SunGard to Spinoff “Availability Services” Business – Disruption From The Cloud

 

SunGard announced plans to spinoff its Availability Services division, much like the missing “u” in its name, as the Cloud disrupts its business.

SunGard to Spinoff Availability Services Business
SunGard to Spinoff Availability Services Business

 

SunGard Data Systems Inc. is of the world’s leading software and technology services companies.  They said so themselves.  Last week, SunGard announced plans to spinoff its Availability Services business on tax-free basis to its stockholders.  It plans to complete the spinoff in early 2014.

SunGard’s provides this interesting public look into an otherwise large, but private, company.

Availiability Services, or AS, is one of three SunGard segments.  It provides disaster recovery services, managed services, information availability consulting services and business continuity management software to more than 8,000 customers in North America and Europe.  So, how well does it do it for SunGard?

AS is only about one-third of SunGard’s business.  Like its much larger Financial Systems sister business, its revenue decreased by 4% from 2011 to 2012 and decreased about 2% for the third fiscal quarter from 2012 to 2013.

Does this mean SunGard is offloading a dog and trying to keep the good parts in the consolidated parent?

Maybe.  The future trends do not look good for AS.  As SunGard itself explained,

“[r]ecovery services revenue has been declining due to customers shifting from traditional backup and recovery solutions to either in-house solutions or disk-based, cloud-based or managed recovery solutions.”

This could be a problem.  However, is there a solution?

“In this environment, we have introduced the Managed Recovery Program (“MRP”), which brings SunGard’s expertise to our customers’ disaster recovery operations. Demand has also been increasing for outsourced management of IT operations and applications. We expect these trends to continue in the future.”

Well, chalk this up to the cloud, I suppose.  And SunGard’s AS division is going to go after this newfangled idea.  But, isn’t this what AS already does?

“Additionally, we provide business continuity management software and consulting services to help customers design, implement and maintain plans to protect their central business systems. To serve our more than 8,000 customers, we have approximately 5,000,000 square feet of data center and operations space at over 90 facilities in ten countries.”

Well, sort of but not really.  AS could be seen a type of cloud services provider, but its customers appear to be shifting away to more generalized cloud providers.  Are Box and Dropbox and their ilk the scourge of legacy companies like SunGard’s AS business?  Possibly. 

However, AS is moving into more consulting services and maybe it can be more nimble as a standalone.  Thanks to public reporting requirements as a result of publicly registered debt, we’ll see after the spinoff.

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