Over the past week, the ICT industry has witnessed two very different examples of the way the challenging economic climate can impact businesses in our space.
It’s taken months and months of negotiation, but Fujitsu finally got Telstra to sign on the bottom line and hand over one of Australia’s most iconic services business, Kaz, for $200 million last week (see page 1). For some time, Telstra has been looking to offload the division, but when rumours escalated about Fujitsu’s desire to purchase it last year, sources reported the pair were unable to reach an agreement on price, terms and conditions. It looks as if the tighter economy and market slowdown finally got the pair to see eye-to-eye.
Telstra forked out $333 million to buy Kaz Group back in 2004. At the time, Gartner analyst, Rolf Jester, was one of several people who questioned the telco’s judgement and ability to keep Kaz running as a successful services business. When asked about the viability of the acquisition by ARN, Jester said: “It is very unclear what Telstra’s overall strategy is. There seems to be no clear vision being communicated by Telstra which needs to be rectified.”
Judging from Jester’s comments today, his views didn’t change a lot over the past fi ve years. But Telstra’s did – back in August 2008, the telco was still insistent it would keep Kaz as a key part of its “enterprise offering”, despite the fact that its services business experienced a 15 per cent decline in revenue to $422 million over the previous 12 months.
While Fujitsu’s announcement last week was no surprise, and I see the validity in the acquisition, I wasn’t expecting rival integrators and outsourcers to downplay its impact as much as they did. In the Federal Government sector, the combined entity will be a significant player with expertise and a long track record. And for other major Australia-based service players like ASG, Oakton, SMS Technology and Management, business could get a lot more competitive.
Ingram Micro’s decision to cull 7 per cent of its national workforce and close ACT and South Australia branches is yet another example of a multinational organisation cutting costs to stay ahead of the economic downturn (see page 1). Right from his first days on the job, local vice-president, Jay Miley, made it clear that restructure was on the agenda. But news of an 8 per cent headcount reduction across Ingram’s US and Canadian operations last month showed even bigger changes are planned globally.
I can see the value in Ingram’s decision to shut up branch offices and retain select staff, rather than simply cutting personnel. But several senior people with experience and heritage have now walked out the front door including Stuart Ellis (head of Solutions Group), Peter Pollari (virtualisation and HP manager), and John Uebel (eSolutions manager and TechLink webmaster). Fresh blood could be what the distributor needs to get through the tougher times, but having experience and retaining value are also imperative. It’ll be interesting to see what other changes are in store.