Why Dimension Data and NTT are merging

Jun Sawada (NTT Inc)

News that Dimension Data, NTT Communications, NTT Data, NTT Security and NTTi3 will merge to create a heavyweight technology provider has sent shockwaves across the channel.

While not exactly surprising in theory - following months of industry chatter - the combined entity will weigh in as a multibillion-dollar business, bringing together three mammoth organisations in the process, housing over 163,000 employees.

Following widespread media speculation, the merger was officially confirmed by parent companies Nippon Telegraph and Telephone Corporation, via an official media statement.

“The global market is changing fast,” a company statement read. “We’ve seen rapid progress in technology innovation; disruption caused by new business models, and the aggressive expansion of innovative competitors.

“These factors have led to clients’ increasing demand for digital transformation. We believe it’s an opportunity for us to create new value and increase our presence in the global market.”

Specifically, the group plans to establish a new holding company focused on global business, under NTT Corporation by the third quarter of the fiscal year ending 31 March 2019.

This entity will be called NTT Inc, with Jun Sawada, current CEO of NTT Corporation, serving as the provider’s new CEO.

Estimated operating revenue of NTT Inc is approximately US$38 billion, of which US$20 billion already originates from outside the group’s headquarters in Japan.

As a result, NTT Communications, Dimension Data, NTT Data, NTT Security, and NTTi3 will be transferred to NTT Inc and will align together under its new leadership.

“While making NTT Group more competitive and profitable, our global governance will also benefit from embracing and integrating our people’s diverse talents, skills, and management experience in global markets,” a company statement read.

“The new structure will leverage their expertise to its maximum potential.”

Furthermore, by the second quarter of the fiscal year ending 31 March 2020, the group will consider integrating these businesses - except NTT DATA - into two new businesses.

“One will look after our global business; the other will cater for our domestic business in Japan,” a company statement added.

“NTT DATA will continue to collaborate with other companies in the group while retaining its present management structure, status as a listed company, management autonomy and brand.”

From a research and development perspective, further steps will include creating a new global innovation fund under the banner of NTT Venture Capital

“[This] will help us evolve our global innovation,” a company statement added. “With this new fund, we’ll activate investment in high-growth areas such as digital technology.

“We’ll also intensify our R&D activities in global markets by using a global network of experts from advanced academic research institutions and venture-capital communities around the world.”