In late March, NTT Data announced a transaction to acquire the services arm of Dell for just over $3 Billion. This transaction includes all of Dell Services, including Perot, which was acquired by Dell in 2009 for $3.9B. The only services that will remain are the break fix attached product services of Dell.
From the capioIT perspective, the outcomes are as varied as NTT and Dell. For NTT Data it is a leap in depth of capabilities and the order of magnitude of the business. Some of the new markets that NTT have gained significant new capabilities include:
- Healthcare, Financial Services, Public Sector
- US non healthcare, Australia, Europe
- Infrastructure Services
- Mid-market services
- Offshore service delivery
This is a significant deal for NTT Data. What will be a factor to watch is the speed in which it can shift people based services to asset-based services that are scalable, repeatable and cost effective. A note of caution has to be raised because in executive briefings post acquisition, a lot was made of the people acquired. capioIT will be looking to hear more about the process and asset based services that will be developed rather than the people aspect. In the as-a-Service, robotics world humans are the enablers of the new technology, rather than the workers.
The acquisition has a significant impact on the rest of NTT. Of course, capioIT believes that the most pertinent area of overlap will be with Dimension Data. In markets such as Australia and parts of Asia, Dimension Data and Dell did have an overlapping market capability and competitive environment. NTT has displayed a keenness to maintain the branding of Dimension Data in the market, so as this continues, there may be some overlap, but this will be balanced by the very significant growth in the NTT Data brand which is largely unknown in the UK, Australia and parts of Asia from a services point of view.
A note on NTT and services. capioIT has been very bearish about the capability of a Telco to offer IT services. We have seen many fail to understand what is required to offer such services, most succinctly the difference between a consultant and an engineer. NTT have been smart in separating the Telco from the services arm. Acquisitions such as Dimension Data have resided outside of headquarters and the legacy business. Perhaps they can be the vendor that breaks the history of Telco’s such as BT, AT&T, Verizon, SingTel and Telstra being far from successful with their long term strategies for growth through IT based services and solutions.
Dell on the other hand is a genuine concern. The primary motivation of the transaction appears to be to free up cash to help pay for the $67B acquisition of EMC. As capioIT has already commentated, the EMC-Dell transaction does not appear to offer to the customer any significant differentiation in growth areas such as analytics, mobility and cloud outside of commoditized markets. Without the services arm, the limited software capacities of EMC and Dell (excluding VMware which will look to maintain its independence if history is any guide) are not enough to drive the required innovation to ensure customer outcomes.
Whilst software is the future, the industry knowledge, scale and capability that Dell is giving up may come back to restrict the capability of Dell. For $3B in a $67B transaction, Dell and its investors may wonder if the value was worth it. Having said that, I am not Michael Dell, and I have not set up a multi-billion dollar company. I will give some benefit of the doubt to his strategy and investment.
NTT acquiring Dell Services was a poorly kept secret. capioIT believes that NTT Data is the big winner in the deal. It paid less than the market thought it would, and gains a significant increase in scale, capability and customers. It is a move to leapfrog it up the rankings for services providers.
On the other hand, capioIT has questions as to the extent to which Dell will be able to differentiate itself in the market as it pays for the $67 Billion dollar acquisition of EMC.
If you require further information, please contact Phil Hassey, CEO of capioIT. capioIT is an advisory firm focused on helping organisations to understand customer experiences from emerging technology as the world becomes Digital. Phil may be contacted easily in the digital and real world.