With NTT Ltd, the Japanese giant is taking a different approach to its global ambition

October 15 2019
by William Fellows, Agatha Poon, Rahiel Nasir, Scott Crawford, Owen Rogers, Melanie Posey


NTT Ltd recently held an inaugural 'Hello' global analyst event not far from its UK headquarters. The company has been created, and specifically located in London, to accelerate Japanese parent NTT Group's global ambitions (see figure below). This report provides a quick take on strategy, positioning and portfolio by a number of 451 Research analysts who were present at the event.

The 451 Take

NTT Ltd has been created to address the new reality of the managed-services-centric approach to delivering IT and communications as its whole market moves from hardware to software. It's an ambitious venture by the Japanese giant to accelerate its global ambition in a way that's very different from past efforts. Its most daunting challenge could be reimagining its iconic Japanese brand, which has been established for more than a century, as it seeks to become a global brand.

On a mission

It has been three months since NTT Ltd officially unveiled its new branding; however, it recently gained the attention of its target audience as it greeted the world via its inaugural 'Hello' analyst event. For the first time, all offices from the 28+ acquired and inherited companies (spanning 57 countries) included under NTT Ltd share a consistent mission and vision under a unified brand. Putting in place operational frameworks and bringing in new models (e.g., dual reporting processes and joint pursuit teams) with checks and balances is clearly important to drive commercial success, but it's the company's ability to parlay its integrated capabilities into a maneuver that makes sense to its target segments – global MNCs, Japanese MNCs expanding outside of their home turfs, Asian MNCs and Japanese-funded local enterprises – that has the potential to place it ahead of the competition.

Thus far, the new senior management team seems unabated. Aside from infusing the market with a new level of energy, it's forging a new kind of collaboration – from co-development to joint selling activities. Evidence of early success includes capturing 600 net new IP projects via its InnerSourcing program of internal collaboration and ideation. In Asia-Pacific alone, it has already generated 10 large opportunities for smart city initiatives and claims a lot more interest from other industry verticals leveraging the joint pursuit model. While complete integration won't happen overnight, NTT has mapped out an aggressive game plan with preset milestones over the next 24 months. What it needs now are some meaningful customer stories that will help validate its integration frameworks and justify any transformation levers. Looking ahead, perhaps the most daunting challenge will lie in NTT's ability to reimagine its iconic Japanese brand that has been established for more than a century as it seeks to become a Top 20 global brand.

At first glance, NTT Ltd. looks very much like a Dimension Data takeover, given that the majority of the executive leadership team are from the company that NTT Communications acquired back in 2010. However, beyond headquarters in London, considerable effort is under way to integrate the NTT Com and Dimension Data teams by implementing a common culture squarely focused on standardized processes for building, selling and delivering offerings to customers.

Prior to the reorganization effort that began last year, NTT Communications' regional businesses (Americas, Europe, Asia-Pacific) operated somewhat independently of each other and marched to the beat of their respective regional drums, while Dimension Data began playing a more active integration/cross-group collaboration role around 2015. Going forward, NTT LTd.'s challenge lies in simultaneously streamlining operations, integrating and standardizing the service catalog, and balancing regional focus and customer service with global operational efficiency. 

How the company integrates and monetizes its three most recent acquisitions – Capside (a Spanish born-in-the-cloud MSP focused on hyperscaler cloud management); Transatel (a Paris-based mobile technology/IoT provider); and Symmetry (a US-based managed/hosted SAP platform provider for IoT) – will be instructive as a case study in NTT Ltd.'s ability to execute on its global ambitions.

Eye on the prize

NTT Ltd's logo looks like the Riemann zeta function, a famous mathematical problem that will unlock many mysteries but has yet to be solved. NTT faces similar challenges – it has great potential, but it's locked up in the complexity of multiple organizations yet to be fully integrated post-acquisition (19 alone over the past nine years). But unlike Riemann, NTT is jumping forward with solving the complexity issue by unifying Dimension Data, NTT Security and NTT Communications under the NTT Limited brand. It is building processes and investing in people to aid cross-selling and cross-working – it claims $1bn in cross-sold revenue in FY2018, for example. But like Riemann, it won't be solved overnight; it'll take years of collaboration, which NTT is instilling in its workforce through launch events and investment in innovation, managed services, and cross-proposition capabilities such as hybrid cloud and SD-WAN. Whoever solves the Riemann zeta function will win the Millennium Prize of a million dollars. NTT is aiming higher: it is targeting $15bn of revenue in 2023 driven by managed services, a bold CAGR of over 6% from $11bn today.

Full stack

NTT Ltd begins with a full-stack offering across consulting, applications, managed services and infrastructure. Its go-to-market strategy is organized around the themes of intelligent business, intelligent workplace, intelligent infrastructure and intelligent cybersecurity. Its ambitious plan is to deliver an integrated customer experience across its services within two years, using a subscription model rather than a perpetual license, with a single bill, service and support. NTT Inc's One NTT plan seeks to extend this across its NTT Ltd and NTT Data assets. The One NTT pilot running in the US will be extended worldwide over time.

Key to success will be NTT Ltd's Transformation and Platform Services (TPS), which include consulting, technical, support and managed services (managed on-premises and cloud infrastructure and application services). Its large partner ecosystem will be critical, and it has created a new client portal that provides users a lens into infrastructure, business, business processes and IT systems for consumption management and optimization.

As well as integrating and expanding its global datacenter capacity (a forthcoming report will cover this topic), it plans to grow NTT Security into a managed security service provider (MSSP) leader and turbocharge its high-growth offerings – cloud communications, application services and global networks. It will scale up its managed hybrid cloud, managed SD-WAN, contact center and managed collaboration offerings and invest in IoT, analytics, artificial intellignce and robotics. The goal is to industrialize new offering development by eventually using 80% standardized components and 20% custom.

No less important is the company's internal transformation to support the model. In addition to combining some 28 acquired properties, NTT Ltd is undertaking its own cloud-driven digital transformation. Just as the customer experience is front and center in its customer-facing strategy, the employee experience is the linchpin of the internal IT strategy, which is essentially moving to the cloud and using serverless computing where possible.

Figure 1
NTT Holdings Organizational Structure NTT Holdings

It's a software world (but it runs on hardware)

Akio Morita, the cofounder of Sony, once described software as the wheels that drive hardware. He was speaking during a time when the digital revolution was starting to hit consumer electronics, and his company and arch rival Philips were battling for supremacy in their quest to create the next-generation music and video players we would all use. But they realized that without new software to play back on their digital systems, all that hardware they were creating would be worth nothing. This is what prompted Sony to acquire CBS Records and Columbia Pictures in the late 1980s.

While Morita spoke specifically about software's importance, software cannot exist without hardware; it is a symbiotic relationship. Today, 40 years after Sony acquired the 'wheels' to drive its machines, another venerable Japanese company is telling us that we live in a world where hardware is increasingly diminishing as software itself is the driver. NTT is certainly not alone here; in recent months, companies such as Ensono, Rackspace and Pulsant have each told us how their go-to-market strategies are now less about pushing 'hardware' – such as datacenter and network infrastructure – and more about software-based products – such as XaaS, digital platforms and customer portals.

NTT's vision, while certainly bold, is beset with challenges, especially for a global entity of Japanese parentage. It is aiming to present itself as a unified multinational company with a single brand and yet offer a 'local' presence with services tailored for local customers. But no matter how providers such as NTT differentiate their services in a bid to stand out in a crowded market, what will always remain vital is the solid infrastructure – the 'hardware' – needed to underpin those offerings. So while Masaaki Moribayashi, NTT Ltd's head of ICT infrastructure services, may look back at his time as the company's CEO of Europe and describe datacenters as a 'headache,' he knows that reports of the death of such infrastructure are greatly exaggerated. Nor does it appear to be diminishing. NTT  has set aside more than $7bn for datacenter expansion over the next four to five years, but it's likely to burn through that in three as it considers investing in new markets such as in Europe and Africa. The latter, in particular, is in dire need of datacenters – this is the 'hardware' that will drive the next-generation services that enterprise users across much of the continent are now demanding.

Strength in security

In security, NTT is known as an acquirer of managed security service providers that have given it a global presence. The Integralis and Secode additions brought a strong position in Europe, while its purchase of Solutionary introduced the NTT brand to the North American market. These acquisitions built on NTT's existing security initiatives and have been augmented with the security capabilities of NTT's other businesses. With the combination of 28 companies and brands that now form NTT Ltd., NTT Security operates as a division of that entity, with more than 2,000 personnel and facilities including 10 security operations centers and seven R&D centers worldwide.

Traditional services in security operations, staff augmentation, incident response and security research are not, however, the sole focus of NTT Ltd's security investment. The Dimension Data business, for example, is a group strongly focused on the future of IT and the transition to cloud-centric services and technologies essential to competitors in both systems integration and emerging infrastructure. NTT Ltd is also a worldwide services partner for many well-adopted enterprise application platforms such as SAP.

These focal areas are also a high priority for security, giving NTT Ltd an opportunity to cross-sell and upsell its 'security by design' concept showcased at the 'Hello' event, and underscored by recent moves such as NTT Security's recent acquisition of application security provider White Hat Security. Also highlighted at Hello were NTT's investment in current trends in security automation and orchestration. Security automation is tailor-made for service providers like NTT Security, which has the resources to capitalize on repeatable automation to streamline security operations for its clients. This not only optimizes NTT's own efficiencies; it also brings this same 'secure by design' philosophy to a world that badly needs it: the collection of too-often disconnected technologies and practices of security accumulated over time in response to a changing threat landscape.