NZ’s largest homegrown IT services firm boosts revenue to $1.4b as firms grapple with the ‘new-normal’

This time last year, Datacom Group CEO Greg Davidson told the Herald that his company’s 2021 financial year would be much stronger, as pandemic positives outweighed the negatives.

He was right. Our latest homegrown IT services firm has just reported a strong 12 months to March 31, with revenue up 8 per cent to $1.41 billion and operating earnings up 59 per cent to $148 million.

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The strong result is good news for the rich-list Holdsworth family, which holds a 60 per cent stake in Datacom, which was built by John Holdsworth, in part, by acquiring NZ Posts IT services division then dramatically expanding its operations. And it’s also good news for the taxpayer, given the NZ Super Fund’s 40 per cent stake (the Super Fund acquired a 35 per cent stake in Datacom in 2018 through buying out NZ Post; it upped its holding this year as it bought $19m more shares).

In July 2020, as organisations started to dust themselves off after the shock of the first round of lockdowns, Davidson saw positives and negatives. Some clients, such as those in travel and tourism, had been flattened. And some had blown their IT budget for the rest of the year on a rapid switch to remote working and were now putting off spending on any IT project without an immediate return.

But others were accelerating their move to the cloud. And in the end, it’s been that trend that’s been the most pervasive.

Some organisations effectively did three to five years’ worth of tech upgrades in a year, Davidson says. Others realised their level of “tech debt” – a new industry buzz-phrase for years of under-investing – but are still in the early stages of catching up.

“It’s the biggest upswing in demand for advice about moving to modern platforms that I can remember,” he says.

Then there’s been the surge in cybercrime that’s come with Covid. “Cybersecurity used to extend to protecting computers inside a few buildings,” he says. “Now the perimeter has extended to included everyone’s homes.”

Datacom’s cybersecurity team has been boosted and now tops 100. The division is helping customers set up and run security operations, “but increasingly we are being asked to audit and provide forensic analysis of breaches after the event. As with other parts of the business, creating more opportunities to foster cyber-security professionals, Datacom is working with tertiary providers to build and run cyber-security training programmes which will produce a new generation of professionals for the industry.

More broadly, the company has hired 200 staff since January for a new high of 6539 and counting, spread across New Zealand, Australia and South East Asia. Datacom wants another 250 or more for its NZ complement, which currently numbers around 3000.

The CEO says while the immigration reset has been “challenging” as his company fills skilled positions in areas like machine learning and cybersecurity, his company is aiming to achieve “self-reliance” in each country it operates through expanded support for training schemes rather than lobbying governments to loosen border restrictions (as the Herald recently report, Datacom’s partnerships now extend to supporting a scheme to train prisoners in web development).

Looking ahead, Davidson says its still too soon too say how the “new normal” will shake out as organisations experiment with new ways of working.

“Some have gone heavily virtual, some have demanded people back in the office. I think life is best lived somewhere in between.”

His own company is hybrid-working. Using Microsoft Teams and other tools for a lot of virtual collaboration, but with most staff also spending several days per week in the office again, too. For al the usefulness of the likes of Teams and Zoom, there is no substitute for the teambuilding, trust and development of good working relationships that comes from real-life meetings, he says.

Davidson says the most important factor is probably for organisations to realise that there’s “no one size fits all”. Some teams will be naturally suited for hybrid working, some will need to spend more time in the office, and some will be mostly in the field.

The pandemic’s remote-working boom has seen cloud computing surge, which has, in turn, led to a data centre boom – including new server farms being built in Northwest Auckland by Microsoft, half Infratil-owned Canberra Data Centres (CDC) and DCI Data Centres (fully-owned by Canada’s Brookfield Asset Management) best known locally as Infratil’s 50:50 partner in buying Vodafone NZ. The “hyperscale” builds run to hundreds of millions, and will dramatically expand NZ’s data-centre capacity. For each company, it’s the first time they’ve built a server farm on this side of the Tasman, and at least six are under construction.

But despite Datacom owning four of its own data centres, Davidson pitches the arrival of the newcomers as “fantastic” news for companies who want public cloud options with less latency (or lag) and other benefits of being local.

The reason is Datacom’s “RightCloud” service is one of its fastest-growing business lines. The brand-agnostic service advises customers on their best options as they weigh public vs private cloud vs on-premise solutions, or mix and match. Through RightCloud, Datacom partners with Amazon Web Services, Microsoft and other top-tier names, as well as offering its own solutions.

On high Kaseya alert

Cybersecurity is in keen focus this week with a breach of Kaseya – a US-made product for rolling out patches that has been cleverly retooled by hackers to roll out ransomware. St Peters College and up to 10 other New Zealand schools have been hit.

Datacom uses Kaseya but was already decommissioning the product before news of the attack, Davidson says.

He says it’s too early to say if New Zealand businesses have been hit (security expert Daniel Ayers says it’s likely companies have also been hit. There are reports that at least 200 companies around the world have been hit.).

Datacom immediately shut down its Kaseya servers.

“We are also actively monitoring customer environments and have not seen, nor been made aware of any qualified infections,” Davidson says.

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