At $3.05 billion, Dell takes $850 million hit

BENGALURU: Dell is selling its IT services business, Dell Services, to the Japanese IT major NTT Data for $3.05 billion. The combined entity is expected to emerge as one of the top ten Information Technology (IT) services players globally with over 1 lakh professionals, of which nearly 30,000 would be based in India.

Dell, traditionally a computer hardware player, became big in IT services with the acquisition of Perot Systems in 2009 for $3.9 billion. The sale price now for Dell Services suggests that Dell is taking at least an $850 million hit on the business. The company, which is transforming into an IT infrastructure services provider, is being compelled to sell off several of what it now considers non-core businesses as it seeks to finance its $67-billion acquisition of data storage and information management company EMC.

“Having had put Dell ServicesPerot up for sale is an acknowledgement of two things. First, Dell never succeeded in making services work globally. Second, it needed money for the acquisition and integration of EMC. Having put Perot up for auction, it would always come down to price. Thus any “rational” deal logic appears secondary.


The access to US marquee clients and the deep entrenchment in the US healthcare market will be beneficial to NTT but the cultural fit and the potential synergies are not easy to grasp. Put in other words, the integration will be a bumpy ride ahead,” Tom Reuner, MD at US-based HfS Research, said.
NTT Data, part of the $105-billion NTT Group, clinched a deal that had Indian and MNC rivals competing for it. TCS and France's Atos were seen as particularly strong contenders.

The Dell Services acquisition marks one of NTT Data's largest overseas buyouts in recent years. It will help it to strengthen its footprint in North America, expand its global delivery network and infrastructure services capabilities.

The Dell Services business that will be acquired includes business process outsourcing, application management and infrastructure services, and the Dell Services Federal Government (DSFG) business. The transaction will not include global support, deployment and professional services that are aligned to Dell's client and enterprise hardware business.

“Dell Services has modernized and restructured its business over the past few years resulting in great business momentum and success. In just three years, we've improved our operating income by 800 basis points, dramatically raised our net promoter score and seen 70% growth in TCV (total contract value) signings and demonstrated improved results,” Dell said.

Suresh Vaswani, president of Dell Services, said that the business had a great 2015-16 financial year, doubling its contract signings and winning marquee deals with global companies across industries.


When the transaction is completed, customers of Dell Services and NTT Data will benefit from a significant expansion of BPO capabilities, particularly in healthcare and insurance industries. It will also strengthen NTT's infrastructure footprint leveraging Dell Services data centres in the US, UK, and Australia joining NTT's 230 data centres globally.

“I'm extremely proud of Dell Services' solid growth, broad capabilities and deep domain expertise in healthcare & life sciences, banking, financial services and insurance. Our investments in digital services, application modernization, tools, automation and ‘as-aservice' models, have enabled Dell Services customers to simplify their IT environment, empower their workforce, engage their customers and grow,” said Michael Dell, chairman and CEO of Dell.