The deal cost NZD$100 million says Lambert and is in line with IBM's global strategy of offering a broader package of products and services to both its top tier clients and the SME sector.

Although IBM already offers similar services to Logical CSI via its Integrated Technology Services (ITS) division, Lambert says ITS was unable to grow fast enough "organically" in the New Zealand market, prompting the decision to purchase market leaders Logical CSI.

After losing key clients like Telecom and the debacle of the Incis project during the 90s, Lambert says IBM is now back on form and ready to step up its activities in New Zealand.

"The 90s weren't particularly kind to us," he says, "but we've had three record years in a row and we're now in a position where we can start driving our business for growth. We're going to provide a better range of end-to-end services to our customer base - and our competitor's customer base."

While he says the move will impact all market sectors it trades in, Lambert says being able to offer expanded network services to IBM's 50-100 top tier clients is key to the purchase.

"If you look at the top 100," he says, "the banks, the insurance companies, the large corporates. You find IBM provides their mainframes, their mid-range servers and their desktops. What the Logical purchase gives us is another string to our bow - and given the convergence that's happening in the network services area, it's critical to our success in the market."
 
IBM's purchase of Logical CSI follows several strategic acquisitions over the past 18 months, including the local operations of Rational Software, Informix and PricewaterhouseCoopers Consulting.

The combination of this acquisition and alliances with network services providers such as Cisco Systems and Nortel Networks makes IBM the market leader in network services Lambert says.

Logical CSI's personnel and operations will be merged into IBM Global Services by mid-year. The brand 'Logical CSI' will be dropped. While he says it's too early to discuss possible lay-offs, Lambert says he's keen to make the acquisition work for all parties.

"We've been involved in more acquisitions than most in the last 10 years," he says, "so we're acutely aware that unlocking the real value of an acquisition requires us to keep the right people on board - and we're going to be very focused on that. There's still a lot to go through in terms of getting to know the people and getting to know their aspirations and skill sets."

March 2004

IBM NZ CEO Nick Lambert