Hear about Van der Merwe?

“Doing this with Mickey Mouse organisations means you don`t get the economies of scale to compete with IBM, EDS or CSC,” observes Wolfgang Jakob, CEO of T-Systems SA.

A record of successfully consolidating large data centres and a cross-shareholding with Cap Gemini helped debis grow to tens of thousands of employees in 20 countries.

When then-CEO of Daimler, Jurgen Schremp, sold the debis business to Deutsche Telekom at the peak, it was not only an excellent deal for Daimler, but it brought Deutsche`s IT department and several other businesses into what is now known as T-Systems.

Global footprint

The requirement to serve multinational companies resulted in an early association with the various incarnations in South Africa of Denel Informatics (now part of arivia.kom).

Discussions in 1996 to take over the IT department of Mercedes-Benz SA led to the establishment of debis in South Africa, with a five-year Mercedes outsourcing contract to get it going.

Denel had similar ambitions in the outsourcing game, and wanted to wrest itself away from the military business it was known for. In addition, the staff debis had were technical rather than administrative, and Denel brought the large Infoplan contract with it. For a while, the marriage of convenience worked, but not for long. In 1998, T-Systems lost the Infoplan account to SITA, and bought its 50 percent shareholding back from Denel.

“We had big problems without Infoplan. With the merger (between debis and Deutsche`s IT businesses), we put in SAP, and discovered by allocating costs properly that not only did we have to carry a contract with DaimlerChrysler SA that was still new, but all other contracts Denel had brought were making losses. Infoplan was 30 percent of our revenue, but more than 100 percent of our profit. It was tough, tough, tough.”

Emergency surgery was called for. Jakob moved 20 percent of debis`s staff into a professional services division to contract them out. But, says Jakob, “that model didn`t work. If I had to do it again I would just retrench…”

Despite the apparent mistake, a restructuring and turnaround was completed within a year. Importantly, two things went very right for T-Systems.

In 1999, the fledgling went up against Dimension Data, EDS and Comparex to win an outsourcing deal from Sanlam worth billions of rand.

Notes Jakob: “I don`t think we would have survived without the Sanlam deal. We needed the size, the credibility, the resource management, the cash flow and the consolidated data centres. It changed our strategic position.”

This wasn`t the only “how to save an IT company” case study T-Systems produced, however. “Now we were known as an outsourcer and body-shopper, but we wanted to become a solution provider,” Jakob recalls.

“So we bought a company called Evolution – in 2000, at the top of the boom – and integrated them. The spirit and focus of T-Systems changed as a result. We had the advantage of not being listed, so we could build a long-term viable company. The four key managers and most of the people from Evolution are still with us. It was a great merger. What a success!”

Star performer

South Africa had, of course, special challenges. While the local management was committed to transformation, according to Jakob, “we had to convince the German owners who were used to buying stuff, not selling shares. They didn`t know what we were talking about.”

He adds: “African Renaissance Holdings, a 25 percent equity partner, really contributes to transformation, however, and T-Systems has extensive programmes to start SMEs, build skills, and invest in empowerment.” T-Systems has an 18 percent shareholding in Lechabile IT Services.

By now, T-Systems was a business focused on managed services and, unlike local competitors like Comparex and Didata, was not beholden to vendors and product targets. “Even when we bought, we bought for skills, rather than customers or revenue,” says Jakob.

The result? Financial year 2002 was its best ever in South Africa, with around R700 million in revenue. “We rank seventh out of 23 countries in revenue, and fifth in terms of profit. We have developed systems and procedures in South Africa that set standards internationally, and we often get to test programmes here because of similar complexity but smaller and more manageable size.”

As a subsidiary, T-Systems plays a key role in the global parent`s strategy to not only serve clients globally, but also to produce in regions where it makes sense. As a result, the company succeeds in bringing business to South Africa.

“We still have the opportunity to create an India here,” Jakob says. “On the project side, we`ve already done that. The AIDS conference in Barcelona was done by T-Systems SA. Many people talk about South Africa`s lack of management skill, but our UK country manager`s name is Jan van der Merwe.”