Kaz/Fujitsu deal will kickstart other service providers

Richard Christou, Fujitsu's corporate first senior vice president and president of global business, claimed this acquisition will make Fujitsu one of the third largest IT companies, by revenue.

It will also give the vendor a team of nearly 5,000 staff across the country.

The strength of KAZ's existing business and the synergies it brings to Fujitsu will deliver new and exciting commercial opportunities, said Christou.

Jens Butler, principal analyst at research firm, Ovum, told CRN this deal will also send out a message that may force some of the competition (IBM, HP/EDS and CSC) to consider alternative approaches and impact the status quo.

"Consolidation, especially in the Australian IT services markets, has long been overdue and this may kick start another round, which will benefit customers," he claimed.

"This purchase will push Fujitsu's IT services annuity revenue to 75 percent. "

In addition, this will potentially enable Fujitsu to compete on a larger scale against the likes of IBM, HP/EDS and CSC across Australia.

Butler claimed this was a reasonably complementary match, with minimal overlap and access to different markets (government and financial Services)

"Given that services revenue is still holding up [IT service providers], whereas the hardware / infrastructure and to some extent even software spend is dropping off, an expansion into the Federal Government services space is a wise move," he said.

"Applications and desktop management will still make up the core offerings. But it will expand the capability for the companies."

Butler said assets are being "sweated" for longer but the actual services components are still being maintained.

"Those with a greater proportion of longer-term, annuity based services offerings are still seeing their revenue holding up," he said.

As for Kaz, the analyst said it finally removes four and a half years of uncertainty and also provides customers with a level of certainty and stability.

"[Kaz can] finally get out of the embrace of the Telco and back into the IT Services space proper," said Butler.

"Historically, telcos have not had the best track record for managing IT services acquisitions (Optus/Alphawest, Commander/Volante and KPN/Getronics).

"Telstra has been planning this for a while and this is the third attempt at the walk up the aisle."

Butler said given [Telstra] originally purchased Kaz for $333 million and subsequent sold Australian Administration Services for $215 million, the telco has has got its money back.

"With its current focus on its new Network Enterprise Services (NES) offerings, it needed to get the right partner and the right price and to remove any confusion between the Telstra NES and Kaz offerings," he said.

Butler claimed culture matching maybe the biggest difference in both organisations, with Kaz being an independent pure service provider and Fujitsu a vendor agnostic player.

"Successfully integrating 1,400 staff and generally disgruntled resources into a different set of business models and diverse culture will take more effort," he said.

"Let's hope that all stakeholders have the patience."