NTT DATA acquires Dell Services for $3bn
NTT DATA acquires Dell Services for $3bn
Toshio Iwamoto, President and CEO of NTT DATA Corporation
Toshio Iwamoto, President and CEO of NTT DATA Corporation

As Dell closes in on EMC it is beginning to sell off assets that are either unwanted or no longer core to the business. While many had banked on Quest to be the first unit Dell divested, NTT DATA had different ideas. In a press release it has announced it is to spend around $3 billion to acquire the Dell Services business.

According to Toshio Iwamoto, President and CEO of NTT DATA Corporation “NTT DATA is pleased with the unique opportunity to acquire such high-caliber talent, and a corporate culture that shares common values with NTT DATA, with emphasis on ‘Clients First,’ ‘Foresight,’ ‘Teamwork,’ and a commitment to innovation. 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.”

A significant deal for NTT DATA

The acquisition is significant for NTT DATA not least in terms of the amount of money it is spending. For example it significantly increases the NTT DATA presence in the US market but the question for many will be how it integrates its existing services team with the one it is acquiring from Dell. Integration is not always NTT’s strong point as can be seen from the length of time it tends to leave acquisitions to run themselves before properly integrating them into the core business.

Another significant part of this deal is at the end of Iwamoto’s statement where he says: “..initiates an important business relationship with Dell.” There are questions as to how this will impact other NTT companies such as Dimension Data and NTT Com Security. Both of these compete with Dell on a worldwide basis so does this mean that NTT will allow the Dell Services unit to continue to sell Dell hardware and security expertise rather than its own?

There is no answer to that in the release. What is stated is that: “Through this transaction NTT DATA and Dell Services clients will have access to the expanded capabilities and industry offerings of the combined organization.” This would suggest that there are already plans in place to rationalise the sales operation but doesn’t really address areas where there is significant overlap between the two companies.

Acquisition brings a massively expanded workforce

NTT DATA already has 80,000 employees worldwide and this deal will bring another 28,000 employees mainly from the US and India into the company. As Lenovo has discovered with its acquisition of IBM’s x86 Division, there can be long term problems with the realignment of pension plans and employee benefits. This has led to Lenovo currently dealing with a number of court challenges. It may be that this is one of the reasons that NTT allows its acquisitions to retain their independence for a while as its enables them to find a solution to these issues.

There will inevitably be overlap between the existing business and the acquisition. What this will mean in terms of rationalisation of the workforce will not be known for some time. NTT DATA will have to think carefully where it makes the cuts as it will not want to damage the DELL Services unit but won’t want to waste a lot of money in duplicate back-office and administrative functions.

As part of the deal NTT DATA will also gain control of the Dell Services data centres in the US, UK and Australia. These will be added to the 230 other data centres that NTT currently manages worldwide and it will be interesting to see the impact this has. Regulators may require some of these data centres to be divested. This is not an easy task as Equinix is discovering as it tries to meet regulatory demands to dispose of some of its data centres post the Telecity acquisition.

There are other implications here including the fact that it is less than a year since NTT opened its 300,000 sq ft state of the art data centre in India. This is just one of several high profile investments into data centres that NTT has made and is planning to make. With the potential threat of regulators ordering the disposal of facilities, customers will want assurances that NTT will provide them with the ability to move facilities in the event of a disposal.

While Dell Services has built up a strong position in many vertical markets, it is interesting that the press release calls out Healthcare and Insurance. These are both markets that are expanding rapidly, especially Healthcare. Both have significant challenges with cybersecurity and it will be interesting to see if this deal includes the Dell Security Operations Centres (SOCs) and the Dell Managed Security Services teams.

If it does then NTT will need to quickly assimilate those into its existing NTT Com Security unit. In doing so it would be able to rival IBM and HP as one of the biggest security providers. This would be a real added bonus for NTT DATA and would go some way to explaining its willingness to invest so much money in this deal.


There are a lot of things that need to be looked at in more detail as part of this announcement. NTT DATA will not be the only part of NTT that will consume parts of the Dell Services unit. Assuming that the deal does go through, and there are some significant regulatory hurdles yet to be jumped, NTT may have to break with its traditional “buy-it and leave it alone” approach.

This is because there is a lot of overlap between the various parts of Dell Services and different companies under the NTT brand. There will also be concern in many of those other business units that they could have large numbers of workers parachuted in to their business causing cultural and working challenges for them.

Despite this and the headline price, this is a deal that works well for NTT DATA and for Dell. NTT will become a much more significant player in various markets while Dell is able to start paying off some of the companies that have backed its EMC play.


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