Last week Infinity Solutions became another local IT services firm to be snapped up by a large corporate.
The Auckland-based integrator was bought by global technology giant Fujitsu, which plans to merge the new acquisition with its local operation.
This acquisition ends a two-year lull in the consolidation of top-end technology providers since HP bought CGNZ in October 2005.
This followed Telecom’s buying spree the previous year when it splashed out $62.5 million and $26 million on Gen-i and Computerland respectively.
TelstraClear also got in on the act in November 2004 by buying local security consultancy Sytec in a deal worth $12 million.
Of all these mergers, the Gen-i and Computerland into Telecom has had the biggest impact on the market – creating opportunities for competitors such as Axon and Infinity to pick up extra business the newly monolithic Gen-i missed.
But how will Infinity being rolled into the Japanese-owned Fujitsu affect the local market?
According to a report compiled by Jenna Griffin, IT services analyst at research firm IDC, the combined Fujitsu/Infinity entity will “entertain a much more competitive position” and be able to “truly compete” with Tier One players. “The results of the merger should reveal an entity positioned in competition for a place in the top five IT services companies, with capabilities and size to compete against the current top dogs: Gen-i, EDS, Datacom, IBM, HP and Unisys,” says Griffin.
But at the same time, Griffin believes Infinity’s mid-market expertise is “a strong asset” that will position Fujitsu well in competing in the small and medium business space.
However, Griffin warns that the new company should avoid “removing the focus on the mid-market while targeting competition in the Tier One space”.
“The ability to address the mid-market will be one of the key differentiators that Fujitsu has over the competition, both in terms of scale and mindshare when addressing Tier Two competition, and capabilities and experience when coming up against Tier One competition.”
I suspect that while the new Fujitsu may very well give larger competitors a run for their collective money, the nimbler Tier Two IT providers will start nibbling at the SME lunch Infinity used to enjoy. A fact of New Zealand business is that locally-owned smaller companies prefer to deal with like-minded suppliers.
Companies that were comfortably served by Infinity may not all feel quite so cosy towards Fujitsu, especially if the latter starts diverting former Infinity staff to chase those “top dogs” Griffin talks about.
After all there will be a number of potential local suitors waiting in the wings, such as Axon, Computer Brokers, Intergen, Optimation, Maclean Computing, and even Datacom, which remains the largest New Zealand-owned IT firm – for now…