Why did Datacom flick off call centre business to US co. for $25m? CEO explains

Datacom group CEO Jonathan Ladd

Welllington-headquartered IT services company Datacom is selling its Asian call centre business to Convergys, an Ohio-based, NYSE-listed business process outsourcing (BPO) company.

Datacom group CEO Jonathan Ladd told NBR Online the deal was valued at $A20 million ($NZ25.08 million).

The call centre division, based in Malaysia and the Philippines, employees around 850 staff - meaning the deal will reduce Datacom's headcount from around 4500 to 3650.

Mr Ladd says Datacom's Asian business was still important, but only in terms of IT services, not the more commodity business of call centres.

Datacom was pleased with the call centre business it had built up, but wanted to concentrate on IT activity higher up the food chain. 

The company wants to focus on "on-shore" business Mr Ladd says, or IT services that an organisation - often a government department - doesn't want outsourced beyond its borders. 

Datacom came to the conclusion that if it wanted to stay in the call centre business, it had to scale up, the CEO says.

"You really have to be a mega player. Some of these people hae 30,000 people in Manila," Mr Ladd said, noting that Convergys has 77,000 staff worldwide. 

"We had about 450 people in the Philipinnes. But what seems to be a big number to us in New Zealand or Australia 400 to 800 – is just a blip."

Datacom's call centre business was recently in the news when state-owned Kordia outsourced 50 positions on Orcon's helpdesk to Datacom.

In a statement to the NYSE, Convergys said, "Datacom will add 15 Asian languages to Convergys’ language capabilities and approximately 1000 employees, working in three Southeast Asia contact centers, to Convergys’s global operations. The integration of the two organizations is expected to take between six and nine months."

The deal will include a  Kuala Lumpur, Malaysia call centre opened by Prime Minister John Key in 2009.

In a statement (below) Datacom Group CEO Jonathan Ladd indicated his company wanted to concentrate on more on "technologically differentiated service businesses" rather than a call centre operation, which increasingly requires global scale.

NZ Post recently sold its 35% stake in privately-held Datacom to the Super Fund for $142 million.

The company is majority owned by NBR Rich Lister John Holdsworth.

Mr Ladd refused any comment on Datacom's work on a backup system to replace Talent2's Novopay. Steven Joyce, the minister in charge of fixing the delinquent teacher payroll system, recently revealed that although Datacom (the previous payroll provider) was working on an alternative system, the two parties had yet to discuss financial compensation. Datacom was working on spec.

RAW DATA: Datacom statement

Datacom Group sells Asia contact centre business to global giant Convergys
Sydney, April 4, 2013 - Datacom today announced a definitive agreement to sell its Asia based Business Process Outsource assets to leading global BPO Company, Convergys.

The sale will see Datacom’s contact centre operations in Kuala Lumpur, Malaysia and Manila, Philippines transition seamlessly to the new owner, Cincinnati headquartered, Convergys.

Jonathan Ladd Datacom Group CEO says “Datacom has built a world-class multi-site multilingual Asia BPO business servicing a suite of long-term blue chip clients.  Today, after a 6 month competitive process, we're proud to sell this asset to scale global BPO service provider Convergys, who will continue to nurture and invest in these key client relationships"

In 1995 Datacom opened in Asia and built a quality multi-site Asia BPO asset with industry-leading capability, 850 staff and a suite of long term clients.

Jonathan Ladd says, “Our Asia BPO business had reached a tipping point and now requires a truly scaled global specialist to take the business to the next level.

Datacom remains utterly committed to Asia and will now focus its regional investment on more technologically differentiated service businesses rather than to aggressively grow a global scale BPO business.”

Datacom will continue to build its leading multilingual Systems presence in Kuala Lumpur, Malaysia and Manila, Philippines and to provide professional IT services and specialised business to business IT solutions and services locally, into Australia and New Zealand and out into the rest of the world.

“This divestment of Asia based contact centres and renewed focus on our strategically poised Asia Systems business will serve to strengthen our capacity for expansion and acquisition investment in our other growth areas,” says Jonathan Ladd.

Locally, Datacom remains committed to grow its Australian and New Zealand BPO businesses and will continue to prioritise work that needs to stay onshore through continued innovation, technological advancement and investment for the benefit of ANZ BPO clients.

Datacom and Convergys expect to close the sale by the end of April.

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3 Comments & Questions

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So just so I'm clear. Datacom are reducing their head count by 900 (most offshore), HP have reduced theirs by 900-1400 (in NZ) ... but there's no political outcry, no massive media storm?

Why just Telecom? I'll tell you why: views and political gain.

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I think the key differences between this and Telecom are (1) they're presumbly simply transferring staff as part of a business sale, not making them redundant which is a big difference, and (2) even if they were, it's not NZ-based staff.

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Who cares if it is offshore? Hence why would it have any political value?

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