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January 4, 2004

IT services: Nordic consolidation gets serious

The Nordic region's biggest IT services companies both finalized prominent acquisitions in each other's home territories just before the end of 2003. The intense consolidation in the region is a response to increasing competition from global players, and TietoEnator [TIE1V.HE] and WM-Data [WM-B.ST] may lose out if they do not expand further afield.

By CBR Staff Writer

Two major Nordic IT services companies have recently finalized important acquisitions.

TietoEnator, the Nordic region’s largest IT services provider, is paying $87 million for Swedish IT consulting firm Ki Consulting & Solutions, a 770 employee organization specializing in integration, application management and development of telecom IT systems. The announcement came after TietoEnator’s closest Nordic rival, WM-Data, paid $234 million to acquire Finland’s Novo Group [NOV1V.HE].

Although the depressed IT market in the Nordic countries is behind much of the consolidation in the region, this has been accelerated of late by the increased presence of US and European IT services companies that have broken into the market.

Vendors such as WM-Data are also facing increasing competition from large US rivals such as IBM Global Services, Accenture [ACN] and Hewlett-Packard [HPQ] for lucrative Nordic-wide and global contracts originating from the region. These larger services firms are increasingly chosen by some of the most prominent Nordic clients because they can provide a much better global reach of services.

To truly compete with the US companies, Nordic firms need to expand their global presence so they can support large Nordic clients overseas. For example, WM-data’s lack of global reach has forced the company to refrain from bidding on a $300 million outsourcing contract with Scandinavian airline SAS [SAS.ST], with which it already has a $68 million IT services framework agreement.

Unfortunately, at the present time it seems that neither TietoEnator nor WM-Data is interested in overseas expansion, and both have dismissed suggestions of a merger with each other or other large Nordic players such as EDB Business Partner, Ementor, and Maersk Data.

Although all these companies are acquisitive now, their inability to move out of the Nordic region may see them lose out on some of the region’s most prominent deals as companies such as IBM [IBM], CSC [CSC] and Accenture increase their efforts. Although large, and growing acquisitively, the Nordic players are far from safe.

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This article is based on material originally published by Computerwire

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