Dimension Data still on notice as NTT plans $500m cost cutting

The chief executive of Dimension Data's parent, NTT Group, has said it's time the global systems integrator became profitable and that it will be one focus of a group-wide, US$500 million efficiency campaign.

At the company's quarterly investor conference, NTT chief executive Hiroo Unoura said NTT had spoken to Dimension Data about "generating profitability" and that "frank" discussions have been held with an unnamed "top executive of Dimension Data".

"Initially [Dimension Data] was focused on paving the way for growth. They laid the foundation for future growth. That's something that we have pursued in the past," Unoura said in Tokyo via an interpreter.

"But now, it is time to also to focus on improving profitability… we are all in agreement with that."

NTT revealed last month that it's seeking to double operating income by 2017, with US$500 million of that realised through procurement and operational efficiency gains. A task force has been created to drive the initiative.

Dimension Data is squarely in the sights of the razor gang, with its name listed as a target in the areas of procurement costs (both direct and indirect), network services and managed services.

Unoura warned investors that Dimension Data's profitability would not improve overnight.

"Yes, it will improve next fiscal year. However, we're not going to see a sudden jump," he said. "We're not going to see exponential improvement in profitability. However, in a couple of years, in two years or three years, profitability will improve."

The latest scrutiny on the multinational IT solutions provider comes after the NTT chief financial officer warned its subsidiary to lift its performance last quarter.

"We have talked to Dimension Data and instructed them to seek increase in both operating revenue and operating income. In other words, they should have guidelines for both top line and the bottom line," said chief financial officer Jun Sawada in August.

DiData was established in South Africa in 1983 and now employs more than 28,000 staff spread across 58 countries. In 2010, the company became a wholly owned subsidiary of NTT Group.

According to the most recent financial results available from ASIC, Dimension Data's Australian arm recorded a net loss of $20.1 million for the year ending 30 September 2014.