NTT DATA held its first EMEA Latin America (EMEAL) Analyst Day last week since the merger of NTT DATA and NTT Ltd. announced in June 2022. The event provided some perspective on the new structure of the firm, its capabilities, and its short-term priorities.

The new NTT DATA Group is a much-enlarged firm with $31bn in revenues and around 150,000 employees. The group comprises two standalone companies:

• NTT DATA Japan, with $13bn in revenues
• NTT DATA Inc., the $18bn international business, co-owned by NTT DATA (55%) and Japan's NTT (45%). The unusual ownership structure reflects NTT Ltd's former ownership by NTT and a business model difference between the two entities.

It is possible that, in time, the two companies will eventually be integrated into one global organization.

NTT DATA Inc. has started its integration first at the geographic cluster level (U.S., EMEAL, and APAC outside of Japan). Historically, NTT DATA looked more like a federation of companies loosely aligned with several integrated practices (such as SAP services). The new geographic cluster structure will help the firm integrate businesses in EMEAL, while preserving its onshore and consulting heritage.

An Application, Infrastructure, and Network Integrated Firm

The 2002 merger with NTT Ltd. expanded NTT DATA Inc.'s capabilities to include data center colocation, network, connectivity, and IT infrastructure. Most of the NTT Ltd. portfolio is services. It also includes a significant network product reselling business.

NTT DATA Inc. has kept the data center colocation business independent, highlighting its CAPEX-heavy business model. The company claims to be the third-largest data center/colocation provider, with 80 data centers. Potential synergies with the rest of NTT DATA Inc. are limited, although there may be occasional joint GTM for server and computing projects.

The integration has focused on connectivity and network services capabilities, along with those in IT services. The aim is to sell integrated IT services, network services, and connectivity, something that few competitors have achieved, through a business (and consulting-led) approach rather than emphasizing connectivity and technology only. An example is private 5G, which the company sells under an Industry 4.0 approach to automotive OEMs rather than through a more technical 5G equipment resale and integration approach.

Priorities: Innovation and Assets

Priorities for the next two years highlighted at the event include innovation and the Asset-Based Business (ABB) initiative.

NTT DATA Group has aligned its innovation efforts across the three geographic clusters. NTT DATA Group's Innovation Headquarters is driving this initiative, prioritizing its R&D spending across:

• Mainstream services (70% of spending)
• Growth (20%)
• Emerging (10%).

GenAI is a priority, with NTT DATA Group using its parent company's investment in its own LLM, Tsuzumi. The company is actively deploying GenAI and Tsuzumi across the SDLC. Here, we noted in conversations an acknowledgment that GenAI's gains are likely to be 10-15% in the mid-term, well down from optimistic claims in the industry of 30-50%. Automating the full SDLC with GenAI will require a long-term investment in addressing gaps.

With its Asset-Based Business (ABB) initiative, NTT DATA Inc. has identified products, solutions, and accelerators built by local and vertical units. It wants to bring a structured approach to its assets, identifying and assessing them, prioritizing and allocating investments, and accelerating its growth through commercial focus and cross-selling into accounts through Inc.'s account managers.

ABB's ambitions go beyond monetizing software assets. The unit wants to structure its portfolio, where possible, into a suite of modules and products under the Syntphony umbrella brand rather than standalone products. Beyond sales (mostly subscriptions), NTT DATA Inc. wants to use ABB's portfolio to differentiate its services. The company targets project sales rather than standalone product sales. NelsonHall estimates ABB accounts for around 6% of NTT Data Inc.'s total revenues (including software and services). ABB has bold growth ambitions to account for over 10% of revenues eventually.

Getting the Word Out

Getting the word out is also a priority. NTT DATA Inc. remains a quiet giant whose capabilities are not yet well-known. For instance, the company has a much bigger scale in its global delivery network than expected, with around 66,000 employees in India and another 16,000 or so based in nearshore locations, including Czechia, Romania, South Africa, and the Philippines. An immediate priority is standardizing tools and processes across centers to harmonize its delivery.

The integration journey is ongoing. In EMEAL, the company has selected its innovation portfolio priorities: GenAI, sustainability, and ABB. NTT DATA Inc. has a very broad portfolio, including SAP and Salesforce services, data & analytics, application cloud migration, and its much-enlarged IT infrastructure and network services.

We expect NTT DATA Inc. to continue to review its portfolio regarding investment and GTM priorities.

Topline growth is a stronger priority than margin expansion: NTT DATA Inc. considers itself the growth unit of the NTT DATA Group.