Telecom NZ pays NZ$100 million for Revera cloud business

Telecom NZ paid a little under NZ$100 million to buy Revera, the data centre specialist formerly known as Hitachi Data Systems (HDS).

Revera is valuable to Telecom NZ because it sits on the New Zealand government supplier panel for infrastructure-as-a-service, effectively the place where government departments buy cloud services.

Revera beat Telecom NZ’s own Gen-i unit for a place on the panel.

Telecom strategy emerges

The acquisition is the latest in a string of moves reshaping Telecom and the local telecommunications industry. It needs to be seen in the light of the Telecom Chorus demerger, Vodafone picking up Telstraclear and Orcon’s sale to Vivid Networks. There is also Gen-i’s partial retreat from the Australian market.

Since the Chorus demerger, Telecom NZ has announced plans to build a new trans-Tasman cable with Vodafone and has talked of deep staff cuts. By the end of the year new CEO Simon Moutter will have reshaped the entire business to the point where it barely resembles the corporation during the Paul Reynolds era.

Buying Revera is a smart move. It gets Telecom NZ back on to the government panel and expands the company’s customer base. The cost isn’t that high considering the potential.

Services can be risky

However, acquiring technology services companies can be risky. Think of when HP took over EDS, it wasn’t a success in New Zealand or internationally.

Telecom NZ needs to attend to two key points:

• There are reasons why Revera beat Gen-i to the government supplier panel and why the company’s commercial customers chose it as a business partner. Telecom must make sure it doesn’t tinker with Revera’s success in a way that reminds customers why they didn’t choose Telecom last time around. Rest assured, sales people working for rival data centre suppliers will be only too happy to exploit any doubt.  
• This means keeping Revera’s brand, management team and skills in place. Telecom NZ says it intends to do all of this, but the 140 or so people who work for Revera will be joining a parent company that’s about to make hundreds of its existing employees redundant. Not all those people moving across will be happy with their new bosses and they may not believe reassurances about their job security.