VADS keeps up the beat

VADS Bhd, a managed network services (MNS) company, expects to grow its business by 10% to 12% per annum over the next two years, spurred by strong demand for its services by organisations that outsource their information technology (IT) requirements. 

Executive director Dennis Koh Seng Huat said there was a trend for local and foreign companies to outsource their IT requirements to experts so that they could focus on the task of growing their business. 

“We are well-positioned to take advantage of this surge in demand for outsourced IT services globally,” he told StarBiz recently.  

VADS, a 69.52% subsidiary of Telekom Malaysia Bhd (TM), could also benefit from its parent company’s forays into Sri Lanka and Indonesia, via the latter’s mobile units, Dialog Telekom Ltd and PT Excelcomindo Pratama, respectively. 

Moreover, Koh said, VADS would be extending its service to the two overseas units through a centralised messaging centre in an attempt by TM to maximise the utilisation of assets within the group’s operations abroad. 

Furthermore, in July, VADS secured a project worth RM44.3mil from Accenture Sdn Bhd, a global management consulting, technology services and outsourcing company, to supply and maintain IT hardware, software and related services for customer relationship management solutions for Telekom, a client of Accenture. 

Dennis Koh

The company’s other clients include MISC Bhd, the AmBank Group, Malayan Banking Bhd, Public Bank Bhd, Gas Malaysia Sdn Bhd and Malaysian Airline System Bhd. 

“VADS' competitive edge lies not only in its ability to offer domestic and international MNS, but also its links with TM,” Koh said. 

But the company has not rested on its laurels. Instead, VADS has expanded its portfolio of managed network services to include managed contact centre services (MCCS) to keep pace with changes in technology and needs of various organisations. 

Koh said MCCS was a new and fast growing division that would generate significant earnings for VADS in the near future. 

The company first ventured into the provision of MCCS in mid-2004 and, to date, it has made good progress managing the Streamyx and Celcom (Malaysia) Bhd contact centres.  

An analyst with AmResearch said the MCCS unit could add RM45mil to VADS' turnover in the current fiscal year ending Dec 31, 2005 (FY05) and RM56mil in FY06.  

The company’s maiden MCCS project was a RM26mil contract secured in April 2004 to manage TM Net’s Streamyx customer interaction centre. 

“This will see MCCS’ contributions to VADS’ turnover rise from 6% in FY04 to 16% this year,” he said. 

The contract was then followed by a bigger 3-year contract worth RM134.7mil for the provision of contact centre transformation outsourcing from Celcom.  

The contract with Celcom involves the enhancement of revenue, which VADS is making good progress in.  

In addition, the analyst said TM’s ongoing restructuring exercise could also be a boon for VADS.  

“Because of VADS' strong links with TM, more contracts could be in the horizon and VADS is eyeing contracts for the other 23 contact centres within TM,” he said.  

The analyst also said although VADS was essentially an IT-based company, it stood out against its competitors in some ways. 

“VADS’ edge over its rivals is in its ability to offer domestic as well as international MNS, while its competitors only offer domestic MNS,” he said. 

The analyst also said VADS had established strong links with international multinational companies via tie-ups and partnerships. A case in point is VADS' partnership with AT&T Corp and Nasdaq-listed MCI Inc to offer a portfolio of global networking services in Malaysia.  

AT&T and MCI are both leading global communications providers.  

“VADS believes the collaboration with MCI, which began in October 2004, would generate revenue of over RM10mil in the current financial year,” he said, adding that VADS was ready to tap the strong demand growth for MNS globally.  

The company has been pro-active in introducing new services to enhance its portfolio of MNS to include VADS SecurePro, a comprehensive managed security solution (against virus attacks and security breaches), VADS Premier Facilities (a neutral data centre for corporations) and VADS Premier iPBX (an Internet protocol-based private branch exchange). 

Koh said VADS did not face any real competition for its managed security services and, since March 2005, had secured about 10 accounts. 

“We are optimistic VADS would secure three more contracts for managed data centre services and it is in the midst of sealing a deal with Malaysian International Shipping Corp for managed iPBX,” he said, adding that the company was currently working with an insurance company to handle its outbound calls.  

The services for this insurance company are expected to be rolled out before year-end. 

On the outlook for the MNS and MCCS businesses, the analyst said it was good, given the growing trend of outsourcing of IT needs.  

He agreed with Koh that the rapid changes in technology, difficulties in hiring experienced IT personnel, as well as increased demand for communications beyond geographical boundaries were factors prompting more organisations to consider MNS. 

The analyst said VADS' “pay-as-you-use model” for MNS relieved organisations from concerns on heavy capital investments or day-to-day maintenance of the applications and supporting infrastructure. 

As a market leader, the brokerage believed VADS was poised to gain from this steady growth in demand for MNS.  

VADS, the analyst said, had managed to clinch contracts worth RM13mil in the first half of this year with some earnings expected to be recognised in the third quarter as services got installed. 

The new contracts include jobs for Singapore Telecommunications. 

The company has a good track record, buoyed by a recurring income of about RM200mil, of which RM150mil came from the MNS division and RM50mil to RM70mil from its MCCS unit for the last financial year ending Dec 31, 2005.  

VADS achieved a net profit of RM8.1mil on a turnover of RM127.1mil for the six months ended June 2005.  

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