SAP is to acquire Concur Technologies, the provider of SaaS-based travel and expense management software, in an eye watering $8.3bn deal. At $129/share it represents a 20% premium on the pre-announcement closing price. Many of the numbers around the acquisition are big - from the customer numbers involved, to the transactions handled and this being the largest SaaS deal in the market to date. The impact on SAP could be big too, if it manages to convert the opportunity.
On one level this is a SaaS volume purchase, with SAP gaining 25m users, in 23,000 companies, across 150 countries. Although Concur is tiny compared to SAP (see here) it will bring more SaaS revenue to SAP. Concur delivered $546m revenue in the year to September 2013 - but with a loss of $24m. In its last quarter it saw a 29% revenue increase to $178m. However, as with all SaaS providers, Concur has trailing revenues – some $700m in this case.
On another level is it about building the SAP business trading network. With the combination of Ariba, Fieldglass and now Concur (all acquired), SAP is anticipating annual transactions worth $600bn. If it handles things properly, that could add significantly to its cloud revenue, and be a key driver for its ambitious aim of tripling cloud revenue by 2017 (cloud revenue remains a smear compared to SAP’s overall revenue, see here). The acquisition (which is expected to close in Q4) demonstrates that SAP has a two track cloud strategy - SaaS/PaaS plus the transaction-based business network. That has the potential to open new opportunities and take SAP in a direction that will differentiate it from the other ‘legacy’ software providers looking for a position in the cloud environment.
Posted by Angela Eager at '10:13'
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In an unexpected move, Oracle founder and CEO Larry Ellison has stepped down from the leadership position - but he is not moving out. He will take the role of chairman and CTO so his influence will still be much in evidence. In a move that echo’s SAP at several points through its timeline, Oracle will run under co-CEOs Safra Catz and Mark Hurd, with Catz handling finance, legal and manufacturing operations, and Hurd responsible for sales, marketing and strategy.
Oracle has been run by the Ellison-Catz-Hurd trio for much of the last four years so this is a shuffle but the shift in relative positions within these three, strong characters shall we say, could give rise some interesting manoeuvring. It could be difficult for Hurd and Catz to make their own new marks and it’s hard to see Ellison relinquishing much control within the company, although his external profile will probably scale down. When the leadership change happened at Microsoft (see here), new CEO Satya Nadella had to contend with Bill Gates and Steve Ballmer on the board (although Ballmer has since left) and questions about who would really hold reins. That has been resolved but Oracle will face the same quizzing and with Ellison’s CTO role it is unlikely to be clarified quickly or cleanly.
Whether the move will result in a change in Oracle’s strategy is an open question but it comes at a difficult time when it is making limited headway with its cloud transition. Q1 results, released alongside the management changes, illustrate the point. Revenue has never risen more than 4% in the last 12 quarters and for the period to August 31 there was a 3% uplift to $8.6bn (within that new licence revenue was down 2%) See here for the year ago comparative. Q2 revenue is forecast at flat to 4%. Q1 net profit was flat at $2.2bn. Although cloud revenue saw double digit growth (SaaS/PaaS – 32% to $337m, IaaS 26% to $138m) it is still only c5% of total revenue despite multiple acquisitions and it is not rising significantly as a proportion of overall revenue (SaaS/PaaS was 3% this time last year, and just 4% in Q1). There is a strong case for more radical change.
Posted by Angela Eager at '09:18'
Despite the polls having predicted the tightest of contests, in the end the Better Together campaign succeeded in getting around 55% of the votes. The Scottish voters returned a relatively emphatic decision in favour of remaining in the United Kingdom. Sighs of relief all round in the currency markets, Downing St. and many areas of business. We had written about the opportunities, risks and issues in the Public Sector and in Financial Services recently and we are glad that we do not have to amend our overall forecasts and outlook accordingly.
However, there is much for the Government to do. The pledges made to devolve more power to Scotland and alter funding rules need to be delivered quickly. In addition, David Cameron has pledged to extend this greater regional self-determination into the other members of the United Kingdom (including for the first time, England). The plans are to draw up initial legislation on the timeline that had been set for Scottish changes and this will occupy a considerable amount of Government time and energy. The issue is even more acute for all the parties involved given the election date of 7th May next year.
SITS suppliers into the Public Sector can take comfort that their Scottish contracts will not be chopped and changed or turned into political footballs, at least for the time being. The Financial Services sector and its supplier community can get on with facing their “Race for Change” in terms of meeting the demands of customers and regulators and dealing with emerging competition. The NO vote at least gives us one less thing to think about!
Posted by Peter Roe at '09:07'
Eligible TechMarketView subscription service clients can download the slides presented at the 2014 TechMarketView Presentation & Dinner held at BAFTA on Wednesday 17th September 2014 here.
If you would like to know how to become eligible then just drop Deborah Seth a line.
If you had a ticket for the event and have not yet received your copy of the slides, please drop a note to Helen McTeer.
Posted by HotViews Editor at '09:00'
Cisco has announced its intent to acquire privately-held Californian cloud company, Metacloud. Terms of the deal were not disclosed.
This is a logical buy for Cisco. Metacloud’s OpenStack technology manages production-ready private clouds inside customer data centres. The Metacloud capability will be folded into Cisco’s Intercloud - the network of hybrid cloud environments it wants to create with partners (see Cisco stumps up $1bn for cloud investment). Cisco’s Cloud Services architecture, which underpins Intercloud, is based on OpenStack open source software.
As the large technology firms continue to sharpen their cloud strategies, further acquisitions are likely to occur. Indeed, we’ve just seen HP buy Eucalyptus. Furthermore, there are plenty of other small players out there that have the technology but not the commercial staying power (or they have backers that want to exit), making acquisition their next logical step.
The acquisition of Metacloud is expected to complete in the first quarter of fiscal year 2015.
Related reading for subscribers to our widely used InfrastructureViews research stream: AWS and the cloud upstarts: Death knell for the established players? and How the leading Infrastructure Services players are fighting for their place in the cloud market.
For more information on becoming a subscriber, please contact Deb Seth.
Posted by Kate Hanaghan at '08:59'
AIM-listed Earthport, the cross-border payments service provider, has announced the successful placing of 65m shares to raise £26.6m. Oppenheimer Funds of NY will take 41m shares and so hold nearly 9% of the company’s share capital. Earthport was featured in our report “Finding the Winners in UK Payments”, available to subscribers of FinancialServicesViews here.
The money will be used to accelerate Earthport’s plans in Asia and support additional initiatives in the US and Europe as it builds its client base and expands its product portfolio. The Earthport management also suggest that a stronger balance sheet will improve credibility in the face of partners, regulators and potential customers.
The Asian market is the fastest growing region in terms of non-cash payments at over 22% p.a. according to the World Payments Report, with the value of cross border payments rising by an average of 13% p.a. from 2012 to 2022 (Source: BCG). Earthport has an opportunity to establish a strong position as this market develops, particularly as it adds substantial players to its customer and partner network (e.g. HSBC and Eurogiro).
The Earthport management have stated the Group is on course for breakeven (on a run-rate basis) before the end of this financial year (June 2015), adding that this is for its “current businesses”. This suggests that Hank Uberoi (the Earthport CEO) has already drawn up plans for some of the money raised. Earthport will continue to be one of the more interesting players in the dynamic payments market. We will probably learn more with the annual results (for the year to June 2014) due at the end of October.
Posted by Peter Roe at '12:53'
VISA Inc. has announced that it is evaluating its shareholding in Monitise after a five-year relationship. The US credit card operator intends to build its own in-house development resources and the sale of its stake is a likely outcome.
Visa Inc. had originally bought a 14.4% stake in the fledgling company and through subsequent financings by Monitise this stake has been reduced to 5.5%. The close link with Visa was very important in the early days in terms of building credibility with the payments world and in the financial markets.
Both Monitise and VISA have moved on. Monitise has obviously grown, but has also changed business model (“Monitise 2.0”) and is now in the process of shifting its professional services team to IBM and concentrating solely on the subscription-based model.
VISA and the other credit card operators see that their pre-eminent position is under threat by all the changes that are taking place in the wider payments market (e.g reduced interchange fees, competition from faster payment services, the entry of Apple and Amazon, etc). Their healthy margins and cash flow are also under threat. So it is understandable that VISA would wish to build greater independence – they probably don’t want to be too closely aligned to IBM, either.
In the near term, the potential sale of the VISA stake cannot be seen as good news for Monitise as it migrates to the new model and rebuilds investor confidence. However, the company has built a wide ecosystem of partners and customers as well as accumulating a substantial and credible management team (many of whom are ex-VISA). Medium and longer term prospects are unlikely to be threatened and the company has re-stated its earlier guidance for the current year and of EBITDA profit in 2016. Another test for the Monitise team.
Posted by Peter Roe at '10:17'
Interesting news in the FT today of a change in European tax laws that could level the playing field for many SITS suppliers in the Financial Services sector. One of the points discussed in the recent techUK roundtable at on the Modernisation of the UK Banking sector, and in TechMarketView’s report, available here, was that the tax system provides a further obstacle for the use of third-party providers as Financial Services do not attract VAT. This provides a further incentive for banks to keep processes “in-house” as they will not be able to offset the VAT that has to be paid on third-party services.
The ruling by the European Court of Justice now means that those services which are supplied between a group’s headquarters and its branches are to be made liable to VAT. Consequently, banks and insurers with headquarters overseas will find their tax bill rising substantially if their UK branches use Group-provided services. As the FT states, this ruling will force financial institutions to review the services they are buying in from outside the EU.
On the face of it, this levels the playing field for UK suppliers of outsourced services. They can now approach the UK operations of potential banking and insurance customers headquartered overseas knowing that they will not be disadvantaged by the tax position. The tax change will take time to be implemented, but it does appear to offer an interesting opportunity to the suppliers of back office and utility services. Certainly worth following up!
Posted by Peter Roe at '10:10'
RM’s Interim Management Statement for June to September reports that the company’s “trading in the third quarter of RM's 2014 financial year has progressed ahead of expectations.” RM continues on a long turnaround path, which involves exiting the hardware business and prioritising the development of software solutions, is beginning to bear fruit.
July’s H1 results showed that adjusted operating profit margin was up to 8.0% from 4.1% and PBT was up from £4.6m to £6.7m. RM is now expecting “a significantly more profitable second half than was anticipated at the time of the announcement of the half year results”.
Profitability of the Education Technology business was ahead of plan; RM wound down the PC business and drove down costs as some managed service contracts expired. In future, the Education Technology division will comprise IT Services, Digital Platforms and Content, Infrastructure Solutions and Internet Services.
RM’s Education Resources division reports revenue and margins ahead of expectations at TTS (the catalogues and on-line sales channel). Meanwhile RM Results, the Assessment and Data Services division, was in line with expectations.
We will closely follow RM’s “Race for Change” in the coming months as the company transitions to a solely SITS player. We’ll be covering the company in more depth in the forthcoming UK Education SITS Suppliers Landscape report, available to PublicSectorViews subscribers.
Posted by Michael Larner at '09:55'
HP has announced a significant regional health contract. It has signed a deal with the Business Services Organisation (BSO) of Health & Social Care Northern Ireland (HSCNI). The four year, £100m, framework agreement sees HP assisting HSCNI in streamlining and supporting healthcare services as its single technology partner.
Under the arrangement, HP will transform the regional health data centre infrastructure, refresh regional services including the GP network and the Patient Administration System (PAS) Infrastructure, extend Northern Ireland’s Health & Care services and implement a new regional e-prescribing solution to improve patient safety in relation to drug dispensing.
The deal highlights the attractiveness of regional government opportunities to the larger public sector SITS providers. Rather than break the deal up into smaller components, HSCNI has opted for a single supplier managing multiple partner and SME organisations, thus providing a meaty deal for HP. HP has had quite a few successes outside of its traditional central government & defence stomping ground over the last few months. First off the blocks was its win with Cambridge University Hospitals NHS Foundation Trust in April 2013 (see HP: strategically important UK health sector win), then came its £26m win at Norfolk County Council (see HP and Norfolk County Council: Big data ambitions). The company has also embarked on an interesting initiative with Swansea University, which aims to deliver a ‘secure situational aware smart complex’. In the longer term this has the potential to be used as a proof of concept for Smart Cities.
All this is good news for HP, which has struggled to grow its revenues in areas like local government, education and health at a quick enough pace to make up for the drop off in central government. But these wins should start to have an impact over the coming quarters and start to take some of the pressure off.
Posted by Georgina O'Toole at '09:34'
I’ve just had a nice chat with WANdisco top team David Richards (CEO) and Paul Harrison (CFO) about today’s half-time results. Normally our Angela Eager covers the company as what she doesn’t know about the big data market probably isn’t worth knowing. But as she’s otherwise engaged, it fell to me to display my profound ignorance of this esoteric topic and ask dumb questions.
Which is why my dumb questions were more about the numbers than the technology, because I was rather wrestling with H1 net losses at $18.5m being over three times its $5m revenues and almost as large as those for the whole of 2013. And then there’s the $9.4m in operating cash burn, a million or so higher than the whole of 2013.
I get it that WANdisco is still in the investment stage, but this seems to be the case for both halves of its business. The primary (well, almost sole) source of revenue is its original application lifecycle management (ALM) product, which is not expected to make a profit contribution for another 12-24 months. The fledgling ‘big data’ business – which is where everybody’s attention is focused – is awaiting the first of its customer production trials to go live. And even then, it’s not clear what revenue stream would be generated, let alone profit.
It may well be that WANdisco has two of the best products in the world in its respective segments, and if so, I guess they should plough on for as long as its banks and investors are prepared to plough in the dosh.
Posted by Anthony Miller at '09:14'
Just to say thanks again to all of you who came along to the sell-out 2014 TechMarketView Presentation & Dinner at BAFTA last night, with a special thank you to Mike Tobin and Telecity for their sponsorship, to guest speaker Tony Pepper, CEO at Egress, and to Tina Compton, event organiser at techUK, without whose magnificent efforts it can truly be said this event would not have been the huge success that it was.
We will be sending out PDF copies of the slides to all ticket holders in the next couple of days.
If you want to get a sense of the evening, just flick to our Twitter feed #TMVEvening2014.
Posted by HotViews Editor at '08:19'
In its first results since its AIM-listing (see here), Mi-Pay announced interims which underlined its potential despite losses and headline numbers hit by the loss of a major customer. Reported revenue declined £0.2m to £1.2m, but underlying revenue was up by11%, with transaction volumes (the growth engine) up 37% yoy. EBITDA losses were c.£1.7m.
Mi-Pay’s proposition enables pre-paid mobile subscribers to top-up their phones over the phone, online or via social media. Mi-Pay’s customers are the Mobile Network Operators (MNOs) who are generally keen to outsource this complex function, particularly as Mi-Pay indemnifies them against the risk of fraud and reportedly provides a good end-customer experience. Mi-Pay takes a fee of 4% on the top-up transaction, of which c.50% is gross margin.
Mi-Pay has added 8 new clients over the past 6 months (the total now being 21), with 3 more going live in H2. Mi-Pay has a solid customer list in Europe (including Vodafone, 3, O2, Sainsbury’s and Tesco). However, growth will predominantly come from Asia-Pac where the company has set up operations in Singapore and the Philippines. In Asia, the proportion of pre-paid is high, at 77% (Source: GSMA Intelligence) and the growth in use of credit cards and bank accounts will drive volume through Mi-Pay’s systems. No other contracts appear under threat. As volumes grow, operational efficiencies should kick in and expand margins. Mi-Pay expects to be (EBITDA?) profitable and cashflow positive by end 2015. The funds raised in the AIM-listing are considered sufficient for the time being.
On the evidence so far, Mi-Pay has the characteristics necessary for success in the volatile payments market, namely a secure position in a growing niche market, protected by IP and good delivery capability. These should support continued growth, in both revenue and value.
Posted by Peter Roe at '09:50'
Yesterday, Business Secretary Vince Cable announced that his department (Business Innovation & Skills) would run a £4m competition for UK cyber businesses to develop ideas to tackle cyber security threats. He made the announcement at the first ever US-UK Global Cyber Security Innovation Summit, held in London. The competition will be run by the Government’s Technology Strategy Board during 2015; it is one of several initiatives aimed at achieving the goal of £2b of UK cyber exports by 2016.
‘Cyber security’ is certainly the ‘flavour of the moment’. All you have to do is search for cyber security on ‘Gov.UK’ to see the number of announcements, publications and initiatives of the last couple of years. Just a couple of weeks ago, the first government supported MOOC (Massive Open Online Course) “to inspire and education the next generation of cyber security professionals in the UK” was announced. Back in the middle of last year, BIS’ Information Economy Strategy, which aimed to help business compete and grow to contribute to the growth of the UK economy, gave “protecting citizens and systems” as one of the key focus areas of the strategy.
We have met a number of cyber security SMEs during our research. Several, including Purple Secure Systems, Egress Software, Deep Secure and Coactiva Aspiren feature in our Little British Battler reports. Others, like Nexor, are highlighted in our recent report: UK public sector SITS suppliers – cyber security offerings. There were several other announcements made yesterday that will please them greatly, for example, the appointment of a cyber security small business champion. One of his roles will be to encourage small cyber security businesses to work together more closely; one of the benefits our LBBs found from TechMarketView’s LBB programme was forming a network of like-minded companies. In addition, the announcement of a project to work with volunteers to set up regional cyber security SME clusters will please those that sit outside the now well-known Malvern Cyber Security Cluster. When speaking with Steve Kingan, CEO of Nexor, he commented that he saw a great opportunity to form a similar cluster around Nexor’s base in Nottingham. Nexor already sponsors the East Midlands regional branch of the Institute of Information Security Professionals.
It is questionable how effective the £4m competition will be. As far as we can tell, the SMEs we have met have had little problem finding the funding they require; investors are also attracted by cyber. The challenges they face are broader e.g. integrating into the supply chains of the larger players. There is also a big possibility that once the SMEs use the funding to develop new IP, they are snapped up by a non-UK player! US-based FireEye has been a serial acquirer, purchasing US-headquartered Mandiant, which has a significant footprint within the UK intelligence sector, earlier this year.
Posted by Georgina O'Toole at '09:50'
Rackspace shares slumped 17% following the announcement that it has not found a buyer for the business. Back in May, Rackspace hired Morgan Stanley to help it evaluate its strategic options, prompted by “multiple parties who have expressed interest in a strategic relationship with Rackspace” (see Rackspace considers its options). That all looked quite promising, and there have since been many rumours about possible interested buyers. Firms named in the press include HP and CenturyLink.
However, HP has since gone on to buy Eucalyptus (see HP buys Eucalyptus, but now what?), and clearly no other buyer has felt compelled enough to dip into their wallet. Instead, Rackspace has “declared its commitment to remain independent” and has named President Taylor Rhodes as CEO.
Rackspace has been working hard to articulate the difference between what the hyper-scale public cloud players provide versus its own position, where the emphasis is on the management of cloud services. However, it has found itself eased out of the leading pack, lacking the Capex clout of the likes of Amazon Web Services on the one hand, and a strong, niche position on the other. Furthermore, it would seem potential buyers also failed to see the attractiveness of its position.
Now committed to retaining its independence, the challenges remain the same - in particular, how does Rackspace fight off competition from the very wide range of players that are aggressively playing in the market? Tough times ahead.
Related reading for subscribers to our widely used InfrastructureViews research stream: AWS and the cloud upstarts: Death knell for the established players? and How the leading Infrastructure Services players are fighting for their place in the cloud market.
For more information on becoming a subscriber, please contact Deb Seth.
Posted by Kate Hanaghan at '09:32'
This evening we will be welcoming around 200 of the great and the good in the UK IT industry to the 2014 TechMarketView presentation and dinner, sponsored by Telecity, in the magnificent surroundings of BAFTA in London’s Piccadilly. The theme for the event this year is ‘Race for Change’ - expect thought-provoking presentations from the TechMarketView analyst team and some lively conversation over champagne and dinner!
Whether you’re lucky enough to be coming or not, you can follow the event on Twitter #TMVEvening2014 and look out for coverage in tomorrow’s UKHotViews.
By the way, if you are looking for one of the hottest tickets in town for tonight’s event, we are sold out. But by all means contact Tina Compton at techUK (020 7331 2011, firstname.lastname@example.org) in case there are any last minute cancellations.
The entire TechMarketView team will be heading off to BAFTA from 3pm but normal service will resume tomorrow.
Posted by HotViews Editor at '09:19'
As indicated in its trading update earlier this year (see here), back office optimisation provider eg Solutions is undergoing quite a turnaround and today's H1 results (for the six months to 31 July 2014) confirm it, with every metric heading in the right direction.
The roll call of metrics includes revenue up 78% to £3.9m while the loss of the year ago period has been converted into a small but satisfying profit before tax of £0.6m. Gross margin is also up (74% vs. 64%) as is cash (£0.8m vs. £0.4m). There were nine contracts with new and existing customers, indicating demand for eg's offerings. A major contract was signed after the period end which will deliver £0.6m this year, plus additional revenue in subsequent years.
The company has not completed its turnaround, and performance is weighted towards H1 so there will be pressure on H2 to meet full year expectations, but the first part of the year has gone well and management says the start of H2 has too. With enterprises focussed on the front office and the customer experience, the challenge for eg is creating a convincing link between back office optimisation and customer experience improvement that will resonate with the new buyers/influencers and influencers, namely line of business managers. We will be meeting with eg Solutions soon and will be able to do a deep dive into its prospects and the developments in the back office optimisation market.
Posted by Angela Eager at '09:12'
Oxford-based Semmle, the self-styled ‘data-driven software engineering’ startup, has secured $8m in a Series A funding led by Accel Partners, along with existing investors who provided $2m of seed funding back in November 2011. Semmle was founded in 2006 by Oege de Moor, then a professor of computer science at the University of Oxford.
Semmle’s proposition is a software platform that analyses code quality in major software development organisations – or as they put it, ‘a business analytics platform to manage the software development process’. Clients include Citi, Credit Suisse, NASA and Dell.
This is certainly not a ‘drop it and hop it’ package in any shape or form – Semmle also develops custom analysis modules on top of the base platform to suit clients’ particular software development regimes.
For this reason my punt would be that Semmle will eventually end up under the wings of an IT services firm with a strong suit in software testing. If so, one could easily see the likes of Manchester-headquartered NCC, Cologne-based SQS, and any number of Indian SIs having a good sniff around, let alone the ‘usual suspect’ global and European players. Sounds like a good call by Accel.
Posted by Anthony Miller at '08:49'
TechMarketView recently met with the Public Sector team at Microsoft. In our latest PublicSectorViews research note, Michael Larner considers the ways in which the company’s five Account Team Units (ATUs), focused on central government, local & regional government, public safety and national security (PSNS), health and education, are engaging with their target markets.
Michael also considers how the disaggregation of contracts, particularly in the central government market, will affect Microsoft’s relationships with its partners ranging from the Tier 1 IT services providers through to SMEs. What will be the impact on Microsoft’s go-to-market model?
PublicSectorViews subscribers can download the research from today here. If you don’t yet subscribe to our PublicSectorViews research stream and you’d like to know more, please contact Deb Seth for details.
Posted by HotViews Editor at '16:56'
In my Apple first impressions post I mentioned four highlights. One of which was that Apple were giving away the new U2 album free to all the 500m iTunes account holders.
Interestingly, there has been a major backlash from people saying they don’t want it in their music collections. So Apple has today issued a special ‘delete’ app.
U2 were quite good at one time. But their decline can be neatly traced to Bono deciding he was going to be the Tony Blair of pop and went off to ‘save the world’. Personally I now tend to switch off when he comes on.
But it does raise an interesting issue of privacy. I am of a generation that is defined by the music I like. My first record was by Buddy Holly when he was still alive. I am very fortunate to have lived through the best music of all time. And I’m not stuck in the past. I love much of the music my grandchildren play and, equally, they like my tastes too – apparently! I’m proud to be associated – known for - the music I like…
My problem with the U2 debacle is down to a recent experience. I needed ‘It ain’t what you do, it’s the way that you do it’ to start a speech I was giving. I’m not a Bananarama fan so it wasn’t in my collection. So I bought ‘The Greatest Hits of Bananarama’ from Amazon.
Ever since then I have been haunted by ‘For someone who likes Bananarama you might like…” on every site I visit. The ‘tailored ads’ just follows me around from site to site. I’ve even been invited to ‘Like’ Bananarama on Facebook.
So I really am with the ‘U2 deleters’. Some Big Data analytics engine already has all these people down as obvious U2 fans as they have it in their iTunes collections – whether they like it or not.
And U2? Apparently Apple paid them $100m for the privilege. So I’m sure they really don’t give a damn – unlike many iTunes members.
Posted by Richard Holway at '14:17'
US-headquartered Big Data analytics firm Palantir has been selected by Sunderland City Council (see here) to underpin the council’s Intelligence Hub. On completion, the hub will enable council staff, and potentially healthcare and the police, to analyse data to channel resources more effectively in their community. Palantir is best known for its work with the US Government ‘intelligence community’. However, more recently, its co-founder Joe Lonsdale has sought to apply his experience to other areas of government including the local government sector. He recently co-founded OpenGov, a start-up designed to make government budgets and financial data more easily accessible and comparable.
Sunderland is looking to run the Intelligence Hub itself and is looking to Palantir pass on its expertise. Other local authorities might have let the contract to a system integrator but Sunderland’s Chief Executive, Dave Jones, has ‘a particular interest in the use of new technologies’, is a member of Government's Local Public Data Panel, and has been involved in the IBM Smarter Cities programme since 2009.
The Intelligence Hub continues ‘The Sunderland Way of Working’ programme which looks to remove siloes in decision making and to implement platforms, such as Palantir’s, to handle structured and unstructured data. As we have seen in Norfolk (see HP and Norfolk County Council: Big data ambitions) local authorities are realising that transformation programmes need to be supported by data from across the organisation. It is also worth noting that Norfolk County Council CIO Tom Baker was previously Sunderland City Council CIO.
We believe small scale projects like Sunderland’s (the contract value is believed to be in range of £1.5m and £5m) will be the forerunner to large scale ‘Smart City’ projects. And suppliers should watch closely for other members of Sunderland’s technology leadership leaving for pastures new.
We will be taking a closer look at the UK’s progress in ‘Smart Cities’ and the related opportunities for suppliers in a PublicSectorViews research report later this year.
Posted by Michael Larner at '09:59'
With the release of its full year results today Craneware demonstrates that market complexity and regulatory change can create opportunities, albeit with a lag between the market grasping the implications and starting to spend.
For the year to June 30 2014, contract value rose from $38.5m to $71m for the provider of revenue integrity solutions to the US healthcare market. Revenue grew from $41.5m to $42.6m and the result was PBT of $11.3m vs. $10.6m (see here for the previous year). Note that although Craneware operates a SaaS and subscription business model, it is profitable and has increased its cash despite paying a dividend, so sensible management can make SaaS pay.
There was a return of large deals, which have been absent for two years (they were a quarter of the contract value during the year), among contracts signed with all sizes of hospitals, and some 7 and 9 year contracts. CEO Keith Neilson says that in the face of continual change for the foreseeable future, hospitals have moved from panic mode to pragmatic mode.
With plans that include tuck-in technology purchases (e.g. the Kestros mobile application acquisition – see here) to establish a bridgehead into the patient side of the healthcare market, and a deeper move into analytics, we expect to see activity from Craneware over the year on both buy and build fronts. The analytics prospects are enticing – it wants to productise analytics solutions by including content i.e. data (its own and 3rd party, benchmarking capabilities). It will help its customers with cost management but it is also a step towards the commercialisation of data and that is untapped area of riches for all software vendors.
Posted by Angela Eager at '09:30'
Advanced Computer Software (ACS) has followed its bumper FY14 (see ACS confirms ‘another strong year’) with another six months of good growth. According to today’s trading update for the half-year to end August, revenue in the period will be up by 9% to no less than £108.1m with ‘adjusted EBITDA’ up by 14% to no less than £25.3m. As expected, net debt is also coming down, reaching just under £38m by the end of August compared to nearly £50m six months previously.
ACS’ largest division, Advanced Business Solutions, has now completed the integration of the Group’s largest ever acquisition, Computer Software Holdings (see here for background). And it’s encouraging to hear the management report that there are “clear signs” that the CSH business is returning to sustainable growth.
In general, all three of ACS’ divisions now seem to be performing as expected. Advanced Business Solutions’ underlying growth is supported by continuing demand for shared services, procurement, budgeting and forecasting solutions from both the public and private sectors. Advanced Health & Care is making progress in the evolving market for community and mental health care systems, as well as maintaining its position in the ‘urgent’ care market and winning business with its mobile solutions. And Advanced 365 Managed Services continues to differentiate itself by cross-selling cloud-based services in conjunction with ABS. We look forward to publication of the interim results in November to get a fuller picture.
Posted by Tola Sargeant at '09:24'
Hosting provider, Host Europe, has terminated discussions regarding a possible purchase of AIM-listed, iomart, and says it is no longer considering making an offer.
In August, Host Europe confirmed it had approached iomart regarding a possible cash offer. At the time, iomart senior management (who have a combined share holding of c18.5%) indicated they were supportive of the offer.
iomart rejected previous offers from Host Europe earlier in the summer (see iomart rejects Host Europe bid). Although it looks to us that the companies would have made a good fit, it would seem that between them the teams just couldn’t ‘do the deal’ in the end.
Meanwhile, iomart has updated the market on trading for its first half to the end of September. Revenue and profit are expected to be “substantially ahead” of last year. Indeed, since 2010 iomart has achieved a highly commendable compound annual growth rate of 32% in revenue and 66% in adjusted EBITDA.
Host Europe may have backed off, but with such attractive financials we’d be very surprised if iomart doesn’t become the target of future takeover bids. Indeed, Host Europe itself is backed by private equity company, Cinven, which acquired the hosting firm from Montagu Private Equity last year. More broadly speaking, the mid-sized data centre and hosting industry is a fascinating place with purchases aplenty. Examples include BDC sells Pulsant to Oak Hill and Alternative Networks buys Control Circle.
Posted by Kate Hanaghan at '09:12'
I just really hope that Richard Green, founding CEO of Cambridge-based ‘enterprise location intelligence’ products and services company Ubisense, knows what he’s doing.
At some £2m, the company recorded first half net losses (to 30th June) greater than the whole of 2013. This is partly due to the acquisition of its loss-making Japanese partner, Geoplan Interworks KK, in December last year (see Ubisense senses Asia opportunity with Interworks), which on the other hand helped boost H1 headline revenues by 40% to £17.3m and lift gross margins by over 5 points to 33.9%. However, operating losses expanded by nearly 40% to £2m.
I’ve been following Ubisense’s fortunes since it listed on AIM back in June 2011 (see Ubisense to be first ‘real’ UK SITS IPO for over a year). I do like the company – and Green – and I think it has great potential. But I’m still not clear how this is all going to turn around into a consistently profitable player.
Posted by Anthony Miller at '09:09'
The Scottish referendum remains too close to call. Westminster politicians and the “Better Together” campaign have gone some way in turning the tide, but the next 72 hours will be an anxious time for those who wish to keep the Union.
In pursuing the Scottish ideal of self-determination, the YES voter will be taking a significant risk. This risk has several important facets. Firstly that the new Scottish government will prove equal to the challenge, secondly that all the other authorities (Westminster, the EU, the Bank of England….) bend to Scotland’s wishes and thirdly, that the financial markets and businesses do not turn their backs on a country with no clear idea of its currency and its overall balance sheet. In addition, the effects of a YES vote will go far beyond the borders of an independent Scotland, spilling over into currency markets and pension portfolios as it undermines Sterling and the UK’s international position. A wider perspective can also be found in an excellent article by Gideon Rachman in today’s FT, see here.
And now it is clear that this risk is not worth taking. Westminster has indeed bent (probably) as far as it can in promising a post NO-vote Scotland additional tax-raising and spending powers, a more powerful role in running its affairs and an improved central funding formula. Consequently, much of what Scottish voters are asking for would be delivered without years of confusion, politicking and waste.
However, to prepare for the possibility of “brave hearts” winning out over “cool heads”, you can read TechMarketView’s reports on the potential opportunities and risks for SITS suppliers in the Public Sector, available here, and on the impact on the economy and the Financial Services sector, here.
Posted by Peter Roe at '09:09'
Management at New Jersey-headquartered (though India-centric) IT services firm Cognizant has fixed its perceived growth problem (see Cognizant pulls back on FY growth target) by making the biggest acquisition ever by an offshore IT services supplier.
Cognizant is to pay $2.7bn cash to purchase its long-time partner, US-based, private equity held healthcare IT software and solutions company, TriZetto. Cognizant has raised $1bn in debt finance to help cover the cost although it had some $4bn in cash and short-term investments on the balance sheet. The deal will add some $700m to Cognizant’s $2.5bn Healthcare sector revenues (its second-largest vertical), and provides a 7% boost to its $9.6bn headline revenue run rate.
It’s a bold move, but at at less than 10% of Cognizant’s revenues and at a price that is around 10% of its market cap (currently some $27bn) the deal could validly qualify as a ‘fill-in’ acquisition. As far as I can tell TriZetto is purely US-focused so it seems unlikely that this signals any new intent by Cognizant on the UK healthcare market – and wisely so I would think!
Posted by Anthony Miller at '08:29'
This paper, written by Fujitsu, considers how the workplace will look in 2020, based on work with Enterprises, R&D and industry bodies and tested against the perspectives of some of the country’s leading CIOs.
How do organisations and their CIOs prepare to meet and exceed business demand and user expectations? What strategies and plans should be adopted to prepare for a seismic change in the workplace between now and 2020?
• Cloud –reinventing not just IT but the entire marketplace
• IT Departments will need to adapt to survive
• Different ways of working driven by people, not technology
• One major device, not many, and with broader functionality
• It’s not only the corporate worker who will be mobile-enabled
The paper investigates the impact these changes will have on the IT department and its role within the Business. It outlines the market’s belief that IT will become a utility. It considers the demise of the Service Desk as we know it and how the supply chain will be revolutionised. Ultimately, Operational IT will need to adapt to survive and offer competitive advantage for the wider business.
Click here to download
Sponsored Post provided by Fujitsu. All text, links and images are their own. For information on placing a Sponsored Post with TechMarketView contact email@example.com
Posted by Fujitsu at '00:00'
Our story Microsoft and Minecraft turned out to be correct - other than the consideration that is! Today Microsoft confirmed the acquisition of Minecraft for $2.5b.
Markus 'Notch' Persson and the two other founders are to leave. Microsoft and Mojang (the company behind Minecraft) assured their loyal band of gamers that 'everything would be OK'. So that's alright isn't it?
Our views are unchanged from the original post.
Posted by Richard Holway at '16:20'
The demarcation lines within K3 Business Technology Group are becoming more marked as the Microsoft business moves forward on the back of the new ax|is Dynamics AX-based retail solution while the Sage and SYSPRO division trundles along, meanwhile Managed Services is waiting for mass adoption of cloud-based ERP, according full year results from the company (to June 30 2014).
K3, who provides IT solutions to retail, manufacturing and distribution sectors, has had a costly time over the past couple of years (see the background here) but the worst seems to be over. The ax|is product is drawing new business – sales reached £12.6m, around half of new business during the year.
For the company as a whole, revenue was up 13% to £71m, including recurring revenue up 2.5% to £35m, leading to a 310% increase in PBT to £1.9m and adjusted PBT up 51% to £6.6m. The profitability improvement was sales-led but a reduction in contractor costs was also a factor.
As had been flagged - see here - performance was driven by the Microsoft Dynamics AX solution, (which we also see reflecting rising wider market demand for vertical solutions). Microsoft UK, which is a core part of the business, saw revenue jump 34% vs. just 2.7% for the Sage/SYSPRO unit. Sage saw an improvement in Q4 on the back of new hires/management changes and a few sizable X3 wins according to CEO Brian Bolton, who sees X3 as a growth opportunity. He also believes SYSPRO can do more than hold its own. Consequently, Sage and SYSPRO are set to receive more investment. As to Managed Services, Bolton says hosted deployment is the default for SYSPRO and part of most AX deals, but the slow burn continues.
K3 has made good progress, but more work needed to even up the business and build its partner-based international business - but we hear the partner strategy is already opening up larger sized deals. K3 is in talks with larger SIs such as IBM, Hitachi, and PwC, which illustrates the growing interest tier 1's have in the smaller suppliers.
Posted by Angela Eager at '09:04'
After a very busy year, Monitise returned results in line with the July Update, see here; showing revenue of £95m, up 31% with EBITDA losses of £31.4m 63% higher than FY2013. Year-end cash balances totalled £146m.
During FY2014 the company announced the move to a subscription-based business model, brought in a joint CEO, announced an alliance with IBM and acquired several companies to broaden geographical and sector reach and to build capability in Content and product innovation.
Over the coming year, Monitise will complete its transformation to the new model based on an API-based platform and standardised product set, with tightly managed functionality aligned behind an extended distribution network. IBM will be a major part of this, but other system integrators will be able to implement Monitise’s portfolio. Monitise is also building its team of domain experts who have traction with the larger potential customers and ecosystem participants.
A key focus will remain on the larger banks, who are now bringing mobile into mainstream business and building more expansive strategies. The strategic partnership with Santander is a clear example of this process. The use of Monitise’s platform and capabilities can offer banks a cost-effective and ready access to mobile commerce and inter-operability across an ecosystem of retail and banking partners. Monitise management emphasise their role as an enabler, rather than as a competitor or disruptor, for the banks. They are one of the (very) few companies with scale that can play this role.
Revenue growth of at least 25% is forecast for the current year, with EBITDA profit in FY 2016. The transition to “Monitise 2.0” and coping with rapid market changes will continue to test the management team, but they are making the right moves to capture a meaningful (and profitable) share of this important market.
Posted by Peter Roe at '08:48'
AIM-listed hosting provider, Nasstar, has completed a respectable first half, which was boosted by its acquisition of e-know.net in January. Underlying Group revenue growth (for the six months ending 30 June 2014) was up 17% to £5m. Acquired e-know.net had underlying organic growth of 19%, while the existing Nasstar UK business grew 8%. Adjusted EBITDA margin increased to 21% from 10% in the comparable period last year. The overall picture has altered somewhat since the close of FY13, when total revenue was c£2.5m (+£100k on the previous year), and when the company was loss making to the tune of almost £3m (see Nasstar remodeled for FY14).
Nasstar appears to offer fairly standard Microsoft-based services, including hosted desktop and hosted Exchange. However, its emerging focus on the legal, finance and recruitment sectors could help it to build some differentiation amongst the mid-sized enterprises it targets. Its acquisition of Kamanchi (see Nasstar recruits Kamanchi) after the close of the half-year period supports this sector focus. Northampton-headquartered, Kamanchi provides a variety of IT services, including hosted desktop and consultancy services around buying and integrating recruitment applications.
If Nasstar can start to really make a name for itself in its chosen vertical sectors, we think there is potential for it to flourish. Of course, to gain real scale, another acquisition would be required. And given how fragmented the market is, there should be plenty of choice. The challenge will be identifying something of quality that can genuinely add sector expertise and capabilities.
Posted by Kate Hanaghan at '08:47'
When I first heard the rumours, I thought I would be writing of yet another UK HQed FTSE250 SITS company leaving the LSE because of an overseas takeover. The actuality this morning is the exact opposite, I am extremely pleased to say.
A few minutes ago, Micro Focus (HQed in Newbury, England) announced what is in effect a takeover of Attachmate Group (HQed in Seattle, USA). Value is $729.6m + debt of $1165.8m = $2349.8m. So, given Micro Focus’ value of c$1910m at close on Friday, it’s a reverse takeover. As a result we will be getting a UK HQed SITS group with an enterprise value of >$4b, revenues of c$1.4b and EBITA of c$500m pa and clearly in sight of the FTSE100 which currently only has one SITS constituent – Sage.
There seem to be great synergies between Micro Focus and Attachmate in that both are really old established software companies serving the enterprise markets. Indeed you could attach the ‘Legacy’ label to both. And nothing wrong with that! It means both have high profit margins (Micro Focus 45% and Attachmate 33%) and recurring revenues (Micro Focus 66% and Attachmate 71%) which we really like!
Interestingly, Attachmate acquired Novell for $2.2b (announced in Nov 10 - completed in Apr 11). Pretty much the same as Micro Focus is paying for the whole Attachmate operation now. Which says rather a lot for that acquisition! Attachmate also owns SUSE Linux – the #2 to Redhat in the open source Linux market.
Attachmate was owned (89%) by PE firms Golden Gate, Francisco Partners and Thoma Bravo. Interestingly, we reported that other legacy software firm Compuware was taken private in a $2.5b deal only last week by Thoma Bravo. I wonder if that will be another interesting acquisition we might report in the future? That would secure Micro Focus’ coveted FTSE100 slot!
When I spoke to Mike Phillips he confirmed that he was staying on as CFO of the enlarged group with Kevin Loosemore continuing as Exec Chairman.
I must declare that I am a long term Micro Focus shareholder. Indeed I bought at 293p in Jan 09 when Stephen Kelly (See Kelly to become Sage CEO) was CEO. I saw my investment soar until Kelly unexpectedly quit later that year and the share price crashed again. Mike Phillips joined in Sept 10 and, together with Loosemore, oversaw an excellent run. Indeed they have returned about 70% of the equity value to shareholders (the 60p per share Return of Value proposed last month will still take place). Micro Focus shares were 842p at Friday’s close so I’ve already seen a c250% return on my investment (Dividends and Return of Value included).
All-in-all excellent news for all those who want to see a strong representation of LSE quoted UK HQed SITS companies.
Footnote - Micro Focus shares have opened up 9% at 919p. We are clearly not the only ones who like this!
Posted by Richard Holway at '08:07'
The acquisition of managed payroll provider Eurowage Ltd in April this year has helped heritage recruitment and HR player Bond International Software to bounce back from a disappointing end to its last full year (see Bond mixed fortunes in full year).
Interims for the six months to 30 June, show revenue up 8.2% to £18.4m, and operating profits up 25% to £1.7m – pushing the margin up to 9% vs. 8% last time. This compares to just 1% growth achieved in the last full year. Eurowage will have contributed three months revenue.
CE Steve Russell said the Eurowage purchase was a ‘significant step change for the group and …believes this will produce good growth prospects’.
Expanding into outsourced HR and managing payroll services based around its own software IP, is certainly a good move, albeit Bond is late to the party. It will need some good new wins here to stem the declines in its core software business.
Posted by John O'Brien at '07:51'
Mumbai-based, mid-tier offshore services firm, Mastek, is to spin out its mainly US-focused insurance products and services business which will then be known as Majesco, the brand that Mastek is known as in that market. The core Mastek offshore services business will then comprise Mastek’s UK operations, which is currently responsible for over half the company’s worldwide revenues, and its operations in Singapore. Shareholders will receive one new share in each company after the split, which is expected to complete in June 2015.
This is a very sensible move. Mastek has been struggling of late (see Mastek borders on losses) as management wrestles with the challenge of running a company with two business models: an R&D-intensive packaged software operation; and a labour-intensive traditional offshore IT services operation. These have quite different operational metrics and, potentially, different valuation parameters too.
The proposed demerger radically changes the shape and form of Mastek, which has a long history of operations here in the UK, so we are likely to comment more once we better understand the detail.
Posted by Anthony Miller at '07:34'
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