NEC to acquire Australia ICT company CSG Limited

May 2012

Market Insight

“We Accelerate Growth”

NEC to acquire Australia ICT companyCSG Limited

Overview

NEC announced an agreement to acquire Australia ICT company CSG Limited’s Technology Solutions Businesson May 30th. The acquisition will strengthen NEC’s position as an integrator, and is a timely development at atime when vendors and channels are looking to build stronger services capabilities and grow their servicesrevenues in the areas of implementation, managed, hosted and cloud services. This trend is expected to continueand we expect to see more consolidation of channels and integrators in the coming months.

NEC’s move to position itself as an end to end integrator beyond Enterprise Communications isvital

NEC is a well known Systems Integrator in the Australia market, particularly in the contact centre segment,where it is one of the leading integrators for Genesys contact centre applications. Whilst NEC also offers itsown solutions or partners with vendors such as Zeacom to offer contact centre solutions in Australia , NECalso has a strong understanding of integration in the contact centre space. This is a very specialised area andmany systems integrators have struggled to build a successful contact centre practice. There are only a handfulof providers in the market with this specialism, and NEC is unique in being both a vendor and an integrator inthe contact centre market.

NEC is particularly strong in the areas of hosted voice and managed voice services, and their hosted voicebusiness witnessed good growth in 2011. We are now entering a phase where hosted and managed voiceservices are growing strongly for many vendors and integrators, and hence the acquisition is very timely inenabling NEC to position itself as a large end to end integrator in the Australia market. NEC recently launchedits Cloud Telephony offering for the SMB market. This offering is available through its channels. Delivered overbroadband, NEC Cloud Telephony is available as a bundled service on a single monthly bill and removes the needfor SMB’s to invest in on-site PBX and PSTN services.

Hosted UC services, which include UC applications provided over a cloud based model, is the largest segmentof the UC services market. This segment accounted for about 45% of the overall UC services market inAustralia in 2011. The expected shift towards hosted and cloud based models will drive revenues and adoptionof services in this segment. Again, the acquisition will strengthen NEC’s position in this segment.

Conclusion

The integration between the two companies will not necessarily be easy, and it may take a while to get the rightcultural fit. The Alcatel and Lucent merger was an example of a merger that generated significant culturalchallenges. Dimension Data and NTT also faced similar issues initially when they merged. Although NEC is alarge Japanese company it has localised its operations ever since Alan Hyde took over as Managing Director andthis may make the integration less challenging.

Earlier this year NEC Australia announced its technology plans for the year ahead, as well as initiatives toachieve its vision of being Australia’s leading communications systems integrator by 2014. The CSG acquisitionwill bolster NEC’s revenues in the areas of hosted and managed services as well as widening its offerings as anend to end provider beyond just enterprise communications. Coverage of segments such as ERP, BusinessIntelligence, CRM and IT will be critical for NEC to compete with some of the more established ICT integratorsin the market for some of the large IT contracts. The acquisition will also help NEC build its consulting practicewhich is a niche service for many vendors. Few integrators have the ability to offer consulting services andhence have partnered with some of the specialised consulting companies for such engagements.

This market insight was authored by Audrey William, Head of Research Frost & Sullivan ANZ

© 2012 Frost & Sullivan Page 2

NEC to acquire Australia ICT company CSG LimitedMarket Insight

NEC to acquire Australia ICT company CSG LimitedMarket Insight

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