Back in the days when companies had blank checks for electronic commerce projects of every shape and size, Proxicom was one of the stars of the Internet consulting industry. Even as budgets were slashed, Proxicom managed to hold on to its cachet, largely as a result of its solid management team and a client base that included such respected names as GE Plastics, Marriott International, Merrill Lynch & Co. and Primedia.
Thats one reason why Compaq Computer was willing to pay as much as $266 million for Proxicom earlier this year, before losing to a counteroffer from South African-based Dimension Data Holdings for about $347 million.
The purchase of Proxicom, which came at what analysts believed was a high price for the market conditions, was part of a bold play by Dimension Data to become a truly global consulting and Internet infrastructure firm. The jury is still out on whether the play will work, as the deteriorating economy has hurt the companys finances. Dimension Datas shares, which are traded on the London Stock Exchange, have lost more than 70 percent of their value since Dimension Datas acquisition of Proxicom. Its stocks were hit hard in September when two major brokerages, The Goldman Sachs Group and Lehman Brothers, cut their earnings forecasts for the firm, largely based on worries about corporate spending on Internet infrastructure.
Counting on Its Strengths
Still, Dimension Data remains confident that its global reach and its strength in three key markets — e-business services, managed IT services and network services — will help it ride out the downturn.
"Part of our strength is the fact that we dont have to rely on any one market now," says Brian Eckert, executive vice president for the newly merged firm, which has its North American head office in Reston, Va. "Right now theres less work in areas like Web site design, and more work in less sexy areas like network services. So were able to shift resources."
Dimension Data isnt well known in the U.S., but it is a strong player in Australia, Britain and South America, and is the dominant networking services company in South Africa. The company currently has a presence in 30 countries and has 11,000 employees, including about 1,500 in the U.S.
With the integration of Proxicom into its fold, Dimension Data has split the company into three units: an e-business services unit, formed from Proxicoms base in Web site development, electronic commerce and business intelligence; a network services unit, which covers the installation and maintenance of integrated voice, data and video networks; and a managed IT services unit, which provides full-service management and monitoring or hosting of a companys IT infrastructure.
"The benefits of the merger to Proxicom were obvious," Eckert says. "Our customer base needed us to be able to scale to handle the kinds of systems they were deploying." As an example, Eckert says, the company is currently working with an automotive client deploying an electronic commerce system that will operate in five countries. Current clients such as GE Plastics and Marriott are also looking to expand their international operations.
"With Dimension Data, we were able to get to that scale and pick up skills we needed in managed network services," Eckert says.