executive, Chris Quin, told Computerworld that the company is talking to its local clients to gauge their willingness to work with an offshore partner through Gen-i.

“We’d never do it without clear client engagement,” he says.

However, Tech Mahindra already enjoys a known and proven partnership with Telecom and is helping with some of the work around operational separation, says Quin. The model Gen-i would pursue would involve bringing lead-people familiar with the Indian operation here to New Zealand to engage with clients.

Tech Mahindra set up a New Zealand office in 2005. In October, the Dominion Post reported that the company had 38 staff in the country working for Telecom on a range of short-term contracts, as well as filling gaps in the telco’s technology team. The company signalled that the number of Tech Mahindra staff in New Zealand could increase to 50.

Axon has just completed its financial year, ended 31 October. Green says revenue growth was in the order of 20%, taking Axon to just under $100 million. As analyst firm IDC had projected growth in the segment of around 6%, Axon’s is a very good result.

Margin growth for the company was around 25%, says Green.

Axon has won new business contracts from several organisations, including Hamilton City Council, Radius Health, PGG Wrightson, Mighty River Power and Fulton Hogan among others that cannot yet be named, he says. Several of these organisations, as well as others, are also serviced by Gen-i, as New Zealand enterprises often choose to multi-source their outsourcing contracts.

The vision for the next three years is focused on “delivering next generation ICT business solutions,” says Green. The delivery component includes business and technical consulting, design, and build of ICT systems, as well as management and procurement.

Green says that in Axon’s market sweet spot — organisations with between 200 and 2,000 seats — the demand is for a full-service approach, where one supplier can deliver in multiple areas.

“The real game is about delivering business value and helping the customer get return on investment,” he says.

The acquisition path will shift Axon from an infrastructure delivery model to an application integration approach, especially as SaaS (software as a service) systems grow in popularity in the business world.

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