As the LATAM ICT market rapidly catches up to North America and Europe in terms of adoption of digital-related technologies and, most importantly, a transformational mindset, Logicalis’ investments across its Digital Accelerators and Digital Solutions portfolios, backed by a strong foundation enabled by the company’s heritage as an infrastructure provider, strengthen its value proposition when it comes to scale and trust among regional buyers. With Logicalis LATAM’s footprint spanning virtually all (99%) of the region’s 500 largest companies, the next chapter for the company will be about growing mindshare through cross-selling and upselling services in new areas. Adopting an integrated approach by blending business consultants, security specialists and Digital Accelerators’ professionals will enable Logicalis to elevate the value around digital transformation (DT). Remaining cognizant of pricing and budget constraints among regional buyers will likely compel Logicalis to further adopt outcome-based contracts, a necessary step as clients seek to offload the financial burden of managing legacy infrastructure to vendors’ “as a Service” offerings.
Strong foundation provides reliable use cases as Logicalis strives to shift its value proposition
Logicalis’ roots in LATAM date back to 1960 and engineering services company Promon, which currently owns a 35% stake in the company and boasts a large footprint across most of South America. The combination provides the integrated scale necessary to support price-sensitive clients, especially as most of the services opportunity is fueled by legacy infrastructure. According to Logicalis’ executives, 80% to 90% of the current market opportunity is tied to “lift and shift”-type activities, but the trend is rapidly changing toward scalable transformation. In TBR’s view, Logicalis’ heritage supporting clients’ IT infrastructure will play to the company’s advantage as regional buyers increasingly adopt and seek support for managing both the infrastructure and software layers of their hybrid IT environments. According to TBR’s December 2019 Digital Transformation Insights Report: Voice of the Customer, “Cloud computing remains the most common technology investment area for DT initiatives. Removing the cost and capacity constraints of fully on-premises infrastructure enables enterprises to explore new ways of working and leveraging their data through mobility, IoT, analytics and collaboration software. Complexity continues to drive demand for integration tools, new skills and management services.” We believe as regional buyers gradually shift toward “as a Service” offerings, Logicalis’ value proposition will also have to adapt or even lead the change when it comes to risk sharing and new pricing models.
While the company’s business consulting unit spearheads outcome-based pricing initiatives, we believe Logicalis could further accelerate its value proposition transformation if it approaches every opportunity with scale in mind from the beginning. To execute on such a strategy, the company would need to further build out its consulting and application services capabilities, with acquisitions in these domains highly likely.
We acknowledge the volatile environment Logicalis LATAM must navigate to operate in, but the company has an opportunity to use the region as a test bed to deploy DT-ready frameworks across global operations. For example, Logicalis’ Software Defined X unit’s NEPAL framework provides a strong automation-centric use case around provisioning, troubleshooting, monitoring and event-oriented services supporting SD-WAN and SDN environments. This work will prove to be a steppingstone toward 5G infrastructure, a key area considering 50% of Logicalis LATAM’s revenue stems from telecom clients, largely fueled by Logicalis’ relationship with Cisco (Nasdaq: CSCO) and its work providing infrastructure management services.
Additionally, Logicalis’ services portfolio, enabled by Optimal, an integrated, automation-based services platform, acts as a strong backbone to the company’s infrastructure heritage and bridges clients’ legacy and new infrastructure support needs, helping Logicalis to ensure knowledge sharing across teams is standardized. As Logicalis continues to manage technology maturity across various countries in the region — being an incumbent in some and the challenger in others — addressing broad market challenges, such as specialized skills shortages, likely presents the greatest opportunity for the company. Working with regional universities to establish DT-aligned courses and curricula could help Logicalis deepen its roots and expand its addressable market for recruitment.
Logicalis Latin America Analyst Summit: Recognizing LATAM’s status as the region contributing the largest share of revenue and offering the most comprehensive portfolio opportunities, Logicalis tapped its Brazil headquarters in Sao Paulo to host an industry analyst summit. Operating under the slogan “Architects of Change,” a tagline the company recently adopted as part of its rebranding, Logicalis hosted a client and more than two dozen regional and international analysts at a two-day event, showcasing the company’s ability to drive change in a rather volatile market — from both a macroeconomic and political perspective. Logicalis’ ambition to transform from a reseller into a solutions provider is well aligned with the company’s investments in its portfolio, partners and staff.