Subscribers to the TechMarketView Foundation Service can download the latest edition of IndustryViews Venture Capital, our quarterly round-up of activity in the UK software and IT services venture capital scene.
Besides our regular summary of interesting angel, seed and institutional funding transactions, we catch up again with professional investor, Tim de Vere Green, founder of early-stage technology investment firm Origin Capital, to hear about his successes and – needless to say, disappointments – over the past year.
Posted by HotViews Editor at '08:21'
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I’ve made no secret of the fact that I invest in the tech sector. Indeed since 2007 I have served as a director and became a shareholder of the Allianz Technology Trust (#ATT.L) since when its share price has risen by 150% - making it one of the best performing quoted Tech Investment Trusts.
As you read last year in Holway’s Share Portfolio – Update 2013. my own portfolio was up 48% in 2010, flat-lined in 2011, up 35% in 2012 and up a whopping 50% in 2013. This year/2014 has been much more difficult with a more modest 8.2% gain (but still better than the 3.4% gain the FTSE SCS Index or the 3% decline in the FTSE100 since 1st Jan 14) on the year. That’s still a 225% Holway Portfolio gain since Jan 2010.
In 2013, the best performer in the Holway Portfolio was Blinkx. When I read press reports of the critical research note by Benjamin Edelman in Feb I decided to bank my profits. Holway’s share sale was reported in many newspapers. See FT. I won’t make those kind of personal comments again! But it was a wise move as Blinkx has crashed 80% since. I also sold out of Google which has declined 6% since. Conversely, I sold Yahoo too – believing that all the gains from their stake in Alibaba had been made. But Yahoo is up 22% since I sold.
Fortunately my biggest disasters were both my smallest holdings so, from a weighted basis, didn’t cause too much damage. I lost 75% on Digital Barriers and 47% on Parity. I bought into both because of my respect for Tom Black and Phil Swinstead respectively. Now sorely tested!
I trimmed my holding in Amazon (down 25%). ARM also fell 12%. Oh dear.
On a brighter note, I invested in the MXC IPO and have been rewarded with a 58% rise since. MicroFocus, yet again, has done me proud – up another 39% (and that’s before dividends and return of capital). Backing Vin Murria yet again proved profitable with ASW up 32% after the agreed bid from Vista. I bought into TeleCity because of my relationship with Mike Tobin – which has increased 20% since he left! I am still expecting them to be acquired.
My biggest holding is in Apple which was up 40% in 2014. Indeed Apple is my best investment of the last decade.
Backing Mike Lawrie at CSC was rewarded with a 14% gain and Stephen Kelly’s arrival at Sage saw a 13% rise (although I have been a long-term shareholder). All my other holdings (the Holway Portfolio has c20 tech companies) rose or fell by <10%.
So, all-in-all, an unspectacular year – at least I did better than leaving the cash in the Bank! But I end it more concerned about the year ahead than a year back. Maybe I should liquidate the lot and put them into Pensioner Bonds!
Note- Performance relates to period 1st Jan 14 to 20th Dec 14. Performance excudes dividends of c1.5%. TSR therefore c9.7%..
Posted by Richard Holway at '10:35'
Shares in Atos rose almost 5% following the announcement that it would be acquiring Xerox’s global ITO business for up to $1.1bn.
It’s clear that this is a good deal for Atos. It expects the business to be immediately accretive to earnings and deliver a 10% margin in the first year. Part of this is going to be achieved by consolidating and integrating the business into Atos’ managed services operations.
Xerox meanwhile has suffered for its 'Services ambitions' for too long (see here and work back), and so a decision to either get bigger or get smaller had to be made.
Subscribers to TechMarketViews research services can read our analysis of the deal here.
Posted by John O'Brien at '16:28'
The year to October 2014 was busy for eServGlobal, the AIM and ASE-listed provider of mobile financial services to emerging markets. A year ago eServGlobal formed a joint venture with MasterCard and BICS to expand their flagship HomeSend proposition, see here. MasterCard then took a major stake, reducing EServGlobal’s holding to 35%, converting it to an Associate (adding a gain on sale of £17.5m). Since April, the company has recognised its share of the losses (A$ 2.3m, £1.3m) from HomeSend, and not revenues, which goes some way to explaining why the full year top line was flat (in AS$ terms, down 12% in Sterling). Gross profit was down on the year by 7% in A$ terms (19% in Sterling), but adjusted EBITDA came out at A$ 2.6m (£1.4m), up c.25% in Sterling terms.
The company is spending heavily on technology to ensure that the platform and product portfolio remain competitive, capitalising A$5.4m (£3m). Year end cash was A$ 3.7m.
The company has built a customer base of 65 companies including four large MNO groups, a growing number of financial services companies and a wide footprint of network corridors. In 2015 it will focus on expanding connected subscriber number, particularly in South-East Asia. eSG’s core business is targeting the 2.5bn unbanked in emerging markets with HomeSend building share in the US$430bn remittances market and expanding (with the MasterCard muscle) into other payments areas.
eServGlobal is working hard to realise its potential and it has the components in place, but needs to show real value from the core business, see here and work back. Management are confident of progress, with a broader mobile money and e-wallet business offering growth alongside the HomeSend associate. However, the share’s consistent drift downwards throughout 2014 shows that investors still need convincing.
Posted by Peter Roe at '10:07'
Buy and build managed security specialist Accumuli is adding another company to its roster of acquisitions, putting up £8.9m to take on RandomStorm, who specialises in network security, vulnerability management and compliance, via a combination of managed services and in-house developed IP.
This is the largest of Accumuli’s acquisitions over recent years (e.g. Equalis was acquired for £1.9m, see here, and Accumuli put up £2.6m for Signify Solutions in June, see here) but it does bring capability in the ‘Prepare’ part of the four phase IT Security Readiness framework. Accumuli has a presence in the ‘Protect’ and ‘Monitor’ areas but was weak in ‘Prepare’. While Accumuli is more focussed on proactive threat intelligence and detection, there is scope for acquisition or development in the ‘Respond’ area.
Since it was founded in 2007, RandomStorm has provided services to over 500 organisations and its current strategy is to identifying IT security risks within customers’ infrastructure and environments, then provide the solutions (based on its own IP) to monitor and manage the risks identified. For the year to April 30 it achieved revenue of £3.5m and EBITDA of £1m, and in the five months to September 30 2014 revenue was £1.8m with EBITDA of £0.4m.
This is a big investment for Accumuli (who posted £10.3m in H1 see here) but the integrated nature of the RandomStorm capability will mean it can move forward faster than by buying up several providers with point capabilities.
Posted by Angela Eager at '09:32'
Marking the denouement of its life on public markets, telecoms infrastructure-focused Daisy is to delist from AIM on Monday, subsequent to its MBO (see Daisy agrees £500m takeover offer).
Daisy was founded back in 2001 and joined AIM in 2009 by virtue of reversing in to Freedom4 Communications (in effect the remains of Pipex/Tiscali). Mostly dealing in network infrastructure and services, Daisy had a small play in traditional data centre services, somewhat boosted by its rescue of 2e2’s UK data centres on the latter’s collapse (see Daisy chains up 2e2 data centres).
It has been far from plain sailing for Daisy in recent times, so now it has a chance to catch its breath and regroup outside of the glare of the public eye. Seasoned Computacenter executive Neil Muller will take over as CEO next year (see here). What goes around, comes around.
Posted by Anthony Miller at '09:01'
Atos has stepped in to buy the ITO business of struggling copier and BPO giant Xerox for $1.05bn in cash, putting an end to speculation about the future of Xerox’s services business (see Xerox Q3 Services disappoints and work back). It confirms our long-held view that Xerox buying big into Services was a mistake.
Let’s remind ourselves of the history. Xerox paid $6.4bn for ACS back in 2009 to move into Services (see Xerox copies Dell, buys ACS) – effectively paying 1x sales for the entire ACS ITO and BPO operation. Xerox is now disposing of the smaller of the two ‘ITO’ for 0.7x projected FY14 revenue of $1.5bn. Atos could also pay a further $50m ‘subject to the condition of certain assets at closing’.
So what is Atos getting for its money? It will take on 9,800 ITO employees in 45 countries, with 4,500 in the US and 3,800+ in global delivery locations including India, the Philippines and Mexico. The Xerox ITO leadership team will join Atos, and then, Atos will become responsible for providing IT services to Xerox.
Strategically for Atos, the US will now become its single largest market, which is an important step for the company looking to become a truly international, rather than predominantly regional European ITS player.
Both companies have a track record of working together. Atos contracts Xerox for managed print services, as well as human resource and financial services BPO. Meanwhile, we learn that Xerox currently uses Atos for ITO work in Europe. This shows how sub-scale Xerox’s ITO operation is/was within the European market.
On the face of it, the deal makes a lot of sense for Atos, so long as it is able to carefully integrate the business like it has done on previous occasions. For Xerox, it begins the denouement of its global Services ambitions. The big question is, will BPO be next?
We will be on the investor call this morning, and will provide more analysis for TechMarketView subscribers later.
Posted by John O'Brien at '08:30'
Silicon Valley-based seed-stage fund, SparkLabs Global Ventures, has invested $420k in UK-based kids coding game startup Code Kingdoms. It appears that SparkLabs participated in an initial angel funding round in Code Kingdoms in May this year.
This really is the archetypical ‘noble cause’ and one that TechMarketView heartily supports.
Posted by Anthony Miller at '08:28'
It seems Accenture can do no wrong right now. The IT services bellwether beat its revenue targets for the third successive quarter (see Accenture beats Q4 revenue target). Last time CEO Pierre Nanterme said he was ‘very pleased’. This time it was ‘excellent’. No arguments from us. Indeed its shares rose 5% on the results.
Revenue for Q1 was up 10% in local currency (LCY) to $7.9bn, and up 7% in US Dollars. The vast majority of this is organic. In the investor call, CFO David Rowland said recent acquisitions contributed just 1-1.5% to growth (see here and work back), and that ‘digital related services’ contributed ‘very significantly to overall growth’ with strong results from its new divisions Accenture Analytics, Accenture Mobility and Accenture Interactive (see Accenture launches three new divisions).
Operating profits were up 9% to $1.19bn, pushing Accenture’s margin up two whole points to 15% from 13% last time. Accenture also raised its guidance for the year, for growth of 5-8% (LCY), up from 4-7% previously.
Consulting and outsourcing were up 7% (LCY) and 14% (LCY) respectively. All bar one of the five operating groups hit double-digit growth (Resources at 2%), with communications, media and technology leading the way at 15%, followed by health and public services (13%), financial services (11%) and products (10%).
North America, Accenture’s largest market, is storming ahead, with growth of 12% LCY, and Europe appears to be bouncing back well at 9%.
The only weakness is the bookings, which were down 11.5% on last year to $7.7bn (which included a 3% negative foreign currency impact). Nonetheless, Accenture is clearly gaining market share at the expense of competitors and has plenty of time to turn the levers upwards once again though the rest of FY15. The big challenge for the competition in 2015 is how to keep up.
Posted by John O'Brien at '08:22'
In a trading update released today, education hardware and software provider, Promethean World, delivered some more negative news to the market. The company had already warned during a previous update that there was a risk around the timing of some orders towards the close of the year. And so, it has come to pass that “certain larger contracts”, which have been under negotiation for a period of time, will now not ship until Q1 2015.
The impact will not only be felt at the top line (revenue will come in below expectations at £118m-£120m) but in terms of profits and cash too. The last sight we had of the numbers was for the quarter to the end of September, when revenue was £30.8m - down another 17.9% compared to Q313, or 12.8% on a constant currency basis. Year to date revenue was down 12% at constant currency (see Promethean: Nerves of steel required).
A key challenge for Promethean is school budgets. With such pressure on the finances, convincing educational establishments to hand over cash for new technology can be a tough sell. And we don’t see that scenario changing materially as 2015 gets under way.
Subscribers to PublicSectorViews can read about the key trends in education and the leading suppliers in the recently released UK Education SITS Market Trends & Supplier Landscape 2014-15
Posted by Kate Hanaghan at '08:18'
Loss-making but cash-rich video search technology play, blinkx, has dipped into the piggybank to buy US-based ‘video supply side platform’ company AdKarma, for an initial $15m cash and an optional $5m cash and/or shares.
In truth, I can’t quite glean from today’s release (or indeed from their website) precisely what AdKarma does and how it does it, bestrewn as it is with adland gobbledegook. Suffice it to say AdKarma turned over $13.3m in 2013 at an 18% gross margin (sounds more like a commodity services business, then) and just $600k operating profit. AdKarma is expected to reach headline revenues of $20m+ this year, with an operating profit of $3m (by blinkx’s accounting policies … hmmm).
Anyway, this is all a drop in the ocean for Cambridge-born but now California headquartered blinkx, which suffered an horrendous H1 (see ‘Transformational period’ for video star blinkx) as it tries to find its feet in the mobile world. Tricky, as it never really grounded itself in the static world!
Posted by Anthony Miller at '08:00'
When we published last year’s UK Public Sector SITS Market Trends & Forecasts report, we sought to differentiate between ‘what Government says it is going to do’ (particularly at the Cabinet Office level) and ‘what the purchasing organisations will actually do’. This is still relevant, but less so. Just over a year later, our view is that the actions of the Cabinet Office have changed the way that those across Whitehall think. A new way of procuring and managing ICT services and software is now firmly embedded across central government departments and agencies. Moreover, it has penetrated beyond the walls of Whitehall and into the broader public sector. Certain ways of behaving are now a given.
Many of the actions taken to change the Government’s approach to ICT procurement and delivery have helped deliver substantial efficiency savings. However, as we highlighted in our analysis of the Autumn Statement (see Autumn Statement: Efficiency through Transformation), the low hanging fruit has been picked, particularly in Whitehall. Further savings will be far harder to achieve. And increasingly we will see organisations compelled to invest in digital technologies, and the associated transformation of their organisations, processes and systems, if they are to continue making savings in the broader budget. We will also see the spotlight increasingly focused on the frontline of public service delivery i.e. in the wider public sector.
Subscribers to TechMarketView’s PublicSectorViews stream, can now download UK public sector SITS market trends & forecasts (December 2014). In the report we provide our detailed view of the market trends in all areas of the UK public sector - central government, local government, education, health, police and defence. And we consider how those trends will impact the different areas of the SITS market - from infrastructure services to application services, from business process services to software – through the General Election period and beyond. If you are not yet a subscriber, then... why not? Please contact Deb Seth to find out more.
Posted by Georgina O'Toole at '15:16'
The end of 2014 marks an inflexion point for the UK Business Process Services (BPS) market. Following several years of healthy growth in areas like public sector shared services and insurance, we now see more uncertainties and risks on the horizon.
The 2015 General Election and recent supplier scandals could impact both public and private sector. There are also deflationary implications from the move to business process automation (BPA) and other tools that shift services from traditional manual to new digital and ‘self-service’ channels.
As a result, we are now taking a slightly more cautious view on growth for the UK BPS market over the next few years, anticipating compound annual growth (CAGR) of 6.4% from 2013 to 2017, when the market will be worth £8.34bn.
Mid-single digit growth is still pretty healthy, and will ensure BPS remains the fastest growing horizontal sector across the UK SITS market (see UK SITS Market Trends and Forecasts 2014). The fundamentals remain sound across public and private sectors seeking help standardising and transforming business processes, re-platforming, and removing cost from operations.
What has changed in 2014 is organisations looking at ways to free up spend to invest in digital technologies and services (social, mobile, analytics and cloud) in what we call the ‘Race for Change’. The needle will move further on this path in 2015 as organisations attempt to ‘Join the Dots’, seeking ways to connect and extract real business value from these new technologies, gadgets and devices.
Within the BPS market ‘Joining the Dots’ is about how you join up these myriad systems and processes; automate low value administrative activities; drive actionable insights out of all the ‘big data’ and support your customers through the journey to digital. There are many outcomes on this journey, but the single biggest one is enabling a step change in the customer experience.
These are big market shaping trends that will create both challenges to suppliers as well as many new opportunities over the coming years. There will be pockets of much stronger growth too in areas like Platform BPO, Business Process Automation, and Business Process as-a-Service (BPaaS) that offer more flexible and cost effective ways of consuming BPS.
Subscribers to TechMarketView’s BusinessProcessViews research stream can read where to place your bets on UK BPS growth in our new report UK Business Process Services Market Trends & Forecasts 2014. The accompanying forecasts data and charts can be found here.
If you’re not yet a subscriber, please contact Deb Seth (email@example.com) who will be happy to help.
Posted by John O'Brien at '14:24'
Ideagen is on the acquisition trail again but this time it’s set its sights on a more substantial purchase. The SME, which supplies information management software to highly regulated organisations, looks set to buy Gael, a supplier of governance, risk and compliance (GRC) software to the healthcare, manufacturing and aviation sectors, for a net cash consideration of £18m (the total consideration is £21m). Ideagen is funding the purchase via a ‘heavily oversubscribed’ placing that is set to raise £17.5m.
Gael is a similar size to Ideagen and has sound financials. It generated revenues of £8m in its last FY (to end Dec ’13) with a PBT of £1.4m, and is expected to deliver revenues of c£9m in FY14. In comparison, Ideagen turned over £9m in the year to the end of April 2014 with a PBT of £2.6m (see Ideagen’s organic growth boosted by NHS business). Both organisations are growing nicely organically – Gael has enjoyed 14% compound annual organic revenue growth between 2011 and 2014 and has recurring revenues of c£4.5m.
By bringing Gael into the fold, Ideagen will immediately gain scale, strengthen its management team (the CEO is staying on) and marketing capability, and add over 1000 customers to the Group. Just as importantly, Gael brings with it strong IP in the GRC area, enhancing Ideagen’s risk management proposition. The acquisition strengthens Ideagen’s position in the healthcare and manufacturing sectors (Gael has 130 NHS customers), and provides it with a strong entry into the aviation sector - Gael’s 300 airline customers include the likes of Emirates.
All things considered, Gael looks a good fit with Ideagen and very much in keeping with the latter’s strategy of acquiring businesses with strong IP and recurring revenues, in complementary markets. But this is a sizable acquisition – more of a merger of equals – which brings its own challenges. So far, Ideagen appears to be handling its rapid expansion via its ‘buy and build’ strategy admirably but the risks of quick expansion involving the integration of numerous acquisitions remain.
Posted by Tola Sargeant at '09:47'
Hot on the heels of some very valuable contracts, with WPP, Thomson Reuters and ABN Amro, IBM has announced another nine data centres for its global cloud-computing network. This adds to the crescendo of activity as Amazon, Google and Microsoft all ramp up capacity. This investment will also improve IBM’s ability to store sensitive data in accordance with increasingly strict, country-specific privacy and banking regulations.
In our latest InfrastructureViews Market Trends and Forecasts report, available via this link, we predict good growth in the UK Cloud Services market. However, we shy away from the blockbuster forecasts of other commentators, suggesting a growth rate of around 10%p.a. is much more likely. Customers will require suppliers to operate in the “parallel universes” of supplying “old” infrastructure services alongside the “new” cloud-based offerings. Migration of large systems will take time, and the successful introduction of some cloud-based capacity will relieve some of the stress on legacy systems.
IBM, with its breadth of experience and customer base will be able to benefit from this trend. Cloud will bring some revenue growth and open up new customer opportunities, whereas the baseload of business in the “old” world should give margin and cash. The commitment to a cloud-based future and global coverage also ensures that IBM’s customers will be able to look to Big Blue for their longer term infrastructure strategy.
IBM has a balancing act to perform. It will not want to compete on price to fill its data centres quickly (it would almost certainly lose against AWS and Google), but rather build solid long-term business with the larger companies as they migrate their businesses over time. This strategy will not give immediate returns, but it should create a valuable silver lining longer term.
Posted by Peter Roe at '09:32'
TCS has already made it into the Top 3 in our Application Services supplier rankings (see ESAS Supplier Landscape 2014) but there is no let-up in its ambitions – it is after more growth and a more influential position within its customers. Delving into the business during an analyst event earlier this week, it was clear it has been pushing and pulling on its many business levers to align them to meet these aims.
We’ll provide a deeper dive into how TCS is faring in a report early in the new year but initial impressions from the event are favourable, with customers indicating they are viewing TCS as a strategic partner rather than purely a technology service provider and are trusting it with more transformation-style engagements. It has a strong digital proposition with an emphasis on convergence across the technologies but is also taking care of its core business while providing a bridge between the two areas. As highlighted in the ESAS Supplier Landscape 2014 report, we view this as a critical success factor in the digital transformation environment.
The higher TCS moves up the value chain, the more pressure it will be under to deliver at a pace customers need, to undertake more risk sharing, and come up with new pricing models that are appropriate for the digital environment. These are not small matters but it has resources and ambition to move them along.
Posted by Angela Eager at '09:17'
The clouds gathered at Oracle during Q215 but it was a positive gathering that showed the software giant was building this side of the business – and that the numbers of salespeople and engineers hired to boost cloud performance are delivering.
As one of the industry bellwethers, Oracle’s cloud shift is keenly watched for what it says about Oracle’s prospects as well as those of the market in general. OpenWorld this year was all about the cloud (see here) and Q2 (to November 30 2015) saw progress in cloud revenue. Combined SaaS/PaaS/IaaS revenue was up 45% but only to $516m, which is still a droplet compared to overall revenue that was up 3% to $9.6bn over the quarter. SaaS and PaaS totalled $361m, or 4% of total revenue, compared to 2% in the year ago quarter.
For Oracle, it is all about the future and beating rivals like Salesforce.com and Workday. Larry Ellison maintains Oracle is closing the gap on Salesforce and will catch up with it next year, basing the belief on new cloud bookings. “Total Q2 new cloud bookings grew at a rate of more than 140%,” according to the company. By Q4 this year it expects new cloud bookings to exceed $250m, with new cloud bookings expected to be over the billion dollars mark next year. That compares to Salesforce.com’s $1.4bn revenue in Q3 (see here) and fiscal 2105 revenue guidance of c$5.4bn - although its growth rate is slowing. There is no doubt that Oracle is making cloud progress but it has a long way to go. The main concern is that it wants customers to buy into a complete Oracle cloud stack (infrastructure to applications) which may be out of kilter with the open and mixed vendor cloud ethos.
New software licences were down 4% but support and maintenance was up 6%. Net income was down 2% to $2.5bn on the back of lower software sales, increased expenses and the effect of SaaS revenue.
Overall Q2 was a reasonable period (shares rose in after hours trading) and has restored some confidence in the company and its cloud shift.
Posted by Angela Eager at '08:45'
London may have its ‘Silicon Roundabout’ and Cambridge its ‘Silicon Fen’, but it seems that Brighton has a Silicon Beach! For that is where the headquarters is located of international social media monitoring SaaS platform, Brandwatch, which has just made it first acquisition, that of London-based analytics startup, PeerIndex. Terms were not disclosed but the rumour mill pitches the deal at some £10m, mostly in Brandwatch shares.
Founded in 2005, Brandwatch attracted a couple of ‘angel’ funding rounds before receiving $1.5m Series A investment from media monitoring group, Gorkana (recently acquired by US-based peer, Cision). This was followed in 2012 by a $6m investment from Nauta Capital and, in May 2014, a $22m Series B round led by Highland Capital Partners, with Nauta and other existing shareholders also participating.
During this time Brandwatch has opened offices in New York, San Francisco, Berlin and Stuttgart, has grown to over 200 employees, and is reported to have achieved revenues of £13m in 2013. Clearly the sea air is very good for its health!
Posted by Anthony Miller at '08:19'
Although I have much of the latest technology from Apple and now Windows 8.1, I still use my tried and tested Blackberry Bold. I find my iPad +Blackberry the perfect traveling companions. I much prefer the physical keyboard for emailing over any touchscreen. I also like the long battery life. Of course, everything else on the Bold is rubbish - hence the iPad!
I’ve been waiting a long time for today’s launch of the new Blackberry Classic and it looks good. Almost identical to the Bold but with a 3.5inch touchscreen as well as the physical keyboard, two cameras, faster processor, 16gb and a much faster web browser (well, it couldn’t be any slower!) It claims an impressive 22 hrs battery life too. Price is c£350.
The FT states "At its peak in 2008, BlackBerry accounted for one in every five smartphone sales and had a market value of $80b, compared to $5b today'. I don't think the Classic is going to change that in any significant way. As The Telegraph finished its review ‘If you have to have a Blackberry, the Classic is brilliant. If you don’t, it’s an irrelevance’.
Posted by Richard Holway at '16:37'
Many of you know, or might even belong to, the Worshipful Company of Information Technologists – the 100th City Livery Company. I’ve been a Freeman since the 1990s and became a Liveryman a few months back.
I was therefore delighted to accept an invitation from the new Master – Nic Birtles – to address the next Business Lunch to be held @ 12.15pm on Wednesday 11th Feb 15 at Saddlers Hall – the magnificent mansion house a few yards from St Paul’s Cathedral.
Amazingly this will be for a record-breaking third time that I have addressed a WCIT Business Lunch. The first was in 2000 just after the dot.com bubble had burst. The second was in 2003 when the IT sector in the UK was seriously on its knees and soon after I had given my “IT’s All Over Now?” speech at the inaugural Prince’s Trust ICT Leaders Dinner. Nic has particularly asked speakers to address future trends for the industry and I intend to do that in a Year 2000, Year 2015 and Year 2030 format or “Where we were, Where we are and Where we are going”.
The lunch is open to all and, of course, all the proceeds are to the WCIT. You can see more details and book at Business Lunch Booking
Posted by Richard Holway at '14:53'
Education systems and solutions provider Tribal looks set to miss its profit target for the full year having failed to achieve key contract milestones and completions before the year end. Only last month Tribal seemed confident of meeting expectations (see Tribal in line for full year). The Group’s shares fell 11% in early trading on the news and are currently trading at around 145p.
On the bright side, it seems to be largely an issue of timing - Tribal expects to benefit from the deferred contract milestones and completions early next year, setting it up for 2015. Tribal also reports contract successes in two of its international markets. It has signed an AUD$19m (c£10m)/5-year deal to deliver its student management system across all Technical and Further Education Institutes in the state of Queensland in Australia. And secured its second major student management system customer in Canada, the University of Alberta in Edmonton.
Despite the ‘extendable’ contract award timelines, international education markets continue to offer attractive growth prospects for Tribal. There was no news today, however, of its progress in the UK market, which accounts for around three-quarters of its turnover. Tribal currently sits at #4 in TechMarketView’s UK Education SITS supplier rankings but risks losing market share if management is too focused on international ambitions.
PublicSectorViews subscribers can download the UK Education SITS Supplier Landscape Report 2014-15 here for more detailed analysis of Tribal and its rivals. If your organisation doesn’t yet subscribe to PublicSectorViews and you’d like details of our subscription packages just drop a quick email to Deborah Seth in our Client Services team.
Posted by Tola Sargeant at '09:42'
It is reassuring to see stalwart EDP changing with the times as it transitions to recurring revenue and hosted provision but the changes put pressure on the company in FY14 (to September 30 2014) with more to come in FY15.
Revenue for the provider of software and services to the UK wholesale distribution industry and of more horizontally targeted sales software solutions was down yoy from £5.8m to £5.5m, due to delays to orders in H1 (see here). Pre-tax profit was down sharply to £40k (from £794k) however.
EDP was impacted by the shift to recurring revenue - now 80% of the total vs. 77% - but management says the effects will be more evident in 2015. Add that to pricing pressure on its products and the expected loss of £300k in 2015 following the move by a major customer to acquire a competitor software business, and the rest of the current financial year is looking tough. EDP has responded by cutting £200K in costs, and investing in lead generation. It is also growing its hosting service which now represents over 50% of revenue for the first time. While the outlook does not look comfortable, EDP has survived major industry changes during its long life, so may well have the experience to do it again.
Posted by Angela Eager at '09:35'
Unisys has said that Peter Altabef will join the company as President and CEO from January 1st. In a previous life, Altabef was CEO of both Perot Systems and MICROS Systems (acquired by Oracle), and President of Dell Services.
Altabef takes the place of Ed Coleman who left earlier this month. On Coleman’s watch, the company frequently dipped in and out of quarterly losses – but always managed to close each year since 2009 with a net profit. However, during Coleman’s time, Unisys shrank quite notably. In 2008 revenue was $5.23bn (net loss of $130m), but just $3.46bn in FY13 ($92m net profit). During that period, services revenues slumped a chunky 35% to $4.6bn. And the ups and downs have continued this year. Take its Q3 for example; not a bad performance, but one that was blighted by a weak H1. It is this inconsistency that is the company’s core challenge - and the likely undoing of Coleman.
There are certainly some gems inside of Unisys, for example see Unisys has early success with next-gen HOLMES. But it is its overall performance that needs fixing. Altabef must like a challenge because getting Unisys into a shape that will enable it to produce consistency of performance is going to be one tough job.
Posted by Kate Hanaghan at '09:21'
Capita’s shares unexpectedly rose over 6% yesterday. Shares in the UK BPS market leader have been on a downward path since their high of £12+ in September, and concerns about 2015 growth in public sector have not helped (see here).
There are a few encouraging announcements that may have helped. Capita’s under-performing insurance services business announced an important three-year renewal with insurance customer Hiscox, which should help restore some confidence to the division, which has been in continual decline now for some time (see Capita continues to outperform ‘the rest’ (update)). Capita may also be experiencing some uplift from rival insurance BPS player Quindell’s ongoing crises (see Quindell hits the skids).
Capita also acquired managed print services player Complete Imaging Ltd (Complete) for an undisclosed sum last week, which has customers including Money Advice Trust, Kings College Cambridge and South & City College Birmingham. According to accounts filed with Companies House, Complete had revenue of £10.1m in FY13, up 17.8% on FY12, and pre-tax profits of £1.3m.
Then there is the website Create Tomorrow, which is a real change of direction for Capita into tech innovation (see here), showing where it is placing its bets, and in some cases already working for customers. It explores wearables, customer experience-led service design, payment innovation, game science, behavioural science and analytics, robotic process automation and mobile innovation. The most recent update is RPA. Alongside technology from Blue Prism, Capita is referencing case examples by our Little British Battlers (LBBs) Genfour and Celaton, which are clearly now on its radar (see Little British Batters - the Fourth Generation).
Most of these innovations are themes we are predicting for 2015 (see Predictions 2015: Business Process Services). But as we point out, the key to success is all in ‘Joining the Dots’.
Posted by John O'Brien at '08:54'
The word tripping off the tongues of most suppliers these days is ‘digital’. It means different things to different people but one thing is clear – supplier activity is driven by the race for change around digital transformation. The latest report from the ESASViews research stream - Enterprise Software & Application Services Supplier Landscape 2014 – assesses the progress of the leading suppliers to the UK market and the critical digital success factors.
Speed, approaches and progress vary widely but there are some common themes. For suppliers, digital progress revolves around the intelligent provision of the technologies and services needed to enable digital transformation. The stakes are being raised however, because it is now also about the convergence of the various technologies (cloud, mobile, big data/analytics and social/collaboration), which is akin to keeping bucking broncos under control. This is driving diversity of performance - not just between suppliers but within suppliers. Another prominent theme is the criticality of providing bridges between legacy and digital environments – which aligns with the TechMarketView theme for 2015: Joining the Dots.
With traditional ESAS areas in a low/no growth rut, suppliers have to get digital strategies right in order to remain relevant in the market. The challenge is gauging the pace and matching investments, commercial models and the product and service business mix so that revenue continues to flow from traditional business areas, while digital-related revenues ramp up.
Subscribers to ESASViews can download the report here. If you do not take our services and would like to know more about them Deborah Seth will be happy to help.
Posted by Angela Eager at '08:46'
Following a brighter first half (see eg Solutions goes positive on all metrics in H1), AIM-listed back office optimisation software provider eg solutions (EGS) has raised cash and eliminated debt through a share placing and redemption of outstanding loan notes. The board has also reappointed founding ex-CEO, and current acting-CEO, Elizabeth Gooch, as full-time CEO once again. Get it? Got it. Good!
On the financial side, EGS is to place 4.9m shares at 65p (an 8% discount to last night’s 71p closing price) to raise £3.2m gross. The funds will be mainly used to bolster staff recruitment, sales & marketing and R&D, with what looks like the balance of about £1m going straight to the balance sheet.
In addition, the holders of the £550k of outstanding convertible loan (10%) notes – mainly EGS chairman Duncan McIntyre and Aspect Software CTO, Spencer Mallder (see eg sets poor example on profits and gains new Aspect) – will convert their entire holding at 50p per share, leaving EGS without debt. After the placing, Gooch remains EGS’ largest shareholder, though her stake will be diluted from 32.2% to 23.5%. EGS directors will then hold a total of 38.4% of the share capital.
The company also reiterated its forecast for an ‘in line’ FY.
It would be fair to say that EGS has had not the plainest of sailing in recent times, both financially and at Board level. Let’s see if the ‘refreshed’ Board and the extra cash can set them back on course.
Posted by Anthony Miller at '08:21'
Lastminute.com is synonymous with the dot.com crash of 2000. It is also synonymous with its two founders – Brent Hoberman and Martha Lane Fox. They have both gone on to great fame and, one assumes, fortune too.
But that is not exactly what one can claim for Lastminute.com. At its 2000 IPO it was valued at c£770m. It crashed soon after as the dot.com bubble burst. In 2005 Lastminute.com was bought by Sabre for £600m and today they sold it to Bravofly Rumbo Group (a Swiss travel company) for £76m – about half the rumoured price back in Sept when Oakley Capital was considering a bid.
Lastminute.com was itself a ‘disrupter’ but then found its business model was all too easy for others to copy so, in a way, the disrupter itself got disrupted. It then failed to move with the ever increasing pace in the ‘Race for Change’.
As Hotviews readers know, we have a bit of a ‘thing’ about companies that make profits and generate cash. Many seem to criticise us for having such old-fashioned ideals! As far as I can see, Lastminute.com has hardly ever made a profit. Mind you neither have most of the other disrupters either. But, one day, they will have to or join the 90% Club like Lastminute.com, Bravofly itself and so many other ‘froth stocks’ you read about on Hotviews.
‘When will they ever learn? When will they ever learn’
Posted by Richard Holway at '18:56'
I’m always happy to report IT job creation in the UK – particularly at entry-level. Accenture has today announced that it will hire 1,600 in the UK in the next 12 months. Most of these are for those with established skills. But a fair number are for both graduates and apprentices. Indeed I have reported several times about Accenture’s Technology Apprenticeship programme. Today’s announcement talks of 60 apprentices – but I think these are a restatement of previous announcements eg at the launch of the Tech Partnership.
Happy to give HotViews space for any other companies creating similar numbers of new jobs in the UK. Just send me an email on firstname.lastname@example.org
Posted by Richard Holway at '18:29'
As in dashes for cash, dilutes the stock, and delays forecast break-even – not a ‘good look’ for London-headquartered ‘advanced surveillance technologies’ firm, Digital Barriers.
The company has just announced a placing of some 20m shares at 37p (no discount to last night’s close) to raise net £7m. The placing represents nearly 31% of the issued stock and will be used partly to keep the business running and partly to strengthen the balance sheet. Further, new CEO, Zak Doffman, has delayed his forecast of reaching break-even until the end of FY16 (31st March). Digital Barriers’ share price has fallen nearly 80% so far this year.
First half net losses almost doubled to £13.1m, exceeding revenues (see Digital 'Barriers' to profitability remain). At the time, Doffman was confident that they would meet FY expectations. Which FY now?
Posted by Anthony Miller at '09:14'
BT has moved quickly to choose between its two eager suitors, see BT- about to choose a bride?, and has turned its attentions exclusively onto EE. As we have suggested, this is where the hard work starts as the stakeholders work out how to combine the two businesses without destroying value. The indicative price for the deal is £12.5bn, that’s 7.9x EBITDA or over £500 per customer, so BT looks prepared to pay well to get back into mainstream mobile where growth and margins are under pressure.
BT predicts synergies from network and IT rationalisation and there should be savings available in network elements such as backhaul. However, securing IT savings on a merger is notoriously difficult. EE is already an amalgam of two companies’ systems and linking into BT’s system stack will take time and effort. We would expect the two operations to be run as separate entities for some time, unifying the brands and sorting out the systems over the next couple of years. Realising earlier savings could prove difficult and risky. This will also reduce the potential returns from any “quad play” moves, a major strategic rationale of a deal.
Of course, this dalliance may not lead to a marriage and BT still has its fall-back strategy based on its broadband hubs, but this looks unattractive in comparison with the acquisition alternative. With O2, the shunned suitor, now available after its parent Telefonica has apparently tried hard to find her a new home, we could see further changes in the mobile landscape in the New Year.
The BT and EE teams will be working hard over Christmas to make the numbers and the strategy add up, but BT’s longer term future should be much rosier with a strong mobile offering.
Posted by Peter Roe at '09:10'
Scisys, the supplier of ‘bespoke software systems, IT based solutions and support services to the media broadcast, space, government, defence and commercial sectors’, is now adding retail to that list with the acquisition of web and mobile application developer Xibis Ltd.
Scisys will pay up to £3.2m in cash and shares for Leicester-based Xibis, including £800k cash up front and further cash payments depending on performance. Scisys is paying over 3x expected FY14 revenue of £1m (25% up on last year). Xibis is also expecting a £200k PBT in FY14 vs. a £20k loss last year.
Xibis specialises in developing web-based and mobile apps for UK retailers like Halfords, Interflora, Thorntons, as well as names like Seat, NFU Mutual and Forte. It is now moving into mobile iBeacon technology for some of its retail sector customers, which Scisys sees giving it a play in emerging 'Internet of Things' applications. Chairman Mike Love said ‘These technologies will eventually be adopted by Scisys' traditional client base allowing for significant cross-fertilisation between the businesses’. We would agree that view, but of course the timing and rate of adoption will be the big unknown.
We have met several retail technology players through our Little British Battler (LBB) programme (see LBB - the fourth generation). TagPoints, one of our Fourth Generation LBBs, which also develops beacon technology for retailers, was acquired by SmartFocus in September (see here). So we can see consolidation now starting to take place.
Scisys is taking a small bet on this emerging sector, where there are real innovations taking place. It seems one well worth taking.
Posted by John O'Brien at '09:03'
As 2014 draws to a close, we reveal our analysis on the trends that will impact the UK Infrastructure Services Market over the next three years.
While the “Race for Change” will continue to impact both the market and industry, our theme for next year - “Joining the Dots” - brings the opportunities around digital transformation into focus. In infrastructure services this about how you create better customer and end user services; how you ‘Join the Dots’ between old world legacy systems and new world services; how you bring clouds together; and how you make systems work better together through advanced automation. This is a huge opportunity for suppliers.
In "UK Infrastructure Services Market Trends & Forecasts" (authored by Research Director, Kate Hanaghan), we define and explore the key Market Shaping Trends, namely:
The infrastructure services market is large and accounts for c40% of the total UK Software and IT Services market. However, it is struggling to grow. Our forecast model helps suppliers pinpoint the areas of opportunity to 2017, and understand the areas that are in decline.
Subscribers to our popular InfrastructureViews research stream can read the report in full here: UK Infrastructure Services Market Trends and Forecasts 2014-15.
If you would like to become a subscriber, please contact Deb Seth
Posted by HotViews Editor at '08:59'
In our UK Healthcare SITS Supplier Landscape 2014-15 report we said that newly-listed Servelec, which sits at #25 in our UK healthcare SITS rankings, had no shortage of ambition and could well re-enter the top 20 next year, possibly with the help of acquisitions. Well, it now looks certain to climb the rankings following the acquisition today of social care application provider Corelogic for £23.5m (£14.5m in cash, £6m in loan notes and £3m in shares).
Corelogic is a sizable addition for Servelec as it delivers on its strategy to expand into adjacent, complementary markets. In the year to end August 2014, Corelogic had revenues of £9.6m (up 25% on the prior year) and a PBT of £1.4m. In comparison, Servelec’s healthcare business turned over around £15m in FY13. Together the two businesses have a stronger proposition for the UK market, bringing together Servelec’s offerings for community and mental health with Corelogic’s adults and children’s social care case management software, and associated financial modules. This is a good fit with government policy, which is driving closer integration of health and social care services and systems interoperability.
Of all the social care application providers in the UK market, Corelogic is a sensible choice. Its modern software seems to be proving popular with local authorities – it won 9 out of 11 tenders for which it competed last fiscal year. Corelogic now has a 20% market share in social care and is used by 50% of Local Authorities in London, where Servelec also has a strong presence. As part of a larger group, it should become an even stronger competitor to established players such as OLM and Northgate.
Posted by Tola Sargeant at '10:02'
Last week we launched TechMarketView’s theme for 2015, Joining the Dots. This theme reflects our belief that we will see a massive increase in the number things connected to other things and/or the internet. ‘Joining the dots’ will offer significant opportunities to suppliers of software and IT services to the UK market – though financial rewards will not be quite so obvious or swift.
TechMarketView’s research directors have recently presented their predictions for 2015 around this theme for their respective market segments and sectors: Infrastructure Services; Enterprise Software & Application Services; Business Process Services; Public Sector software and IT services; and Financial Services Sector software and IT services. I have extracted the essence of these predictions into some closing thoughts. The highlights are shown below, but subscribers to the TechMarketView Foundation Service can read the full screed here.
‘Mobile’ is a given – think ‘micro-mobile’
Although ‘transforming the customer experience’ through mobile devices has barely got underway, attention is already shifting to micro-mobile devices – basically, sensors – to take this to the next level. The combination of even smaller and ever cheaper technology, faster and more pervasive networks, advanced visualisation software, and massive data repositories and sophisticated analysis tools, will elevate the ‘customer experience’ to something previously only imagined in the realms of science fiction, if not fantasy.
New technology alone cannot join all the dots
Legacy back-end systems developed years (if not decades) ago were never designed to process the volume of transactions – and the ‘richness’ of transactions – initiated from millions of mobile devices let alone billions of micro-mobile devices. No amount of new ‘front-end’ technology will fix this as it is the cause of the problem. Bullets will need to be bitten – sooner, rather than later.
‘Digital’ is a symphony, not a solo
The ‘digital revolution’ has spurred the creation of a new breed of consultancy – the so-called ‘digital media agency’ – which tries to bridge the gap between IT design and marketing advisory. Some are start-ups, purpose built for the role. Many are simply rebrands of existing web design companies and PR agencies.
This mix of skills is generally not found in traditional IT systems integrators or for that matter, in traditional marketing and advertising agencies - no existing player is yet able to go truly ‘solo’ in the digital world. Therefore we are seeing a coming together of old world and new world through commercial partnerships and full-on acquisitions. Both come with risk, especially when the companies involved are of significantly different size and culture.
The more dots you join, the greater the risk of disconnection
The sense of urgency in ‘joining the dots’ – and the inherent complexity in doing so – leaves organisations open to increased risk. We have seen this many times before with legacy, mission-critical systems failing after a ‘routine’ software upgrade (no names, no pack drill). These risks are multiplied exponentially as you interconnect more systems, old and new. Radically different development and testing technologies and processes will need to be established to reduce the risk of system collapse and to make service interruptions all but invisible to its users. This is indeed rocket science.
Switch to automatic
In order to join all the (appropriate) dots without proportionally increasing the number of people involved in joining them, you just have to automate wherever you can. Automation simplifies complexity and eliminates the mundane. But only to a point.
The CIO shall reign forever and ever (Hallelujah!)
The role of the CIO is certainly not dead. Each turn of the technology screw makes the ‘IT ecosystem’ intrinsically more complex, not simpler. Someone has to actually ‘join the dots’ and that’s the CIO. By the way, someone also has to carry the can when it all goes horribly wrong; that’s the CIO too!
Show me the money
Please, do try to make some money out of all of this. Both the software industry and the IT services industry are undergoing transformative changes in commercial engagement models (e.g. ‘pay as you go’, ‘outcome-based’) and product/service delivery models (notably ‘cloud’), with dramatic - in some cases catastrophic - consequences for revenue growth and profitability. By definition there can only be one winner with ‘first mover advantage’. Everybody else needs to stick to business basics and (re)learn how to turn revenue into profit and profit into cash.
Posted by Anthony Miller at '09:58'
Cohort, the independent technology group working primarily for defence (air, land and sea), wider government and industry clients, has had delivered a strong performance in its H1 to end October 2014. But the improvement was primarily driven by one of its four market-facing subsidiary companies: MASS.
Total Group revenues were up 13% to £37.6m, while adjusted operating profit increased 34% to £2.5m. Despite making two acquisitions during the year, this also represented organic growth. MASS, which focuses on electronic warfare support and secure information systems in the defence market, accounted for 41% of revenues in the period, and increased revenues by 31% to £15.6m. Last week we reported that MASS had won three new MoD contracts – see MASS thriving in land of the giants.
Across the other divisions, performance was not quite as rosy – revenues at SCS, the defence technical advisory business, were slightly down; and SEA, the advanced surveillance systems and software house, also had lower revenue (£12.2m vs. £14.0m) after disposing of its space business but adding system and in-service support provider, J+S, into the fold. Meanwhile, MCL (Marlborough Communications Ltd) was new to the Group (acquired in July) and made an initial contribution.
The outlook is good. Order intake (in addition to orders acquired) is up 80% at £64.5m. And crucially, £44.1m of the order book is deliverable in H2. When added to the recently announced MASS contract wins, that means 88% of the consensus forecast revenue is underpinned for the full year
Posted by Georgina O'Toole at '09:45'
A post from Mobile Cloud Labs (MCL), a specialist developer of software for mobiles and tablets caught our eye this morning. The announcement itself was just that management has approved the audited accounts for 2014 for the company, who listed on the GXG Market in 2013. The consolidated results were a sea of red in terms of profit and loss, although FY14 losses reduced substantially €261K vs. €675K) despite it being a year of hard work setting up its back-end infrastructure, and revenue figures were not included. The back-end work is preparatory to a “spectacular roll-out” in 2015 according to CEO Richard Sylvester.
At the moment MCL is building mobile applications covering identity theft prevention and location based apps – but they are only a means to an end. It will use the data gathered from these applications to support its aim of transitioning to a targeted mobile ad company. Its goal is to enable advertisers to target their ads to pinpoint locations, at the right time, via the planned AdAbouts platform, and track the process from ad impression to point of sale.
This is an interesting interpretation of a data driven business we have written about previously in ESASViews and hooks into the expected demand for location based mobile apps and ‘micro-moments’ (see Predictions 2015 - ESAS). While the use of mobile apps as a means to gather data to create a mobile ad operation makes me uncomfortable (although the company is clear about its plans on its web site, I wonder whether users who sign up to its apps will be so aware), MCL is not the only company collecting mobile data and offering targeted mobile ads. It will be interesting to see how it develops and if it can differentiate itself from both direct competition and the digital marketing agencies who are moving into the ESAS market.
Posted by Angela Eager at '09:44'
IBM has been chosen as the preferred supplier for the NHS’ Electronic Staff Record (ESR) contract ahead of Steria and CSC, which were also shortlisted. Upon contract award, the ESR service, which is critical for the NHS’ payroll, will transition from incumbent supplier McKesson to IBM. McKesson unexpectedly withdrew from the re-procurement of the £200m-£400m ESR contract in June having announced plans to divest of its UK businesses (see McKesson exits ESR bid process).
This a significant win for IBM, which is likely to push it from 12th place in TechMarketView’s UK Healthcare SITS rankings into the Top 10 (see the UK Healthcare SITS Supplier Landscape 2014-15 Report if you’re a PublicSectorViews subscriber). IBM is no stranger to the UK healthcare market but it took a step back from the sector when it failed to win any National Programme contracts (in hindsight many would see this as a lucky escape!). It has been quietly building up its UK healthcare business again since 2009 and had success at the local level in 2012, signing an IM&T deal with University Hospitals of Leicester NHS Trust.
The ESR contract is a sizeable central deal in the health sector and strategically important to IBM, but transitioning such a critical system to a new supplier is not without risk. It’s interesting that the Department of Health has felt moved to reassure users that the transition will be ‘carefully planned’ to ‘ensure a seamless transition’. Let’s hope that Steria and CSC don’t have reason to consider they’ve had a lucky escape further down the line.
Posted by Tola Sargeant at '09:30'
In an investor concall last Friday, TCS signalled a weaker UK market, although Europe as a whole was growing ‘better than average’. Management attributed the weakening to ‘seasonality and impact of Insurance’.
According to my estimates, TCS UK grew by 12.2% yoy in Rupee terms last quarter (to 30th Sept) vs 16.6% in Continental Europe. This translates to 9.4% yoy growth in GBP, and is the seventh consecutive quarterly decline in UK growth from its 30.8% peak in the Dec. 2012 quarter. Over the past 12 months, TCS UK revenues have grown by 12% to reach £1.54bn, making it the largest of India-base peers by far (see OffshoreViews).
The underlying issue is with Diligenta, TCS’ UK life and pensions (L&P) business process services subsidiary, established in 2006 on the back of the £486m, 12-year landmark contract with Pearl to manage its closed book policy business. TCS went on to win a similar deal at Friends Life in 2011, worth £1.4bn over 15 years (see here).
But the thing about closed book contracts is that policies (and therefore revenues) run off, so we can only assume that TCS has not been winning enough new business to top it up. Indeed, a subsequent contract to support Friends Life’s international L&P activities (see TCS scores first ‘international’ deal at Diligenta) was solely for the use of TCS’ banking software, BaNCS, not for business process services, though the application will be hosted by TCS in the UK.
TCS is not the only game in town in UK L&P, with Capita and WNS very much in the frame. Subscribers to TechMarketView’s BusinessProcessViews research can read much more about the players in the UK market in our recently published report, UK Business Process Services Supplier Landscape 2014.
Posted by Anthony Miller at '09:04'
Audioboom is the SaaS based digital social media audio platform listed on AIM with the marvellous ticker of “BOOM”. The company has recently made a series of announcements showing rapid progress in building its network of content partners and in opening up new opportunities to increase its revenue potential.
At the half-year results in August, Audioboom had 2.8m registered users of its App (now available on iOS and Android) with content partner websites increasing the number of active users to 12m. The number of content partners now tops the 2,000 mark, covering an eclectic mix of music, sport and news with rapid growth in the US. Audioboom works with its partners to deliver their content through media platforms such as Facebook and Twitter. The management expects that the principal revenue driver will be the delivery of advertising which is tailored to the individual user in terms of his location and what he/she is listening to.
Audioboom’s “cleverness” is in its ability to learn the preferences of its listeners and to tailor content accordingly and it is this capability that will be used by Audible Books (an Amazon subsidiary) to present book recommendations to users, with Audioboom receiving a revenue share.
At the interims, revenue was just £24k, with losses of £698k. In October the company raised £8m via a placing to fund future growth.
As with many such platform plays, the secret of success is not necessarily in the technology, but in the ability to build a connected ecosystem quickly and to deliver a service effectively to large numbers of users, taking a relatively small turn on each transaction (you can see this approach in what Monitise is doing in e-commerce). Audioboom seems to have made a sound start.
Posted by Peter Roe at '08:37'
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