TDS Buying IT Expertise, Not Burying It

Every telecom company that expects to survive is acquiring the expertise to build a cloud and managed services strategy. In that regard, Telephone & Data Systems Inc. (Amex: TDS) is joining the crowd by buying Iowa-based Vital Support Systems, an IT value-added reseller and support company. (See TDS Pays $45M for Vital Support.)

But TDS, which is parent company to Midwest telecom operator TDS Telecom and also wireless operator U.S. Cellular Corp. (NYSE: USM), is doing things a bit differently from some of its telecom brethren. Instead of rolling up its acquisitions under the TDS banner, the company operates a number of units that retain their own identities within its TDS Hosted and Managed Services unit.

Thus, Vital -- an acquisition announced by TDS Monday -- is joining VISI Inc., TEAM Technologies and OneNeck IT Services Corp. as units within TDS HMS.

"They are allowing these companies to maintain their own brand and presence," says Bernie Arnason, managing partner of Pivot Group Media and a longtime consultant to smaller telcos. "We see other companies rolling up the companies they buy – from a management and a branding perspective, at least -- into the new parent company."

Vital will retain its management and staffing because the company is well-established as a provider of IT hardware and software expertise, says Bill Megan, TDS HMS group president. Instead of consuming the new company, TDS will now add its networking, cloud and collocation capabilities to what Vital can sell.

"We think they are in an enviable position in the markets in which they choose to compete," Megan says. "They have the engineering and sales capabilities and the trusted advisor status that they built up over many years. What we bring are very sophisticated enterprise-class cloud solutions and collocation capabilities."

This approach helps TDS avoid the problem some telcos have run into when launching cloud services while trying to train and prepare their sales and support teams for a totally new world of IT services.

TDS could bring Vital's into some bigger markets where Vital doesn't currently have a presence, including Madison, Wisc., and the Twin Cities area of Minnesota. But deciding where to expand will be done on a market-by-market basis, as TDS targets mid-sized companies -- with 100 to 2,000 seats -- within its service region.

So Megan doesn't see this acquisition as any kind of integration challenge for TDS, just as an opportunity to sell more of its cloud and managed services to enterprises, and a chance for Vital to more fully serve customers that might be looking for cloud-based IT services.

TDS will continue to look for such acquisition targets and will continue organic expansion as well, Megan says.

That kind of growth is imperative for telcos as traditional revenues wane and there is greater competition for business services, Arnason says.

— Carol Wilson, Chief Editor, Events, Light Reading

joanengebretson 12/5/2012 | 5:30:09 PM
re: TDS Buying IT Expertise, Not Burying It

Agreed. I didn't mean to imply your post was only about the naming issue. I was just picking up on one aspect of it.

joanengebretson 12/5/2012 | 5:30:09 PM
re: TDS Buying IT Expertise, Not Burying It

Hello Carol

It's true that when telcos make acquisitions, they typically deep-six the other company's name. But there have been a few exceptions when it comes to data centers. For example, Terremark is still Terremark. And Cyrus One is still Cyrus One.

Keeping the Cyrus One name was a smart move for Cincinnati Bell, since they're planning an IPO for Cyrus One.

I don't think that's the motivation for Verizon or TDS (especially not Verizon). But perhaps it's not a bad idea to keep that option open (as well as to preserve the IT strengths you reference.)




cnwedit 12/5/2012 | 5:30:09 PM
re: TDS Buying IT Expertise, Not Burying It

I think in this case, it's more than the name - they are keeping the management and the talent, In fact this is as much about buying the talent and leveraging the relationships that Vital has built up as anything else.

Verizon did that with Terremark as well, although initially they moved their own folks over to run the new company. I'm not as up to speed with what Cincinnati Bell did with Cyrus One.

I think TDS is realizing this is where the growth is and is acquiring talent here as a result.


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