Gen-i out of the bottle?

Telecom and TelstraClear are among the last three in the hunt to buy systems integrator Gen-i.

Telecom and TelstraClear are among the last three in the hunt to buy systems integrator Gen-i.

Computerworld understands that three offers had been received for Gen-i when bids closed on May 21. The third party could be Australian company Volante, which had earlier had discussions with Gen-i and was named in the Sydney Morning Herald some weeks ago as having concluded a deal to buy the company. Veritas and Datacom have also been spoken of in the market as candidates.

Telecom sources say they expect their bid to be successful. If it is, Telecom Advanced Solutions will be wound into the company to take advantage of Gen-i’s Australian presence, they say.

That would be detrimental to TelstraClear because most of Gen-i’s large outsourcing customers use TelstraClear.

Telecom formally says it doesn’t comment on market rumours. Nor will Gen-i CEO Garth Biggs. TelstraClear answered similarly.

Gen-i’s owner, Eric Watson, is understood to be keen to sell the company as he cashes up to service his UK business. Just what the business might sell for is open to speculation. Sources say it will depend on the balance sheet of the business and what sort of caveats are in place. Gen-i has around 700 staff and turnover of $150 million.

IDC research manager Graeme Muller says it’s difficult to put a sale price on Gen-i. “It will totally depend on who’s getting it.” He dismisses as “unlikely” a price of $80 million that has been quoted elsewhere.

In another part of the aggregation battle, Telecom has done due diligence on Computerland, and TelstraClear is understood to be undertaking the same process. Telecom has an existing partnership with Computerland.

Rod Severn, country manager for Sun Microsystems, which last year renewed a reseller agreement with Computerland, says a possible sale of Computerland would not impact on its relationship with the country’s largest reseller chain.

“It wouldn’t affect us [Sun]. It might even be good for us as we do a lot of work with Telecom,” says Severn.

The sale of Gen-i, as well as the possible sale of Computerland, comes at a time when the larger, multinational vendors are fighting for a decreasing number of large customers.

Around 20% of Gen-i’s business is in desktop and network outsourcing, and 20% in systems integration. It is a much larger provider of outsourcing services than Computerland, with major customers including IAG, Air New Zealand and Fonterra. Computerland does around 30% of its business in desktop and network services, and 20% in systems integration. IAG didn’t respond to requests for comment; Air New Zealand wasn’t prepared to.

At the other end of the vendor spectrum there is a continuing need for the smaller vendors to grow to maintain economies of scale.

This all points to a potential battle at the desktop level, something that the large vendors are finding exceptionally difficult to manage, says Axon managing director Matt Kenealy. Axon has also been regularly approached by potential buyers and brokers, he says.

“Customers want to be able to chose technology to meet business needs and to implement it at the lowest possible cost.

“That may mean dealing with third-party products that the big vendors don’t have control over. The telcos, particularly, are used to having control through their network services.”

In Australia Telstra recently bought integrator Kaz. This month, it won a $A750 million outsourcing deal with Qantas, part of which is to provide desktop services for seven years.

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Tags gen-i

More about Air New ZealandAxon SolutionsComputerlandDatacomDatacomIDC AustraliaQantasSun MicrosystemsTelstraClearTelstra CorporationVeritasVolante

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