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Ever since South African IT services provider Dimension Data purchased 51% of Chilean IT systems integrator Magenta to enter the local market in April last year, the word "acquisition" has soon followed mention of the company with regards to its foray into Latin America, where it also has presence in Brazil and Mexico.
Then in October, Japanese telco giant NTT purchased Dimension Data.
Is the company still bent on its inorganic expansion plans in Latin America? What has come of the relationship with NTT? BNamericas spoke with Sylvio Mode, Dimension Data's senior VP and managing director for Latin America, about these and other issues.
BNamericas: Dimension Data has presence in Chile, Brazil and Mexico. You entered Chile last year with the purchase of Magenta, and it's known that the company is looking to expand in the region. What are the company's M&A plans?
Mode: It's true that we have expansion plans for the region; we can be much bigger than what we are today, which will be good for our clients because pfart of our solutions can be better taken advantage of when you achieve scale.f
I'd say that of the four main countries to do business in Latin America, we're in three. And I think our next steps will be to go to Argentina, Colombia and Peru, and I think this will be fast. There are possible organic expansions - establishing some link in a certain country to begin business - as well as the inorganic scene. We're evaluating it.
Acquisitions aren't a strategic goal for us. We're always looking, but it depends on a lot of factors. First availability, and second if it is convenient economically speaking. Third, acquisitions can be very good to establish a footprint in a certain country where we aren't present, to really boost scale in a country where we're already present, or to complement the offering.
BNamericas: So will your growth in the region be more organic or inorganic?
Mode: I'd say for the next year, we should be looking much more to expand organically. I'm not saying that there will be no acquisitions, but [organic growth] will be our overall strategy.
BNamericas: Last year Dimension Data was acquired by Japan's NTT. Have there been any changes in the company since that purchase? What are the synergies being realized?
Mode: This was a non-integration acquisition. NTT has more than 300 companies of varying sizes. Dimension Data became one of the large companies under the NTT umbrella. NTT is a US$100bn company, of which I think about 98% is in Japan. So outside of Japan, Dimension Data is much bigger than NTT. Because of issues that include the understanding of cultures, NTT understood that to expand in ICT services, the time to market would be faster with an acquisition.
And Dimension Data was the ideal candidate for NTT. We are present in 49 countries, we had a significant size at [global sales of] nearly US$5bn, with good top and bottom-line growth year-on-year in the last 10 years. NTT saw us as a "plug and play" company, so the idea isn't to change the business, the brand, the management or the people.
This has been good for Dimension Data. Basically nothing changed for the employees. But in terms of the company's capacity to do business: Before we didn't have an MPLS network, [and] now we do, with high capacity, global reach and low latency. We didn't have data centers; NTT has 31 very good data centers throughout the world. Our muscles also grew with a US$100bn company backing us for our investments.
So the synergies have been good - Dimension Data with its offering and know-how, people, participation in the market in 49 countries, and NTT with its economic force, its assets like the data centers and networks.
I'd say there are three work streams we're working on together. The offering: Dimension Data has invested a lot in acquisitions to provide virtualization and cloud services, and is working with NTT engineers to get this to market. Second is synergies in the sales force.... We're beginning to present offers together. And third, obviously, is in procurement and making better purchases together.
BNamericas: What type of growth is Dimension Data expecting for this year in Latin America, and what is the regional contribution to global revenues?
Mode: Latin America is part of the Americas region, which represents about 20% of Dimension Data global. And Latin America represents about 20-25% of the Americas region, but we're growing much faster. Budgets have been very aggressive over the past couple of years, and they will continue to be that way for the next few years.
BNamericas: What is driving this growth?
Mode: We're increasing our capacity and striving to become more visible in the market. We've invested less in our own brand than the competition has in their brands. Now we're going to invest and make more visible our success cases, letting others know of our capacity. We need to get closer to the market. Before, at trade shows, we'd go as partners of a certain brand. Now we will go as our own brand and invite others to partner with us.
We'll also target the existing customer base. We may be doing a small IP telephony project with a customer, and we can get into big data center service contracts, for example.... We'll be changing the company's profile with the installed customer base.
Apart from that, we'll be investing in areas where we haven't been strong. For example, in Chile we're strong with service providers, but we're investing in the enterprise segment - mining companies and banks, for example. In Brazil, we're not strong with the service providers, so now we're investing to become a core technology provider with services firms. We're using the synergies with Chile to bring the know-how to Brazil. In Mexico, we have the world's largest video presence project with the presidential office and all the ministries. But we're not as strong in government in Chile or Brazil, so we're bringing that focus over.
Our strategy for Latin America is one of centers of excellence. We want to grow, but in making deployments with capacity that we already have.
BNamericas: How do you break down your business?
Mode: Dimension Data is a multi-geography, multi-technology solutions integrator. Our solutions are grouped into three market architectures - network as a platform, where we're talking about network integration, security, everything related to the design, implementation and maintenance of high performance, highly complex networks. Data center networks are in there too - planning, development, deployment and often management.
Then there's converged communications and collaboration, and the third is virtualization, where there's also a lot of data center and storage. In all areas we work with best of breed, with companies like EMC.... We understand that our customers are heading toward maturity in regards to using and developing cloud services.
Because of our multi-geography, multi-technology focus, our clients - principally multinational companies - have a big advantage when it comes to the cloud.
BNamericas: Would you say that the breakdown of business is about even among the three market architectures?
Mode: I'd say that today, network integration and converged communications make up more than two-thirds. With our installed base - those clients that renew their service [contracts] - our footprint, is there. So it's 75% or more. But today the issue of virtualization and data center services is growing at a much faster pace.
In Latin America, we've grown much faster than the market. We're still not that big, but if you look at the Chilean market for example, [consultancy] IDC numbers show that IT services is growing at 11-12%, but we're much higher than that, with the first digit being higher than three. Virtualization, IT services, application management and hosting are all involved in cloud services, which is driving the growth.
This is a unique opportunity for us, for which we've prepared with staff training, partnerships with vendors such as EMC and Cisco.
BNamericas: Would you say that your clients in the region are mostly international players that have assets in Latin America, or actual regional players?
Mode: We have a range of clients, broken down into three areas - global clients like HSBC, Citibank, Google, Oracle, Accenture, where we are providing services wherever they are; then the multinationals, which aren't global clients but have operations in more than one country; and then we have domestic players, which can actually be bigger than a global client in a given country. In the case of Chile, for example, we have Banco de Chile, VTR. The same in Brazil, we have companies such as Rede Globo and Oi, as well as big global clients such as Amazon, which is now opening its first office in Brazil.
I'd say that Dimension Data's competitive differentiator is the fact that we're in many countries and that we work with different technologies. The company really focuses on execution capacity. We don't do as much propaganda as our competitors. The quantity of people in delivery, providing the services, is much greater than our sales force.
Quality of service is in our DNA. The proof of this is that in the last two years, we're located in Gartner's Magic Quadrant for IT service providers. We're number one in execution capacity. We're not yet a leader, but a challenger. If you look at the vertical axis for execution capacity, we're in front of all the rest, including the big brands.
BNamericas: Who are your main competitors?
Mode: There are some global companies like Logicalis, which is strong in Latin America, as well as Desca. There are also some local companies.
About Sylvio Mode
Sylvio Mode has been at Dimension Data as senior VP and managing director for Latin America for little under a year. Mode has more than 20 years of experience in IT services operations, in positions such as head of the BPO operation at Accenture Brasil, VP of support and on-demand services at Oracle Brasil and executive president of the business outsourcing unit at HP Brasil.
He has an electronic engineering degree from Brazil's Escola de Engenharia Mauá, and an MBA in corporate finance from IBMEC.
About the company
Founded in 1983 in South Africa, Dimension Data provides solutions such as unified communications, network integration, IT infrastructure outsourcing and managed services.
The company operates in 49 countries throughout the world, employing some 12,400 people. It posted global revenues of US$4.74bn in 2010.
Earlier this month Dimension Data acquired cloud and managed hosting solutions provider OpSource to enhance its cloud computing offering.