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Editorial: Buying into the big league

Editorial: Buying into the big league

Shortly after announcing a significant win with chemical comp­any, Orica, at the start of the year, managing director of Kaz Technology Services, Andrew Richardson, told ARN that potential customers were starting to see the company’s selective sourcing value proposition. The services company has won a steady stream of sizeable deals since its performance has obviously turned a few heads. Telstra chief Ziggy Switkowski’s must have been among them given the announcement that the telco is whipping out its chequebook again to purchase Kaz.

Whether the $333 million price tag represents good value for money or not will only become clear further down the track. But what is mmediately apparent is that the Telstra balance sheet will give Kaz the clout to go after real heavyweight services contracts, something co-founder and CEO, Peter Kazacos, has made no secret of wanting to do for a while now.

According to Telstra figures, the combined services of Kaz and the telco will be a billion-dollar business — leapfrogging Fujitsu into sixth place in the local market (they are currently ninth and eighth, respectively). Telstra’s numbers suggest multinational heavyweights CSC, Unisys and EDS are within touching distance — all are estimated to have annual ICT services revenues of less than $1.5 billion in the Australian market – but HP and market leader IBM Global Services retain a big lead at about the $3 billion mark.

Nevertheless, Kaz has frequently replaced big overseas incumbents in contracts it has won and will now relish the challenge of rubbing shoulders with the market giants and pitching for deals it could only have dreamed about winning before its proposed acquisition by Telstra. Being an Australian company has been a hindrance in this space to date, where virtually all of the customers are multinational companies that have no interest in the buy local proposition (not that I’m suggesting in anyway that Kaz wins contracts on anything other than merit), but the financial backing of Telstra is likely to see some of the loftier boardroom doors being opened. Converting those discussions into hard business is still going to be a difficult task but it is a challenge Kazacos and his team will undoubtedly relish.

From a Telstra point of view, retaining the Kaz brand name and letting the company operate as a standalone unit can only be a good thing. And although the marriage of its services arm with Kaz has drawn a mixed bag of responses from local analysts, it certainly makes more sense than some of the much publicised and heavily criticised takeover bids the telco has considered in recent months. While Kaz will have its profile raised at the top end of the market and stands to gain valuable communications service offerings that will round out its portfolio nicely, Telstra will learn a lot about how to play in the second tier of the managed services space.

IDC’s research program director for telecommunications, Landry Fevre, suggested Volante would have been a better fit for Telstra because it is more on the network side. It would have been interesting to see how Volante responded to such an approach but I guess we will never know.

What do you think?

Brian Corrigan is Editor of ARN. Reach him at brian_corrigan@idg.com.au


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