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A decisive switch from military to civilian contracts
ON OCTOBER 27, Denel Informatics, part of the state-owned Denel group, changed its name to Ariel Technologies and announced a major restructuring, not only of its business, but of its organisational culture. Denel Informatics, formed in 1994, was formerly part of Denel's Infoplan, which provides information technology (IT) services to the South African National Defence Force. The formation of Ariel Technologies represents a decisive break with this legacy, though it will continue to provide IT services to the defence force. In much the same way that parent company Denel is diversifying away from the manufacture of military hardware, Ariel is seeking new markets and business opportunities. It has already expanded its customer base to embrace both public and private sectors. Today, 80% of Ariel's business comes from the commercial sector of the market, compared to 1994 when 60% of its business was from the defence force. The creation of Ariel Technologies follows a strategic decision by Denel to concentrate on its core businesses and restructure its non-core interests. Ariel is reckoned to be a candidate for eventual privatisation, although this awaits a decision from Denel and the government. "The new name, Ariel Technologies, reflects a total restructuring process that started in April 1997 in response to an initiative from our parent parastatal company to commercialise the IT-focused division," says the managing director of Ariel, Tony Kaleb. "Since then, the group has been totally realigned under a new management team. We have now renamed, re-branded and repositioned the group in real terms and not merely as a windowdressing statement." Other options being considered for the group include the formation of joint ventures and alliances, such as that recently announced with debis IT, or the possible sale of the company to an outside group (though this is less likely). Ariel is a R650-million a year technology group comprising 14 business units divided into three broad areas of focus: professional services; technology products and focused solutions. Professional services cover consulting, system integration and outsourcing, which falls under the recently formed debis IT Services Southern Africa joint venture with debis Systemhaus, the international IT service unit owned by Daimler-Benz. The new joint venture incorporates Cenit System Integrators and Ariel's outsourcing business unit, giving it a ready-made staff complement of 600 and annual projected turnover of more than R220-million in the current financial year to March 1998 - more than a third of projected group revenues. The debis IT joint venture will compete with existing outsourcing companies such as EDS, IBM and Persetel Q Data. Debis is a respected name, particularly in Europe, where companies are finding it cheaper and more effective to outsource their IT requirements to specialised IT service providers capable of bringing world-class skills to the technology race. Professional Services also offers Year 2000 compliance through subsidiary Beyond Y2K Solutions, equipment rental and leasing (Spartan Computer Rentals), software and hardware support and maintenance, site preparation and cabling (Ariel Support Services) and training (Ariel Training). The second area of focus, technology products, includes "best of breed" products, from database, development and connectivity software (Sybase) to world-leading Toshiba notebooks and office automation products (Ariel Toshiba), UNIX-based Sun Microsystems hardware and software (Ariel Enterprise Systems) and networking products (Netsource). Focused solutions encompasses networking, electronic data interchange (EDI), electronic business, intranet and extranet solutions (Ariel Network Solutions), personal identification and access control (Face Technologies), health informatics (Intersolve Health Informatics) and geographic information systems (Computer Foundation). Many of these are niche markets developed by Ariel and in which it faces little competition. Face Technologies, for example, is a partner in the Prodiba joint venture which was awarded the R270-million contract to produce 11 million credit card-type national drivers' licences over the next five years. It also produces similar drivers' licences for Lesotho, Zambia and Egypt. Computer Foundation's unique demographic database was used in planning the 1994 general elections and is now being marketed to companies spanning a wide spectrum of activities. Spartan pioneered the fast-growing computer rental market in South Africa, and Ariel Toshiba markets the world's biggest-selling PC notebooks. Sybase has several unique products and services designed to enhance connectivity and communication between computer systems. Many of its other businesses face stiff competition from established IT groups such as IBM and Persetel Q Data, but the projected growth in these markets over the next few years suggests there is more than enough room for all participants. The demand for cabling and networking solutions, fuelled by explosive growth in the Internet, intranet (internal webs using public communications systems) and extranet (allowing external users limited access to company databases), ensures a steadily expanding market for Ariel Network Solutions and Netsource over the next few years. The first step in changing the group culture was to employ a team of professional managers from the private sector. Chief executive Tony Kaleb has been in the IT industry since 1973 and most recently founded Sybase, of which 51% was sold to Denel. Louis Barclay, executive in charge of strategy and planning at Ariel, was previously managing director of Platinum Technology. George Stander is executive manager of Ariel Solutions. He has been part of the Denel Informatics' management team for some years. Financial director Gavin Rochussen is a chartered accountant and corporate financier responsible for a number of technology mergers and acquisitions and is also partly responsible for bringing Spartan Computer Rentals into the group. Arnie Hill, head of Ariel Network Solutions, is regarded as one of the country's leading experts in networking. Coert Vorster, managing director of debis IT Southern Africa, was formerly a senior manager at IBM with vast experience in outsourcing. Alan Cowley, who heads up Sybase, was a founding director of this company. The unleashing of entrepreneurial forces within Ariel over the past few months has resulted in the sale of three businesses which did not align with the group's focus, and the acquisition of several new ones. Operating costs were slashed by 35% and staff numbers cut from 1 600 to 1 350. The group relocated from Pretoria to Sunninghill, Sandton, positioning itself squarely within Johannesburg's new business hub.
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