GDC profits from IT foray

By PETER GRIFFIN IT writer

Listed telecoms contractor GDC Communications' move into selling IT services is paying off.

Revenue from a reseller deal signed with Telecom is expected to top $10 million in the next year.

Telecom will start selling a GDC-developed service called iVASP, which lets customers buy software on an ASP (application service provider) model, paying a monthly fee for software licences and IT support, server hosting and network infrastructure provided at a central site by GDC.

Its share price jumped 19c yesterday to close at $1.15 as the market, so far sceptical of the $9 million investment GDC has made in its ASP operation, absorbed news of the two-year contract.

GDC managing director Paul Honnor said iVASP had generated sales of $1.7 million in the six months to June 30, but sales had the potential to increase 10-fold in the next year as Telecom's marketing muscle gave iVASP the customer reach GDC would not have achieved on its own.

"Telecom is increasingly becoming a data circuit sales company and iVASP is a good fit for them. They also like the outsourcing model," said Honnor.

GDC would target businesses with 20-100 "seats", so it was unlikely to come up against IT services giants EDS, IBM and Datacom, he said.

The deal was non-exclusive, so GDC could sell iVASP through other channels.

"As a company you can buy a slice of access to a firewall, an IT department of 50 heads, exchange servers, and pay by the month," Honnor said.

Although application service providers were much-hyped during the high-tech boom, they have failed to take off in New Zealand in a big way.

Esolutions, the Telecom, EDS and Microsoft-backed e-commerce partnership, was formed in early 2000 with the aim of selling software over the internet.

After embarking on a high-profile but fruitless marketing campaign, loss-making Esolutions was finally bundled into Telecom's Advanced Solutions Group in May.

For GDC, revenue flowing from iVASP will reduce its reliance on the more traditional contracting and telecoms hardware businesses.

GDC turned a profit of $1.4 million in the six months to June 30 on revenue of nearly $30 million. That was down 12 per cent on the previous year as GDC sold its Eftpos and aerial divisions.

The iVASP deal may also put GDC on a better footing when bidding for hotly contested Telecom "patch" contracts, which make up a large chunk of its revenue. Of the 34 contract areas nationwide, GDC holds seven, with the rest shared among Downers, Alstom and Cabletalk.

In June, Telecom extended two Auckland patch contracts with GDC to August 2004.

Honner said iVASP could be sold overseas, and Microsoft had shown strong interest in the service.

Part of the Telecom deal required GDC to gain ISO9001 accreditation for iVASP, a process that had cost more than $1 million.

GDC Communications