IT company Lechabile has acquired majority share of application solutions developer Knowledge Dimension in a deal that will firmly position the black owned firm as one of the country's leading IT service and solution providers.
Between them, the new partners will offer the full gamut of IT services, from product delivery to IT infrastructure and support to customised software solutions.
Lechabile was founded in 1998 by seven IBM executives with a vision to form a globally competitive African company. It weathered the difficulties faced by start-ups around the world and is today a strong IBM channel partner, delivering product, services and support to customers like arivia.kom, Telkom eThekwini Metro, Old Mutual, MTN, Liberty Life, Sita and SARS, to name a few.
Knowledge Dimension, founded a year later, is an application solutions development company focused on helping organisations make the most of their human capital. It was bought by Safmarine Computer Services in 2002 and in 2005 was bought out by management.
The deal, whose value is not disclosed, became effective in October 2006.
The new partners believe the deal will deliver value that is more than the sum of their parts. "We have been moving away from 'box-dropping' towards the provision of value-adding services for some years now, says Lechabile CEO, Winston Mosiako. "But we had no depth in the applications development arena."
Knowledge Dimension has sophisticated software development skills oozing from every pore, but lacked marketing muscle and brand awareness. "Over the past few years we have focused on bringing three new software solutions to the market," says Knowledge Dimension CEO, Ray Hayes. "And so we have not spent much time extending our core customer base."
While the marriage seems too good to be true, it's no shotgun wedding. "We've worked together on joint projects for four years already," says Lechabile COO Andrew Lutwama. "It's been like a courtship."
Lutwama was recruited from Accenture a year ago to help Lechabile change its strategy from a product-focused company to a solutions-centric one. He noted the potential that lay in formalising the two companies' project-by-project relationship. "It made sense in so many ways - we could broaden our market coverage; we could better manage joint development projects - it was not a hard sell for either company."
Mosiako adds that moving into the value-adding solutions space does not just happen, but requires a concerted effort. "The market perceives us a product company. Changing that mindset internally and externally has not been easy." It also requires investment. "We have wrestled with the question: do you staff up with developers and consultants and then find work? Or do you do it the other way around?"
Knowledge Dimension provided the answer to both questions: a depth of skill and a project pipeline.
This deal is not Lechabile's first acquisition, however. Last year the company acquired, and recently sold, Lechabile Storage Solutions. "The company turned out to be too product-driven for our tastes," says Lechabile director Zainul Nagdee.
While selling storage hardware and software was not to its taste, Lechabile is excited by the prospect of offering Knowledge Dimension's custom-developed software products to the market: Depict, LabourWorx and CIC.
Depict is a Web-based strategy implementation solution. "Less than 10% of companies' strategies are effectively executed," says Hayes. "And that's because just 5% of the workforce understand their company's strategy. We plan to change that."
LabourWorx, as the name suggests, is a Web-based labour relations solution. It empowers managers, uplifts skills and improves decision-making. "It ensures a consistent and fair approach to labour matters," he adds, "resulting in transparent relationships, an improvement in productivity and a reduction in labour relations costs."
The third product is Customer Interaction Centre (CIC), an affordable Web-based CRM software solution. Developed using IBM technology, its target market is smaller businesses that need to provide employees with access to the same customer database, from multiple locations.
While each of these products is focused on a separate area of business, they all add value in a similar vein: human performance management.
Knowledge Dimension develops products on IBM technology. Some would argue that this may limit their scope. Not at all, says Hayes. "These days the technology platform is not important. Our products are delivered through the Web, so the platform it is delivered on is irrelevant to the client. It's the solution that is important. Not only do we develop solutions but we support the infrastructure as well via our Service Centre."
In fact, Knowledge Dimension, which plans to grow by 50% next year, aims to be the biggest development shop within SA in the next few years.
With this deal under the belt, Lechabile is scouting about for another acquisition or two - possibly in the telecommunication solutions space. While the company does not disclose its profitability, it turns over a comfortable R200 million p/a and has tidy sum set aside for such transactions.
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