IBM buys Maersk Data

Rethink IT, Oct, 2004

Denmark's largest indigenous IT services group, Maersk Data A/S, has been bought by IBM. The move could trigger rapid consolidation of European services companies, of which there are around 150 large enough for companies like IBM to target.

Maersk Data is owned by the AP Moller-Maersk Group, which said that the need for investment in the services group in order to service its own companies had led to the decision.

AP Moller is a huge Danish shipping business based in Copenhagen, employing 60,000 people with offices in 125 countries. It controls more than 250 vessels adding up to 12bn tons, including container vessels, tankers, car carriers, supply ships and drilling rigs.

It is also involved in oil and gas, shipbuilding, aviation, supermarkets and, until this deal, IT services.

The company said that with IBM as the owner, Maersk Data will be able to reach the global dimension required to support the group.

It is expected that the transaction will take about three to five months to complete, including the granting of regulatory approvals.

The details of the transaction were not made public, but AP Moller said that it expected a positive effect of around 2.5bn Danish Krona ($414m) in the year.

AP Moller has been the heart of the success of Maersk, dragging all over the planet to supply IT resource while other Nordic competitors such as TietoEnator, WM-Data, and EDB Business Partner stayed operating only in the local area. But it still doesn't seem to have been enough and this deal is effectively one of the largest outsourcing contracts of the year disguised as an acquisition.

Maersk Data was formed back in the 1950s when AP Moller bought punch-card machines from IBM. It first became an independent company in 1970 and has spent 30 years growing side by side with its parent company. In 1999 Maersk started big acquisitions trying to get more and more business from outside the group, buying LEC (Landbrugets EDB-Center) and K-D Data, deals which doubled its staff numbers.

Maersk Data currently has just under 3,000 employees and provides consulting, outsourcing, systems integration, data communication services, software development and operations support.

Revenues last year were 3.48bn Danish Krona ($575m) and is roughly break even due to recent restructuring, without which the company should have shown a reasonable profit.

IBM Global Services, Computer Sciences and Hewlett-Packard have all been pushing hard into the Nordic region, and Maersk Data lost out on a big deal to outsource Scandinavian Airline Systems AB at the end of 2003, which first raised concerns that it couldn't compete on the world stage.

The drive to cheaper IT continues with Europeans especially focused on cutting their bills more than using IT as a competitive weapon. Northern Europe is now following in the wake of western Europe, and outsourcing is starting to become rampant. At present the Nordic countries are giving us the huge megadeals. Once all the biggest companies go this route, then outsourcing all IT will become commonplace in all European outposts.