Top 100: Three years after Dell, NTT Data targets more megadeals

While not just centered on the public sector, NTT Data’s acquisition of the former Dell Services business three years ago had many similar traits to other deals in the ongoing wave of consolidation sweeping through the government technology services landscape.

The deal significantly moved the needle on scale for NTT Data’s North America footprint from just under $2 billion to around $4 billion. A bolstered public sector footprint also opened up for NTT Data in addition to other markets like health care, financial services and insurance.

“It created a tier-one systems integration capability in the United States,” said Tim Conway, president of the NTT Data public sector business.

On the 2019 Washington Technology Top 100, NTT Data is ranked No. 65 with $345.7 million in prime contract obligations.

As Conway described it, that tier-one capability means NTT Data could become a true “one stop shop” for federal agencies to buy just about everything in the IT stack from the infrastructure offerings that Dell Services added, to the buyer’s legacy advisory and consulting work.

Three years later, NTT Data has one win in tow that Conway attributed directly to that transaction: a potential five-year, $218 million contract announced last monthfor managed IT services to the U.S. Agency for International Development. Such a bid would not have been pursued before the Dell Services deal and may not have been successful for either on their own, according to Conway.

That is also an example of “many large megadeal successes” NTT Data is going after versus its prior “sweet spot (that) was probably about $25 million,” Conway said.

“It was small enough that a lot of the big guys weren’t necessarily going to go after it,” Conway added. “Now with putting the business together the way we have it and the capabilities that we have, we’re looking at the much larger IT outsourcing deals in the market and pursuing them.”

NTT Data has also re-entered the buyer landscape in the public sector arena thanks to its April deal for the former consulting division of health care IT company Cognosante. At the parent company level, Conway said the aspiration is to double the federal business’ size through both organic growth and acquisitions.

“We are very focused right now on adding to the portfolio with acquisitions that not just deliver growth,” Conway said, although he added “certainly there’s a value to expanding the enterprise and having economies of scale.”

“The Dell integration took some time, but we’re prepared now to do a number of these over the next 12-to-18 months,” he said.

So how does a global IT systems integration company like NTT Data gain its footprint in a federal services landscape that has seen many of its pure-play competitors also bulk up via significant mergers with an eye toward large-scale infrastructure jobs worth hundreds of millions of dollars?

In Conway’s eyes, NTT Data’s global presence gives it a first-hand view in technology research-and-development efforts in the commercial world that eventually make their way into government.

“I’m a firm believer that government often trails in the adoption of technology to commercial businesses that are leveraging technology to survive, to create market position (and) market capability,” Conway said. “We get the benefit of a lot of the investments or successes that the organization has commercially as we look at and pursue business in the federal market.”

Cloud computing is an example he offered of where that takes place, particularly with how NTT Data has seen the investments its commercial customers have made in hybrid cloud environments to bring down IT costs. The company is leveraging that experience in pursuit of cloud work with federal agencies who also have cost at their front of mind, Conway said.

Cost is one main reason why agencies are embracing new types of contracts that include agile development and incremental delivery models to get new tools and capabilities deployed faster, as industry executives have told us over the past 12 months. This is almost an opposite approach to the traditional “waterfall development” method that takes anywhere between three and five years to complete.

The agile method is a paradox for agencies, who are embracing risk by mitigating it through smaller procurements.

“As you get into agile development and you can start to build out functionality, you get to make a determination pretty quickly whether this is a viable approach… or a viable product for the mission that we’re trying to accomplish,” Conway said. “To the extent that it’s not, you can step back and re-evaluate.”

That was the approach NTT Data took for a migration project they supported at U.S. Citizenship and Immigration Services that involved several steps and verifications with deadlines of months, and sometimes days. USCIS is still on the journey to full agile “DevOps” but has seen improvements in functionality, Conway told me.

Improvement would also describe Conway’s outlook on the federal IT market as a whole given the thrust of modernization sweeping throughout government. Security will certainly go hand-in-hand with the push to bring federal technology systems more into the modern, digitized age but one concept is clear to Conway.

“As we get into the innovation that comes out of that, it won’t be just business as usual,” Conway said. “It will really be around new ways of doing government and leveraging technology to really drive efficiency in the business process and cost out of the environment.”