Systems Integrators Again Key as UC Moves to the Cloud
The NTT acquisition of Dimension Data is in the same size category as Cisco’s acquisition of WebEx and of Tandberg, both of which have been industry-shaping moves. So what's the meaning of this latest deal?
Just over two years ago, we posted "VARs and SIs: The Arms and Legs of Unified Communications." That forecast of the importance of VARs (Value Added Resellers) and SIs (Systems Integrators) for Unified Communications (UC) has proven to be right on target. Now, we're seeing the logical extensions of that value in major industry moves.
The big news is that Dimension Data announced this week an agreement to be purchased by NTT for US$3.2 billion. This is in the same size category as Cisco’s acquisition of WebEx ($3.2B in 2007) and of Tandberg ($3.3B), both of which have been industry-shaping moves.
So, what’s the meaning of this? First, let's ask why NTT, and what are they planning?
NTT is the 31st largest company in the world as measured by the Fortune Global 500 (2010) and one of the top 3 largest service providers in the world. NTT has a client base of over 3,000 global multinational clients; a leading edge, international network and communications infrastructure including a global IP-VPN Network across 159 countries; an extensive, world class data center infrastructure in 20 countries and 31 cities; and both R&D and strategic initiatives around IaaS (Infrastructure as a Service) and SaaS (Software as a Service).
But that infrastructure and software need to be delivered, connected, managed and enhanced. As we have seen in the growth of UC, the ability to provide these services (delivery, connectivity, etc.) is key, both for the technology providers and for the enterprise buyers of those technologies. With the choice of growing those skills internally or acquiring them in one major move, NTT chose the major move, and bought an industry leader. Little doubt that NTT expects to grow the Dimension Data global presence both for execution and expansion of the NTT ICT strategy.
Dimension Data has been a leading systems integrator for UC. Revenues in 2009 were at $4 billion, with healthy profit margins. About 40% of these revenues are from systems integration, primarily for their leading VAR positions with Cisco and Microsoft. As noted in 2008, Dimension Data built a portion of that growth on their innovative Unified Communications Development Model.
This acquisition is just one more example of the growing investment in systems integration by the network providers. BT Services is a major UC SI arm of British Telecom. AT&T and Verizon both have business services divisions. And, about a month ago, in a similar move, Paetec acquired Quagga, the leading western US VAR for Avaya, to round out a prior eastern US acquisition.
As for what this all means, there is growing evidence that Enterprises will have more options in the future. With the backing of carriers both for funding and customer relationships, new Systems Integration options will blossom. Enterprises will have access to SIs who can work fairly seamlessly across on-premise and network infrastructure. Enterprises will also see SIs who have a broad range of technology elements at their disposal; as noted, Dimension Data is a leader with both Microsoft and Cisco UC product lines. This flexibility should result in more and better solutions, delivered more rapidly and effectively.
Also, this is a necessary step on the road to SaaS or "Cloud" solutions. To date, a major question about SaaS or Cloud options has been whether the Cloud options can seamlessly integrate with the existing enterprise infrastructure. At the core, that is a system integration question even more than a technology question. Addition of large, skilled SI organizations should address these issues effectively.
Our forecast has not changed. VARs and SIs are the arms and legs of Unified Communications. With the stream of investments in the leading SIs and VARs, we can expect further enrichment of UC solutions and options, and a further acceleration of enterprise customer adoption.
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