Computer giant looks out for No. 1
By : Roseanne Gerin
In these days of cutbacks and buyouts, computer specialists are doing a lot of talking especially to each other.
While reports circulate of domestic personal-computer companies negotiating plans with their rivals, some foreign players are turning the tables by striking deals with big Polish players.
In early April, the local branch of U.S. computer giant Compaq the biggest foreign PC vendor in Poland signed a letter of intent with local computer firm Optimus to join efforts in product distribution, service, installation and IT ventures to boost efficiency, reduce costs and improve services for customers.
"These are very serious topics (between) two large companies and in some ways (it's) a total change of strategy on the marketplace," said Andrzej Widerszpil, the 43-year-old country general manager of Compaq Poland. Three of the letter of intent's four agreements will be signed within
30 days, he said, while the contract will be wrapped up by August.
The alliance may prove to be a good deal for Compaq as it sees its biggest revenue growth in Poland this year coming from services, especially professional services, which include IT consulting, technical and software application designing and systems integration for corporate customers, rather than PC sales.
"Optimus has one of the largest networks of services and this should be the kind of additional potential for increasing customer satisfaction (with) our large enterprise customers, which are banks (that) are spread all over Poland," Widerszpil said.
Referring to its professional services as "our loveliest baby," Widerszpil said Compaq is the only U.S. company among the top five firms in Poland that provides professional IT services. Of Compaq's overall revenue of $150 million last year, sales of traditional and professional services accounted for $45 million (professional service sales were $25 million), PC sales $50 million, and sales of servers and storage space $55 million, he said.
Widerszpil refused to comment on the firm's profit, citing company policy, but added that it's "healthy and huge" and that Poland is one of the top three countries in Europe in terms of operating profit percentages. Undaunted by the downturn in IT markets worldwide, he expects the firm's total revenue this year to hit $200 million. Of this amount, sales of professional IT services will account for $40 million, he said.
Overall sales of IT services in Poland last year reached $600 million compared to $850 million in PC sales, according to Andrzej Jarosz, the Warsaw-based research manager of IT market analysis firm International Data Corp. (IDC). "There is much more opportunity in IT market services ... which carries higher profit margins," he said, but added that Compaq's focus on IT services was not a new strategy. The company has maintained a strong position in the sector since it acquired business computer and IT service firm Digital Equipment in 1998.
"It's a quite obvious strategy of all tech vendors," Jarosz said. "More difficult is how they are going to do it because the (Polish) market is more competitive (for services)."
Compaq will likely sign additional agreements with Optimus as well as with other domestic players in the future, Widerszpil said. The firm is currently mulling two other potential investments in Polish companies, but he declined to name the firms.
Still, Widerszpil ruled out takeovers or acquisitions of local players. In the future, Compaq will likely invest as a minority shareholder in other Polish IT companies to increase its market penetration. For example, Compaq plans to buy a 15% stake of Xtrade, a joint business-to-business e-commerce venture between Optimus, BRE Bank and Commerce One, by June, he said.
Compaq, which started operating in Poland in November 1993, now has more than 250 employees. Last year, the firm sold 60,000 PCs and was fourth among the top vendors in PC-desktop sales with a 7.2% market share behind Optimus (12.7%), JTT Computer (8.9%) and NTT System (7.9%), according to IDC.
Like elsewhere around the world, Compaq sells its PCs and servers through resellers mainly to small and medium-sized businesses and large corporations. IT services, however, are sold directly to corporate clients as it's difficult to deliver them through partners, Widerszpil said.
While the parent company recently announced it was slashing computer production for the European market and outsourcing the work to companies in the Czech Republic as well as laying off 7,000 employees to reduce costs, Compaq's Polish operations won't feel the sting. Widerszpil predicted a 10% increase in Polish staff this year with the extra employees being hired in the IT services sector.
Compaq's major competitors in Poland, as in the rest of the world, are U.S. IT firms Hewlett-Packard (HP) and International Business Machines (IBM) for overall computer-related services, whereas local players Optimus, JTT and NTT are its main rivals in PC production and sales.
"Right now HP is the No. 1 company, but Compaq has a good chance to be a No. 1 company over the next two to three years in Poland," said Widerszpil, adding that Compaq's revenue from professional services was more than HP's last year.
