Services boom drives a 2021 profit recovery for Datacom

Services boom drives a 2021 profit recovery for Datacom

Four data centres receive serious upgrades while Datacom focuses on developing talent.

Greg Davidson (Datacom)

Greg Davidson (Datacom)

Credit: Supplied

Strong services demand fuelled in part by the COVID-19 pandemic lifted both revenue and profit at New Zealand-based IT services giant Datacom in 2021.

Group revenue across A/NZ for the year to 31 March climbed to (NZ)$1.41 billion, up from $1.34 billion in 2020, while net profit after tax recovered from a dip to $19 million in 2020 to $35 million.

Services was the driver, with service revenue up to $1.1 billion from $1.03 billion while product revenue slipped from $317 million to $313 million.

Gross profit lifted from $906 million to $981 million after cost of goods sold. 

Employee expenses were up from $727 million to $777 million year-on-year but other expenses declined from $88 million to $55 million.

Group CEO Greg Davidson told Reseller News he would describe the result as a "recovery", slightly muddled by changes in accounting standards over the years.

Because reinvestment at Datacom was a mixture of capital and non capital items such as training and building capacity the amount of operational investment required could be quite large, he explained.

"The way I think of this result is it's a good recovery back to where we were two years ago," he said, pointing to cash generated as an important metric to fuel that investment.

2021 was a year of significant investment for the company, most notably in data centres, payroll and cyber security capabilities.

Following a $52 million upgrade of the company’s four data centres, Datacom now offers a broad range of capability with more than 2500 racks available in four locations across New Zealand. 

“We saw an immediate acceleration in the demand for cloud infrastructure, for digital projects that would help businesses continue trading and enable local authorities and government agencies to increase their connection and services to citizens," Davidson said.

Davidson told Reseller News Datacom had benefited from its agnostic approach to cloud, dubbed RightCloud, as A/NZ customers continued to adopt hybrid systems over an "all-in" approach to one cloud flavour.

The company offered a suite of public and hybrid cloud partnerships including Amazon Web Services (AWS), Google, Microsoft, Dell, VMware or a hybrid blend.

Davidson expected customers to make more planned and strategic use of public and private cloud well as co-location for older equipment, as was being seen in Australia where in-country public cloud has been available for more than five years.

That required a "laser-like" view on costs.

"We see the role of public, private and existing equipment as sitting on a continuum," he said. 

"You have to sit down and work through that with your customer base on a literally application by application basis to get the right outcomes."

Like many other ICT services providers, Datacom benefited from a surge in demand for business platforms that enabled customers to continue operating during the pandemic lockdowns. 

This accelerated the shift toward technologies that delivered competitive advantage and improved both the customer and the employee experience.

Demand for cyber-security services saw Datacom's team grow to more than 100 staff, making it one of the largest in Australasia.

One of the highlights was Datacom's move to take full ownership of SmartPayroll, under CEO Melissa Cheals. Datacom acquired the remaining 45 per cent of the company it did not already own for $25 million.

The cloud-based Smart Payroll platform supported 19,000 businesses and complemented Datacom’s existing payroll capability targeting small to medium-size enterprises.

“We’ve worked with the SmartPayroll team for some time and in September bought out the last of the smaller shareholders to bring the company fully into the Datacom family," Davidson said.

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Tags iaasManaged ServicesDatacomInfrastructure as a Servicehybrid cloudCloudsecurity

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