A Major New Player in US IT Services?

Posted by: Steve Hamm on July 24

The middle of the worst economic downturn in 60 years may seem like a strange time to launch a major new business, but don’t tell that to Fujitsu, the Japanese technology giant. The company recently wrapped most of its North American businesses into a new organization, Fujitsu America, and made building a big IT services business its top priority. Fujitsu isn’t a high- profile player in the US. You may recall that it bought mainframe computer maker Amdahl years ago, but its mainframe business here has dwindled. Meanwhile, it has been selling servers, related services, and point-of-sale devices—without a huge amount of success. North American sales of such products and services last year totaled less than $2 billion. Ergo the new strategy.

The plan was hatched by Richard Christou, president of Fujitsu’s global business group, and Farhat Ali, CEO of Fujitsu America. Both men were appointed to their positions late last year. The way they figure it, there’s a vast collection of medium-size enterprises—with revenues ranging from $500 million to $5 billion—who never got hooked on the outsourcing and offshoring craze that swept up many large corporations over the past decade. But now these companies are under intense pressure to cut their costs and they’re looking to IT services firms to do the job for them. A company that specializes in serving this slice of the market well should be able to do well in a highly fractured market.

At least that’s the theory. In just a few months, Fujitsu America has a few proof points. It landed a $400 million, 10-year outsourcing contract with Alliance Data, an outfit that processes credit card transactions, and inked smaller deals with companies it won’t name. “As we progress, product sales will be more of an underpinning for services. If we’re successful, in a year 18 months, you’ll see total solutions—consulting, servers, and applications—in a services wrapper,” says Christou.

Another source of competitive advantage, says Christou: Fujitsu plans on providing a mix of global standards and capabilities with local touch that it hopes will be superior to companies that offer one or the other but not both. “We say, think global, act local,” he says.

Farhat, who has worked his way up the management ladder in Amdahl and Fujitsu over the past 30 years, is the embodiment of that strategy. In addition to commanding the North American workforce, he’s also in charge of Fujitsu’s service deliver outposts in Costa Rica, India, and the Philippines.

These guys may have even better timing than they think. A survey of corporate customers released today by AMR Research shows a rekindling of the outsourcing market may be on the way. Survey results gathered by Phil Fersht and Dana Stiffler show a significant pickup in demand for software application outsourcing and infrastructure outsourcing—and it’s just about as strong for mid-market companies as it is for the giants.

These Fujitsu guys talk a good game. They’re on my radar now, and I’ll be watching to see how well they do. It’s got to be tough to gain much ground against the industry giants on the one hand, and the Indian upstarts on the other.

TrackBack URL for this entry: http://blogs.businessweek.com/mt/mt-tb.cgi/