Competitors not rung by Bell purchase of Nexxlink

Two independent solution providers say they aren’t intimidated by Bell Canada’s move into the small and mid-market with its $67 million purchase of Montreal’s Nexxlink Technologies.

“It’s tremendous that Bell is removing anybody that’s our competition,” said Ken Killin, president of the

Toronto-based Ram Group.

“It’s Ram’s goal to become the trusted technology advisor to the small and medium market. I cannot envision Bell ever serving that marketplace.”

He dismissed Bell as a vendor, not a friend of small companies.

The deal, announced last week and subject to regulatory approval, “validates the value the IT services business offers the marketplace,” said Harry Zarek, president of Compugen Inc.

Also last week xwave bought the Atlantic assets of Fujitsu Consulting Canada to grow its service delivery across the Maritimes and expand its annuity-based portfolio.(For more details, see below.)

For all the bravado, Nexxlink president and CEO Robert Courteau thinks his competitors should beware.

“When you have a powerhouse like Bell who decides to get into the marketplace, they have the resources to accelerate the development of our strategy.

“With Bell as the mothership we will have the resources to accelerate acquisitions and product development to make sure we’re the leader in Canada in the market.”

Nexxlink will join Bell’s small and medium business division along with another acquisition it made this year, Charon Systems of Toronto. In fact Bell and Nexxlink were in a bidding war over it only to see the telco emerge the winner. Assuming all the approvals go through the merger Courteau envisioned with Charon will come true – although with a different controlling shareholder.

In buying Nexxlink, Bell marries a provider of integrated IT solutions with revenues of between $100-$115 million and 1,000 employees that is strong in Quebec with Charon, which has strength in other parts of the country. It also gives the telco another avenue to sell network and IP-based services to companies seeking integrated application solutions.

Another bonus, Courteau noted, is the purchasing strength Bell will give Nexxlink with hardware and software suppliers.

For example, he noted, an alliance announced this week between Bell and Microsoft couldn’t have taken place with the smaller Nexxlink.

Among Nexxlink’s strengths is an enterprise resource management application it purchased from CGI Group, part of a partnership with that company that saw CGI take a 34 per cent share of Nexxlink.

Because Bell has an interest in CGI, the Nexxlink deal has to be treated as an insider bid. The deal calls for Courteau to remain at his post, while Nexxlink executive chairman Karol Brassard will stay on until October,2006.

The acquisition is the culmination of Nexxlink’s decision some five years ago to hire Courteau and move aggressively into services. It figures about 60 per cent of its income, or about $55 million, comes from services.

While the Bell deal vaults Nexxlink into another league if you count its new parent’s revenues and resources(now it ranks 11th on CDN’s Top 100 VAR list, while Compugen is in fifth), neither Zarek nor Killin say they’re looking for a suitor to match the move.

Nexxlink’s targets were more medium and large-sized companies, said Killin, companies not in Ram’s space.

Meanwhile, he said Ram is concentrating on growing itsbusiness and expanding into the U.S.

Lured in part by Fujitsu Consulting’s staff of 90 professionals, xwave sealed its deal following a “period of discussions,” said COO Paul Kent. It’s the first company Halifax-basedxwave bought this year. The value of the purchase was not disclosed.

”While in some respects the talent is similar to what we have, in other ways it will allow us to enhance the xwave offering because it augments our talent pool as well,” said Kent.

Fujitsu Consulting’s senior business consultants developing IT systems and application maintenance staff will move to offices in Halifax, Fredericton and Saint John,N.B.

Strengths in these professional areas represent “our calling card in that marketplace,” noted Michael Long, senior vice-president of Fujitsu Consulting in Calgary. “xwave has some skills in that area, but their calling card is stronger in infrastructure areas, in technology areas.”

“Impressive client credentials” in the public sector and health-care industry were also of particular interest to xwave, said Kent. He said Montreal-based Fujitsu Consulting has a significant outsourcing arrangement with the Atlantic Health Sciences Corp. and staff with health care credentials, “which are recognized in the industry and which are always useful.”

Kent, once employed by Fujitsu Consulting Canada, said issues will no doubt crop up surrounding the “appropriate integration of purpose and chemistry and culture and expertise” as the two organizations merge. But no layoffs are expected.

He describes both firms as “highly complementary,” but acknowledges they do differ. xwave, for example, has a broader offering, seen through its more diverse product and service line, in Atlantic Canada.

xwave bills itself as a full-service business-solutions provider serving clients through systems integration, infrastructure services and fulfillment. It plans, designs, buildsand operates IT solutions.

”We have a relationship with Aliant, our parent company, which we can use which obviously they do not have the advantage to use.”

Xwave will use its increased strength in Atlantic Canada, “the heartland of the company,” to pursue business in Ontario, Quebec and New England, according to Kent.

Fujitsu, in contrast, wants to concentrate on all venues of growth, such as investment capital, management time and attention and sales coverage, in other parts of Canada such as major metropolitan areas in Ontario, Quebec, Alberta and B.C., Long said.

Although these four provinces are not necessarily more lucrative businesses, he said, the company anticipates more “mid- and long-term potential” there.

Not included in the agreement are the Halifax-based Fujitsu Consulting Business Services Centre and the Fujitsu Atlantic Delivery Centre.

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Jim Love, Chief Content Officer, IT World Canada

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