Acquisitive Ricoh sets out IT services ambitions

Ricoh is becoming the latest in a growing line of Japanese technology giants to build a substantial IT services organisation.

Following in the footsteps of Fujitsu, NTT and Hitachi, the printing giant has been ramping up its investment in technology services since the turn of the decade, through one of the more intriguing M&A strategies we have seen in the sector.

In Europe alone, the company has snapped up several traditional IT services providers (Germany’s ADA, Italy’s NPO Sistemi and Spain’s Aventia), a UK information management consultancy (Ridgian) and a workplace digital transformation specialist (Barcelona-based Tecno Trends).  Further deals are on the radar, with the company having set aside a warchest of €1.6bn for acquisitions in the next two years, with half of that total set aside to bolster its “Office Services” division.

Office Services is the second main pillar of Ricoh worldwide, with sales rising 5% to €3.5bn last year. This unit brings together three main threads: IT services (implementation and managed services from the device to the data center level), communications services (collaboration and videoconferencing systems) and business process and application services (managed document services and applications to automate back office processes).

The Office Services wing is a 3,300-employee strong, €750m organisation in Europe, with 80% of sales coming from IT services. There are three target client groups. The first is what it calls “SMB Plus” (up to a couple of thousand seats) where it positions itself as a one-throat-to-choke, full-scope provider. The second group goes up to 20,000 seats and focuses on large national organisations (with a growing track record in the retail, insurance and logistics space) or companies with a presence in two to three countries. 

The company also punches at an enterprise level (20,000 seats plus), certainly in the print managed services area (it recently won a major deal with Shell to run the oil giant’s cloud-based print service) but also by working as a local delivery partner to bigger international partners such as Infosys and Fujitsu. Another increasingly important partner group are facilities management companies such as JLL and CBRE, who work with Ricoh to handle the design and fit out of workplace technology.   

David Mills the CEO of Ricoh Europe, told us that while there is a strong overlap between the group’s IT services and traditional print customers, it does have standalone ITS clients. For example, Vodafone is a long-standing customer for network equipment support services. Mills said that the company’s ability to provide local, client-facing “feet on the street” is often a key factor behind its customer wins. 

One of the most interesting aspects of Ricoh’s IT services business is that it increasingly covers the support of non-traditional devices, such as smart lockers (an area it says is growing rapidly, in part due to the rise of shared workspaces), interactive white boards in the retail sector, and warehouse robotic systems. 

Ricoh’s push into areas such as IT services is being driven by the slow, long-term decline of its print business (55% of group sales in its last financial year) as its clients ditch paper – although there remains some growth opportunities in areas such as providing the head technology for 3D printing. 

The challenge for Ricoh with the Office Services wing will be to continue to knit together the distributed clusters of expertise that it has gained from the acquisitions. One of the most surprising aspects of the Office Services business is how diverse its activities are: from implementing electronic patient record systems in Spain to supporting robotic process automation (RPA) at Rabobank. Ricoh operates as 25 different opcos across the EMEA region, and picking the right offerings to turn into multinational propositions will be key to its future growth. 

The company is making some progress in building a more coherent story on the delivery side, having unveiled a new service centre in Warsaw last year, which provides infrastructure management services to clients across several geographies. This is an important step, particularly in being able to offer consistent, standardized offerings to international prospects.

Mills expects the Office Services business to grow at a double-digit percentage in Europe, based on the existing pipeline. He acknowledges that the company has rethought its M&A strategy having struggled with some earlier loss-making turnaround plays, and states that the focus is firmly on profitable targets in areas such as security, or that fill out its geographical coverage.

With many businesses looking to rethink their approach to the workplace in order to support changing workstyles, Ricoh finds itself in an interesting place. The acquisitions are clearly helping it to progress beyond being pigeonholed as a printing specialist, and it will be interesting to see how it leverages the group investment to take it to the next level.