The Norwegian Competition Authority has granted approval to EDB Business Partner to acquire rival ErgoGroup in a move that will have a huge impact on the IT services market in the Nordic region.

Besides consolidating EDB's position as the leading supplier in Norway, it will also leapfrog HP and Logica to become the third largest SITS provider to the Nordic region, according to the latest rankings from Pierre Audoin Consultants (PAC).

The acquisition of ErgoGroup fulfils a number of EDB's strategic aims: expanding its presence in Sweden, boosting presence in the public sector, raising its penetration of the SME market and taking it a step closer to its long-standing goal of becoming the leading Nordic SITS provider.

However, PAC believes that the new EDB ErgoGroup AS faces three big challenges. The group will be heavily reliant on Norway, the smallest Nordic SITS market with only a limited number of large client organisations. Both companies have been building their presence in the largest Nordic market, Sweden, with EDB acquiring Spring Consulting and ErgoGroup buying BEKK. A good first step for the combined group would be to look to support the Swedish operations of existing Norwegian clients.

The second challenge for EDB ErgoGroup AS must be to increase its global delivery capabilities. Local rivals such as Tieto and Logica have placed the growth of offshore resources and the industrialisation of processes at the centre of their plans. If EDB ErgoGroup wishes to remain price competitive it needs to address this issue.

The final challenge is to address the SME market. ErgoGroup has been very successful in this area, supported by a strong local presence. However, EDB has tended to focus on large enterprises. It is essential that the ErgoGroup culture is preserved through the integration, or the combined group risks alienating companies in the SME market, which is becoming an increasingly important battleground. An important factor here is that ErgoGroup MD Terje Mjøs will lead the new company which will provide a point of continuity for SMEs, for whom a local interface with suppliers is an important concern.