DCM Services Ltd is aiming to become the dominant player in its particular area of the computer maintenance marketplace. The company is now a wholly-owned subsidiary of Kode International Plc – expected to report interim figures on Thursday – following a merger with Kode’s computer maintenance arm, Kode Computers Ltd (CI No 1,961). Talks between the two companies began as early as September last year and DCM was finally acquired on July 24 1992. However, the deal did not include DCM Retail Solutions, which was sold to Ranzau Trading Ltd in April 1992 (CI No 1,961). The benefits of merger are considered to be manifold. From Kode’s point of view, the acquisition of DCM Services will help provide the strategic advance it has been seeking for some time, after two years of heavy restructuring.

Lack of direction

Certainly, up to this point, Kode Computer Services has suffered from lack of direction from its directors. DCM, on the other hand, stands to gain improved credibility by a near doubling in size of its operations, and by becoming part of a quoted company – Kode joined the Stock Exchange in 1972. The latter point is especially valuable to DCM as many of its major clients are banks and financial institutions. The combined operation now boasts a contract base of approximately UKP10m, making it the UK’s largest third party maintenance company to specialise in personal computers, networks and Digital Equipment Corp systems. The two businesses complement each other from a strategic point of view too, in that traditionally both have covered broadly similar product lines. However, while Kode specialised in Ministry of Defence and local government work, DCM chose to focus on the commercial sector. It seems highly probable that the new subsidiary will concentrate its efforts on the commercial side as well, as there would appear to be more opportunities for growth here. The local government market has too many other big players, the main one being ICL Plc, which incidentally is undergoing an inquiry from the Office of Fair Trading over its attempted purchase of Municipal Mutual Computing, by means of its subsidiary CFM. Municipal Mutual is the second largest supplier of facilities management to councils, while ICL is the largest, and the situation could well be investigated by the Monopolies & Mergers Commission. Anyway to continue the story, further advantages for the new subsidiary include a pooling of technical resources and enhanced coverage of many areas of the country, where up to now the separate companies’ work has been thinly spread. Regional service centres currently exist in London, Gatwick, Bristol, Birmingham, Warrington, Hitchin, Aberdeen and Edinburgh. However, the merger has brought about its casualties. Duplication of functions, mainly in the administration and accounts departments, has resulted in approximately 30 redundancies, centred at Kode Computers former site in Swindon. The entire business has been relocated to Hitchin, Hertfordshire, the traditional home of DCM, where recruitment of about 20 staff is going on. As regards the choice of name for the new operation, much pre-purchase marketing was undertaken, which led to the conclusion that DCM Services was not only more well-known, but also commanded a more established client base than Kode Computers; and therefore, it was decided that this name be retained. In addition, Joel Jervis is to remain as managing director of the business, while also becoming a director of Kode International. This is viewed to be a tribute to his impressive performance in guiding DCM back into profit after the management buy-in, headed by him, in 1989 (CI No 1,307). On acquisition three years ago, DCM Services was budgeted to lose UKP1.5m.

By Catherine Everett

Within a year, this had fallen to UKP75,000, within two years to UKP200,000 and by the third year, the company had achieved profitability levels of UKP600,000. Jervis’ secret is professed to be nothing less than a good management team, coupled with an active sales and marketing effort. A man determined to make the new

company a force to be reckoned with, he believes that organic growth alone will account for a rise in turnover from UKP10m to UKP13m in the year to come. Further growth is to be achieved by increasing DCM’s current share of established markets. In the main, business is centred on three areas. The majority of revenue, approximately UKP8m, is generated from maintenance of MS-DOS personal computers, networks and related software, and opportunities for expansion here seem inevitable with the personal computer market growing at an average 15% per annum. DCM has also moved into the value-added services side of things, the way forward these days it seems, by providing such things as facilities management, auditing, virus detection, assistance in the relocation of computer systems and even checking that customers have obtained software licences to avoid prosecution. About 60% of work is based at customer-owned sites and as many of DCM’s engineers are site-based, savings are made immediately on overheads and time lost through travelling. Jervis is also very focused on the type of clients he wants to cultivate. He sees bigger customers as the key not only to gaining the more profitable long-term contracts, but also to achieving expansion. Getting a foot in the door can always lead to greater things, and an average contract value is upward of UKP50,000. Certainly, as far as competition goes, he sees the market as a very fragmented, regionalised one; a situation that he is eager to rectify and ultimately cash in on. Another sizeable chunk of DCM’s business involves the maintenance of Digital Equipment Corp products. Although this currently accounts for about UKP1m-worth of annual revenue, the coming year is to witness a big push to try and double this figure. DCM maintains DEC products in direct competition with DEC itself, but is aiming to increase business here by several means. Firstly, by recruiting DEC salespeople, and secondly, by developing existing business from its established client base. The last UKP1m to make up DCM’s total revenue comes from IBM. DCM is the sole category A sub-contractor for Big Blue, which means that it looks after all the non-IBM machines covered by IBM’s maintenance contracts – IBM only attends to its own products itself. However, DCM has pushed itself into the unique position of being in direct competition with the company it works for; it has recently won business tending IBM machines as well. Nonetheless, on the surface, Jervis’ plans for his company over the coming year seem quite modest.

Acquisition

For the present moment, he is quite content to simply see things settle down after the acquisition. But by the year end, further strategic acquisition is to be firmly on the agenda, with an eye to expansion and increased profitability. The focus is, however, to be on niche markets such as networking. Likewise, although this year is to see DCM concentrating mainly on the UK market, the following two or three years are to be marked by movement onto the continent, over and above DCM’s German operation, which was set up in 1991. The opening European market is seen to offer rich pickings, especially as it seems to be at least a couple of years behind the UK in the technology stakes; the UK in turn is accepted as being approximately 18 months behind the US. This push into Europe could be achieved in any one of three ways. One possibility is that DCM will be driven there by existing clients with European operations of their own. Joint ventures with European companies, eager to grab a slice of the UK maintenance market pie, are another distinct possibility. A third option is that DCM set up its own company in Europe. At the present moment, the most exciting markets are felt to be France, and the rapidly expanding Spain and Portugal. But whatever, in a nutshell, Jervis is aiming to increase turnover of the company from present levels of UKP12m to an ambitious UKP50m over the next few years, and ultimately to put it on an equal footing with the rest of Kode International’s business.