Datacom: How New Zealand’s Biggest IT Services Firm Stayed Private

Datacom is proof that a technology company can reach NZ$1.5bn of revenue without venture capital, a stock-market listing or a famous founder, provided it has patient owners and is content with thin margins. This article explains where the company came from, how it makes money, who owns it and why they have never floated it, what the latest results show, and whether a low-margin services firm can prosper as artificial intelligence changes what clients will pay for. It is part of the New Zealand Company Stories hub.

How did Datacom start?

Datacom began in Christchurch in 1965 as Computer Bureau Ltd, set up by two accountants, Bernard Battersby and Paul Hargreaves, who bought a mainframe with about £30,000 from a group of clients and sold processing time to local businesses.

The bureau model was the cloud computing of its day. Few New Zealand firms could afford a computer, so they sent their payroll and ledgers to a shared machine and received printouts back. The company was renamed CBL in 1968 and Datacom in 1984, by which time it had spread to Wellington and Auckland and begun writing software as well as running it.

Its pattern of growth was set early. Datacom expanded by adding adjacent services for existing clients and by buying small specialists: a merger with the Wellington firm CCL in 1989, a move into Australia in the 1990s, and a string of acquisitions in the 2000s in data centres, payroll and local-government software. Payroll, the first service it ever sold, remains one of its most durable. Datacom still processes the pay of a large share of New Zealand’s workforce.

How does Datacom make money?

Datacom sells technology labour and infrastructure to large organisations. Since 2024 it has been organised into four lines: professional services, managed operations, software-as-a-service products and infrastructure products. Most revenue comes from multi-year contracts with governments and corporates.

• Professional services: consultants and developers who design, build and modernise systems, billed by time or by project.
• Managed operations: running a client’s IT, service desk, networks, cloud estate and security on an outsourced basis, usually on contracts of three to seven years.
• SaaS products: Datacom’s own software, notably the Datapay payroll platform and systems for councils, sold on subscription.
• Infrastructure products: data-centre hosting, hardware, software licences and cloud resale.

The mix explains the margins. Reselling hardware and licences inflates revenue but earns little. Labour-based services earn more but scale only by hiring. The company’s EBITDA margin has hovered around 8% to 10% and its net margin is typically below 3%. In FY26 NZ$1.58bn of revenue produced NZ$20m of net profit, a margin of 1.3%.

Government is the anchor customer on both sides of the Tasman. Datacom runs contact centres, networks and core systems for public agencies, and in Australia it has won federal and state contracts for infrastructure and for modernising old applications. That work is steady but politically exposed: when Wellington cut public-sector spending from 2024, Datacom’s home market shrank with it.

Who owns Datacom and how is it governed?

Datacom is an unlisted company with two main shareholders. Evander Management, the investment vehicle of John Holdsworth and his family, owns about 55%. The Guardians of New Zealand Superannuation, which manage the NZ Super Fund, own roughly 44%. Staff hold a sliver.

Mr Holdsworth, a Wellington businessman, joined the company in the 1970s, led it for decades and chaired it until 2012. His family’s stake is the product of patient accumulation rather than a buy-out. The other large block has changed hands only once. New Zealand Post acquired a 35% holding in the late 1980s and held it for more than two decades before selling it in 2012 to the NZ Super Fund for NZ$142m. The fund has since lifted its stake.

For the sovereign fund Datacom is an unusual asset: a direct, long-term holding in an unlisted domestic operating company, managed alongside a portfolio that is otherwise overwhelmingly global and passive. Its investment approach is described in the article on the NZ Super Fund. The board has an independent chair, the former Foodstuffs chief executive Tony Carter, and Greg Davidson has been group chief executive since 2018.

Although private, Datacom behaves in some respects like a public company. It publishes an annual report and briefs the press on its results each winter, which is why its numbers are known at all.

Why has Datacom never listed on a stock exchange?

Datacom has not listed because neither major shareholder needs to sell, the business funds its own growth from cash flow and bank debt, and its low, cyclical margins would be judged harshly by a public market fixated on quarterly earnings.

A flotation has been mooted repeatedly, usually by brokers. On paper Datacom would rank among the larger companies on the local exchange and would give it a technology stock of scale, something it has lacked since Xero left, as recounted in the article on the NZX’s shrinking market. The owners have never taken the bait.

Their reasoning is practical. A family holding company and a fund with a horizon measured in decades can tolerate a year like FY26, in which profit nearly halved because the company chose to invest. Public shareholders in an IT services firm might not. Private ownership also lets Datacom price long contracts aggressively to win them, without having to explain a thin first-year margin to analysts.

The cost is a lack of acquisition currency and of liquidity for staff. Datacom cannot pay for deals in shares, which helps explain why its purchases have been small, and employee shareholders can sell only through internal arrangements.

What were the key strategic turning points?

Datacom’s defining moves were crossing the Tasman in the 1990s, building its own data centres in the 2000s, retreating from Asia and other distant markets to concentrate on Australasia, and a 2024 reorganisation around four lines of business.

Australia mattered most. The New Zealand market for outsourced IT is small and heavily dependent on a single government; Australia’s is several times larger. Datacom built a substantial Australian business in contact centres, managed services and government work, and in recent years it has been the engine of growth while New Zealand stagnated. Roughly half of group revenue now arises across the Tasman.

Less successful was a push further afield. In the 2010s Datacom opened offices in Asia, Europe and America and at one point operated from 36 locations. Profit in FY18 fell 46% as investment ran ahead of returns, a result that reads much like the latest one. Mr Davidson, who took charge that year, subsequently pulled the company back to its two home markets.

FY23 was a second low, with profit of only about NZ$8m. The response was the four-line restructure, a new finance chief and a rebuilt executive team. Profit recovered to about NZ$37m by FY25 before the investment-led dip of FY26.

What do the latest numbers show?

For the year to 31 March 2026 Datacom reported revenue of NZ$1.58bn, up 6.8%, EBITDA of NZ$133m, down from NZ$147m, and net profit after tax of NZ$20m, down 46% from NZ$37m. Operating cash flow fell to NZ$75m from NZ$164m.

The revenue figure is the best for several years: sales had been stuck between NZ$1.47bn and NZ$1.49bn from FY23 to FY25. The growth came largely from Australia and from infrastructure. Headcount rose to about 5,935 from 5,375 a year earlier, and the number of locations to 32.

The profit figure reflects a decision. Datacom stepped up what it calls strategic capital investment, the centrepiece being the acquisition of a data centre at Highbrook in East Auckland from the operator T4, which it is upgrading for the dense, power-hungry computing that AI workloads require. That takes its New Zealand data-centre footprint to five sites. The lower operating cash flow suggests working capital also moved against it.

Management presents the year as a bet on sovereign capacity: computing that sits inside the country, run by a locally owned firm, for government and regulated clients that are wary of sending sensitive data offshore.

How is artificial intelligence changing Datacom’s business?

AI cuts both ways for Datacom. It lowers the cost of delivering software projects and opens demand for local AI infrastructure, but it also threatens the billable hours, service-desk seats and contact-centre work on which much of the company’s revenue rests.

Mr Davidson has called AI the most significant technology shift in decades. The company says AI agents now write as much as 70% of the code in some application-modernisation projects, cutting costs by 30% to 50%. It has put an AI assistant into Datapay and built AI tools for clients, among them a search function for the Financial Markets Authority and quality-checking agents for a food producer.

The commercial question is who keeps the saving. If a project that once took a hundred developers now takes fifty, a firm that bills by the hour halves its revenue unless it wins twice as much work or changes how it charges. Datacom is trying to move towards fixed-price and outcome-based contracts and towards its own products, both of which let it retain productivity gains. The data-centre investment is the other half of the answer: selling capacity rather than labour.

Who are Datacom’s competitors?

Datacom competes with global outsourcers such as Accenture, DXC, Kyndryl, Fujitsu and the large Indian firms, with consulting houses including Deloitte, and with local telecoms and cloud providers. Hyperscale cloud companies are both partners and rivals.

Its pitch against the multinationals is locality: staff, data and decision-makers inside the country, and an owner that will not be restructured from abroad. Against smaller local firms it offers scale and a balance sheet able to underwrite large contracts. In New Zealand its nearest domestic rival in managed IT has been Spark, whose own retreat from parts of that market is covered in the article on Spark New Zealand.

In data centres the field is more crowded and better capitalised. Microsoft and Amazon have opened or are building cloud regions in New Zealand, and specialist operators backed by infrastructure investors are adding capacity quickly; the largest, CDC, is described in the article on Infratil. Datacom’s five sites are modest by comparison. Its advantage is that it sells the managed service on top of the floor space.

What are the biggest risks facing Datacom?

The main risks are margin erosion as AI automates labour-based services, dependence on government spending in two countries, the capital intensity of data centres relative to Datacom’s slim profits, and security or delivery failures on critical public systems.

Public-sector exposure is double-edged. Governments pay reliably and sign long contracts, but they also change priorities with elections, and New Zealand’s fiscal squeeze since 2024 has hit consulting and contractor budgets hard. Australia has offset that so far, though its own governments have pledged to trim spending on outside contractors.

Talent is a perennial constraint. Datacom competes for engineers with better-paying product companies such as Xero and with employers across the Tasman, and its people are its cost base. Finally, there is succession: the majority owner is a family vehicle whose patriarch built the company, and how the next generation regards a low-margin, capital-hungry asset is not a matter of public record.

What can founders and CFOs learn from Datacom?

Datacom shows that patient private ownership can build a large, durable technology business in a small market, and that the trade-off for independence is slower growth, modest returns and the need to fund every investment from internal cash.

• Match the owner to the business model. A services firm with cyclical, single-digit margins suits long-horizon holders. Sixty years with a handful of shareholders is not an accident.
• A minority institutional partner can replace a listing. The NZ Super Fund gives Datacom governance discipline and credibility without the costs of a public market.
• Diversify geography before you must. Australia was a slow build that now carries the group when New Zealand is weak.
• Retreat is a strategy. Withdrawing from Asia and other far-flung offices restored focus after the FY18 setback.
• Watch cash conversion. Operating cash flow more than halved in FY26. In a thin-margin business, working capital can do more damage than the income statement reveals.

The harder lesson concerns scale without leverage. Datacom’s revenue is not far short of Xero’s of a few years ago, yet it would be valued at a small fraction of it, because every additional dollar of services revenue requires additional people. Product companies such as Gentrack and Vista Group illustrate the alternative.

What happens next for Datacom?

The next two years will test whether the data-centre and AI investments lift earnings, whether products such as Datapay can become a larger share of revenue, and whether Australia continues to compensate for a subdued New Zealand market.

The Highbrook upgrade should begin to earn its keep as high-density capacity comes online, provided local demand for sovereign AI computing materialises at the prices Datacom needs. A recovery in New Zealand public-sector spending would help, though it is not something the company controls.

The ownership question will not go away. The NZ Super Fund reviews its direct holdings periodically, and any decision by either shareholder to sell would probably mean a trade sale or a flotation, since few New Zealand buyers could write a cheque of that size. For now both appear content. In an industry that has consolidated relentlessly into a few global giants, Datacom’s most distinctive achievement may simply be that, at sixty, it is still independent.

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