The NTT Data Acquisition of Dell Services is Complete. What Might It Mean for Partners?

By The VAR Guy

Back in March, Japan-based NTT Data, the IT services subsidiary of Nippon Telegraph & Telephone, announced its intentions to acquire Dell Services, the information technology services business unit formerly known as Perot Systems. Today, the $3.1 billion deal has reached a close.

The new unit, which will be called on an interim basis NTT DATA Services, should help NTT advance its goal of becoming one of the top five global IT services providers. The company already had a large share of this market with about $16 billion in global revenue.

“As a top 10 global business and technology services provider, we have been aggressively expanding our international business, boldly pursuing growth as a ‘Global IT Innovator,’” said Toshio Iwamoto, president and CEO of NTT DATA Corporation.

NTT has made just over 20 acquisitions of companies in the last five years, many of which focus on ‘soft’ IT-services like IT consulting and support. The acquisition of Dell Services is its largest to date.

“There are few acquisition targets in our market that provide this type of unique opportunity to increase our competitiveness and the depth of our market offerings,” said NTT Data CEO John McCain, who will lead the combined business.

In addition, the deal significantly increases NTT’s North American presence. In the U.S. alone, NTT says projections point to a $5 billion IT services company. Across the globe, it will gain about 28,000 employees from Dell Services, most of which are in North America or India.

The two companies share very little customer overlap, allowing the new entity to broaden its service offerings in a market that increasingly focuses on providing end-to-end solutions for customers. NTT specializes in advisory services and application innovation, as well as some infrastructure services. Dell Services brings the company secure infrastructure, cloud services and DTO (data transfer object) services.

The new IT and BPO powerhouse will aggressively target verticals such as healthcare, financial services, insurance, and the public sector. This wider range of full lifecycle capabilities should be of interest to U.S. channel partners that are looking to decrease the amount of  “piecemealing” they have to go through to offer comprehensive solutions to their customers

“With our combined expertise, services and resources, there's simply no better team to enable clients to stay a step ahead in highly competitive markets,” said McCain. “We have extremely complementary portfolios. More importantly, both companies have always had an unwavering dedication to client success. Our clients and employees are very enthusiastic about the opportunities this acquisition creates.”

Recent advances in market share from offshore providers and pure play cloud providers such as AWS, combined with notable companies such as HP spinning off their services businesses, have created a shifting ecosystem that NTT hopes this acquisition will help them better navigate. Dell Services data centers in the U.S., U.K., and Australia will join NTT’s 230 data centers around the globe to significantly increase its infrastructure platform.

“Welcoming Dell Services to NTT DATA is expected to strengthen our leadership position in the IT Services market and initiates an important business relationship with Dell,” said Iwamoto.

For its part, the deal gave Dell some much needed cash in advance of its $67 billion acquisition of EMC, which closed earlier this year.