FORUM: UXC's Christmas shopping

Is it a good thing for small, innovative NZ IT companies to be taken over by big overseas players?

The Christmas-New Year period is usually a quiet one for the local IT industry and most people who work in it take a well-deserved holiday over that time.

This summer break was an exception, however, with several significant events taking place.

Among them were the visit of Microsoft CEO Steve Ballmer and the meltdown of TelstraClear’s Paradise email service.

Another important event, the sale of Carter Holt Harvey’s SAP consulting business Oxygen to Australian IT services provider UXC, happened just before Christmas and while it didn’t get the media profile of Ballmer’s visit or the TelstraClear email debacle, it was nonetheless significant.

Before it was announced that UXC was the buyer, there had been speculation that the purchaser was a multinational: Fujitsu, CSC, HP and Tata were some of the names touted as would-be buyers.

While the buyer turned out to be someone based closer to home than originally anticipated, the sale nonetheless raises the question of whether being acquired by a bigger overseas player is a good thing for small, innovative New Zealand IT companies.

The experience of some, such as Navman, bought by US giant Brunswick in 2003, suggests “yes” is the answer, but that of others, such as Marshal Software, points more to a question mark.

It’s hard to predict how Oxygen will fare, but early indications are that the deal will benefit both parties. For starters, UXC is no stranger to New Zealand — it already owns a New Zealand IT services provider, Oracle specialist Sequel Software.

Adding to the mutual benefits are that Oxygen is a trans-Tasman rather than a New Zealand company. Its Australian staff (it has offices in Sydney, Melbourne and Brisbane) and customer base would have been a large part of what attracted UXC to it.

Other positives include UXC’s intention to retain the Oxygen brand, the continued employment of Mike Smith as Oxygen chief executive, an obligation to offer continued employment to at least 80% of the Oxygen staff it acquired and an undertaking to continue to provide SAP consultancy services to Carter Holt for another four years.

While selling was a possibility right from Oxygen’s early days, the timing of the sale late last year strongly suggests it was driven by the restructuring of Carter Holt by Graeme Hart.

It was Carter Holt’s right to sell Oxygen if it wanted to, but it’s kind of sad to see an innovative, profitable local be sold offshore.

After all, the fact that an IT department could use its own experience of implementing SAP to form a business unit that makes money for its owners and adds value for its customers puts paid to Nicholas Carr’s argument that IT departments are little more than providers of a utility.

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Tags OxygenUXC

More about CSC AustraliaFujitsuHPMarshal SoftwareMicrosoftNavmanOracleParadiseSAP AustraliaTataTelstraClearUXC

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