IBM Acquired Logical CSI To Strengthen Network

IBM Acquired Logical CSI To Strengthen Network Service Capabilities

On March 28th, 2004 IBM Australia/New Zealand acquired the Australia/New Zealand operations of Logicalis Group Limited, trading in New Zealand as Logical CSI, for $US65.5million. The acquisition includes Logical CSI's 165 New Zealand staff, of which 105 are technical, from offices in Auckland, Wellington, Christchurch and Hamilton. The acquisition should enhance IBM's local capabilities in network services and will more than double their current ITS team within IBM Global Services. S I T U A T I O N O V E R V I EW

Logical CSI, the New Zealand arm of the Logicalis Group, has maintained a strong focus on networking that has helped it grow to be the 12th largest IT services company in New Zealand. Logical acquired CSI from IBM in late 2002 to strengthen their capabilities and have been targeting market growth areas such as voice over IP, wireless and security solutions. They have also maintained a focus on the mid-market sized customer and are recognised as a leader in network consulting and integration services.

As networks have continued to converge IBM's clients have identified networks as the next area of opportunity for business transformation projects. The acquisition of Logical CSI will allow IBM to improve their network consultation, integration and management capabilities in converged network solutions, including voice over IP. The acquisition should also provide IBM with a vehicle to further strengthen their growth into New Zealand's mid-market.

F U T U R E O U T L O O K

The network consulting, integration and management service markets in New Zealand were worth $250 million in 2003 and are forecast to grow with a compound annual growth rate of 7.6%. A growing demand from executives for a reduction in complexity and cost savings is driving the growth of integrated network infrastructures. The increasing demand for network security over the last year has also driven growth in the security solutions market, a core focus area of both IBM and Logical CSI. Security solutions were worth $142 million in 2003 but this is expected to grow at a phenomenal 25.8% CAGR to reach almost $500 million by 2008.

This strategic acquisition will strengthen IBM's capabilities to provide market leading network solutions whilst extending their reach into the mid-market of New Zealand business. The move will also enhance their ability to assist clients with business transformations, yet more evidence that IBM is aligning itself with its global "Ondemand" strategy.

The issue now facing IBM will be the integration of the Logical CSI staff into the IBM culture and the moulding of a profitable network services group within IBM Global Services. The fact that a number of the Logical CSI staff have worked at IBM may facilitate this process, and the nature of Logical's focus on network services should limit the number of job losses from the merger.

This move has clearly placed IBM as the second largest IT services company in New Zealand with capabilities aligned for a fast growing sector of the IT market.

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