NTT Data is the IT services and consultancy division of the Japan’s national telco, the Nippon Telegraph and Telephone Corporation. Having spent most of its history focused on the domestic market, in 2003 the company launched an international expansion plan.

The first phase of the plan was to acquire a handful of small foreign IT providers, to gain experience of integrating acquired businesses.

In the second phase, it built up to larger acquisitions. These included US-headquartered IT offshorer Keane; the former IT services subsidiary of German carmaker BMW, Cirquent; and, last year, Italian IT services provider Value Team.

Until recently, the acquired companies operated with relative autonony, but this year NTT Data commenced phase three. It is currenly in the process of consolidating offices, and uniting its acquisitions under the NTT Data brand.

With revenues at home reflecting the stagnant Japanese economy, NTT Data has ambitious plans for growth abroad. It hopes to increase international sales by 50% from 2012 to 2013. According to Thomas Balgheim, NTT Data’s CEO for EMEA, Argentina and Brazil, the company hopes to grow its European revenues by the same ratio.

But the European IT services market is as mature as its Japanese counterpart. In their most recent financial years, Europe’s IT services giants Logica, Atos and Capgemini could barely muster more than 5% organic growth.

So, besides the synergies and cross-selling opportunities from its many acquisitions, how does NTT Data propose to build a growing business in a mature market?

Balgheim, who in his career has lead the EMEA financial services division of IBM and the global financial services arm of SAP, argues that for most of its history, the IT industry has focused on automating business processes in the name of efficiency.

"The cost of projects such as ERP implementations was very high, but nobody cared because the returns were even higher," he says. "It reached its peak in the 2000s, but now 80% or 90% of process have already been automated. Now the returns are getting lower, which is why you are seeing flat growth and industry consolidation."

There is a different class of IT project, however, which still offers potential for growth, Balgheim argues: projects focused not efficiency, but differentiation. When IT is used to improve the customer experience and therefore grow the business, he says, it can still deliver high returns.

"Look at the automotive industry," says Balgheim, who has served as CEO of Cirquent since NTT Data bought the company from BMW in 2008. "Luxury cars today have 9 or 10 CPUs. Carmakers are using IT to offer differentiated services such as the ability upload your planned route to the onboard GPS."

Of course, other IT services providers target these projects too, but Balgheim claims they cannot do both. "Most IT services providers claim that they can do projects which generate efficiency and at the same time do projects that generate differentiation," he says. "That is what we as NTT Data would like to challenge. We think a project where you leverage IT to do differentiation is fundamentally different to a project where you deliver efficiencies."

For one thing, he says, ‘differentation’ requires alternative project management and software development techniques. "With a standard, undifferentiating business process like payroll, you have a defined business case and standard software components, which means you can use the waterfall methodology," he says. "But with innovative projects, you are experimenting, so you need to use Agile methodologies, and you need the right people to do that."

NTT Data has 5,500 developers in EMEA, Balgheim says, and 4,000 of them are working on customer-facing, "differentiating" IT systems. Projects range from a smartphone app that allows drivers to check if their car is locked to an electric vehicle charging system in Vienna.

Balgheim says NTT Data is not alone in noticing the difference between "efficiency" and "differentiation" IT projects; some enterprise organisations already draw the distinction, he says. "I know of one company that divides their IT project portfolio between efficiency / automation projects and innovation / differentiation projects, and they have different service provider lists for each type," he says.

Eventually, Balgheim believes, there will be two distinct IT services markets. "That is why we are focusing on differentiating IT projects. We believe there is growth there."