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'
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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'
HP has said it is buying Eucalyptus, a provider of open source software for building private and hybrid enterprise clouds. Terms of the deal have not been disclosed.
In the Race for Change – where technology and disruptive players are moving faster than ever – we emphasise just how important it is for established suppliers to have a clear vision for where they are heading. However, this move from HP leaves us feeling a little confused. In May, HP said it would plough $1bn into its OpenStack cloud offering, Helion. Eucalyptus doesn’t play in the OpenStack camp, and indeed, just last month, Eucalyptus CEO, Marten Mickos, said: “We are unafraid to compete with any OpenStack vendor.”
The interesting part is of course what happens next; whether HP can use the acquisition as a real steppingstone, or whether Eucalyptus just becomes subsumed into the HP machine.
An important part of the acquisition is that Mickos will become the new leader of HP’s cloud business (its third in a short period of time), reporting directly to Meg Whitman. He was previously CEO of MySQL, which he grew from a start-up through to its sale in 2008 to Sun Microsystems. Clearly, part of Whitman’s thinking is that Mickos is the man to really drive HP into the cloud. However, he can’t do it alone. HP’s existing cloud team, Whitman herself and Mickos now all need to come together to make the purchase work and progress the strategy.
The ultimate goal, however, should be about creating a much larger revenue stream from cloud, and turning HP into a much stronger competitor versus both the disruptors (see AWS and the cloud upstarts: Death knell for the established players?) and the established competition (see How the leading Infrastructure Services players are fighting for their place in the cloud market). Mickos has his work cut out.
Posted by Kate Hanaghan at '09:49'
I really don’t envy the challenge facing new Infosys CEO, Dr Vishal Sikka, whose every move is leaked to and scrutinised by the Indian media, and not necessarily in a kindly way. Today’s ‘revelation’ is a purported pro forma email from Dr Sikka automatically sent to Infosys employees “who hit the exit button on the company's internal E-separation system”, imploring them to reconsider their decision to leave the company.
It’s hard to say which is more damaging – the leaks or, if true, the inference that a note from the chief ‘to whom it may concern’, will go any way to helping stem Infosys’ rampant attrition.
I have made my views on Dr Sikka’s appointment eminently clear (see The murmurations of Dr Sikka and work back). However, even I would want to give him a chance to prove me wrong without the added distraction of ‘unfriendly fire’ from the media.
Posted by Anthony Miller at '09:44'
Performance at Anite bucked up in Q1 according to the pre-AGM IMS but it was against a poor year ago comparative (see here) and chief executive Christopher Humphrey says the industry backdrop remains challenging. Performance varies within the business with Handset Testing ahead of the year ago period but Network Testing running behind (the strong pound only taking some of the blame), although with an “encouraging” pipeline. But at least Anite can concentrate on its wireless business since selling off its oddball travel unit in May (see here) and net cash is strong as a result: £49.1m as of August 2014 vs. £6.1m in April 2014. Q1 is a seasonally quiet quarter so it’s too early to discern the form for the year but management says expectations for the full year remain unchanged.
Posted by Angela Eager at '09:27'
In its IMS today, engineering data and design IT systems provider Aveva Group warned that currency effects and the timing of rental renewals will have a negative effect on H1, to the tune of £14m. Add that to “temporary impact from the now completed sales force reorganisation announced in April 2014 and mixed levels of customer activity regionally” and it is looking at revenue in the £84m-£90m range. That compares poorly to the £108m of the year ago period (see here).
Aveva has been flagging up issues around the strong pound and activity biased towards H2 during the year but combine that with the pink flags over sales activity and workforce reorganisation, plus the announcement that it is reviewing its headcount and discretionary spending as a result, and the situation looks graver. The company is being cautious but it does need to see the fruits of its One Aveva approach and progress in its E3D 3D design platform in H2, as well as those rental renewals, to allay longer term performance questions.
Posted by Angela Eager at '09:24'
It seems as if UK businesses are not yet confident enough to commit to new permanent IT hires, judging from the latest numbers coming from UK-headquartered, international recruitment firm, SThree. While permanent placements in SThree’s UK business (of which ICT is the majority) declined by 11% in the company’s third quarter (to 31st August), contractor numbers grew by 17%. However, this was sufficient to boost total UK gross profit by 9% to £16.6m, continuing the trend seen in H1 (see SThree sees UK recruitment rebound).
SThree’s star performing region was the Americas, which registered a 75% leap in gross profit to £9.4m, driven by both permanent placements (+61%) and contractor numbers (+110%). Americas now accounts for 17% of SThree’s group GP. However, this sparkling performance is US-specific; SThree is closing its offices in Brazil (and also in India, by the way), a decision no doubt influenced by the uncertain outlook for Brazil’s moribund economy.
Posted by Anthony Miller at '09:12'
Business process services provider Liberata is making one of its biggest gambles yet with the acquisition of troubled York-based IT reseller Trustmarque, for an undisclosed amount.
Liberata apparently stepped in to buy Trustmarque just before it went into administration (see here). It had gone through a £43m MBO led by CEO Scott Haddow just last year (see Trustmarque Solutions completes MBO).
Trustmarque is easily Liberata's biggest acquisition under CE Dermot Joyce. The deal more than doubles Liberata’s revenue run rate from c£100m today, including the other recent acquisition of IT managed services firm Trinity (see here), to ‘in excess of £240m’.
It also takes Liberata further away from its core in business processing, and deeper into the IT infrastructure services space, such that Liberata will now make significantly more money from IT infrastructure related services than BPS.
Trustmarque currently employs 200 people at five sites, in the UK, with customers including RBS, Lloyds Banking Group, Sainsbury’s and Capita. Public sector clients include the NHS, the Ministry of Defence, the Ministry of Justice, National Services Scotland and NHS Wales. It made revenues of £131m in FY12, and we assume there has been some growth over the past year.
Liberata’s growth meanwhile is non-existent. It recently released results for the year to 31 December 2013, showing revenue flat at £90.6m, with operating profits down to £6.2m from £8.3m last time. Cash is also on the decline, more than halving to £6.7m. Capacity Grid, which was supposed to re-ignite Liberata’s fortunes, only made revenues of £6.2m in 2013. This is occurring while the underlying BPO business is in decline.
It’s easy then to see why Liberata is desperate to make such a bold move as this. Whether they can make a silk purse out of two distressed businesses remains to be seen.
Posted by John O'Brien at '08:46'
One of our very first TechMarketView Little British Battlers, CentraStage, the Buckingham-based developer of SaaS endpoint management software, has been acquired by New York-headquartered IT system management software firm, Autotask. Terms were not disclosed. Autotask was itself acquired by Vista Equity Partners back in June.
We have followed CentraStage’s fortunes closely since we first met them at our inaugural Little British Battler Day in January 2012 (see North East London CSU turns to cloud with CentraStage and ServiceNow and work back) and we view this news with the usual mixed feelings. On the one hand we are absolutely delighted for CentraStage founder and CEO, Christian Nagele, and his team, and wish them all the very best for the future. On the other hand, yes, it’s yet another innovative UK startup that is now under foreign ownership.
Nagele has been a keen supporter of the Little British Battler programme, telling us that the visibility it gave materially boosted CentraStage’s efforts in the market. We are soon to announce details of the fifth TechMarketView Little British Battler event, scheduled for Wednesday 26th November, as we seek to meet even more ‘small but perfectly formed’ UK software and IT services companies punching well above their weight in the market. And hopefully some of them may one day become ‘large and perfectly formed’ software and IT services companies here in the UK!
Posted by Anthony Miller at '08:29'
MoPowered, during its brief history on AIM has deepened its mobile commerce qualifications and broadened its appeal to retailers, this provider of optimised mobile sites now being able to execute secure payments. This development has however been unable to prevent a quartering of the share price since April as the company lost momentum, with contract delays, slow customer on-boarding and senior management changes. See here for our comment on the company’s July Trading Update.
Today’s announcement of MoPowered’s partnership with Time Inc. UK shows that the management is taking an innovative approach as it attempts to drive new growth opportunities. Time Inc. UK (formerly IPC Media) is a leading publisher of around 60 specialist magazines (and a wholly-owned subsidiary of Time Inc. of the US).Time UK will offer MoPowered’s mobile commerce technology to advertisers in its magazines as part of a strategy of offering a wider portfolio of advertising and marketing services.
This opens up a wide range of otherwise difficult-to-access customers for MoPowered, as well as giving the company additional credibility in an increasingly competitive market. The MoPowered solution offers an easy and speedy route for small companies into mobile commerce, with the cloud-based proposition providing a PAYG model.
It is obviously too early to assess the potential impact of this move, and Time Inc. UK will obviously take a turn, but this partnership will clearly help MoPowered as it works to rebuild its momentum.
Posted by Peter Roe at '10:07'
The recently announced Lewisham ICT Framework for Education (see here) encapsulates many themes we are seeing in the UK education market.
The buying environment is fragmented with many schools outside of local authority control but Lewisham says it has ‘worked closely with schools within the borough to establish functional or output specifications’ and wishes to ‘extend the opportunity for other educational institutions, local authorities and academy chains to make use of the framework’.
The provision of ICT and the technical proficiency of staff vary greatly and Lewisham’s framework looks to cater for those wishing to cherry pick items to those looking for a managed service provider to take responsibility for everything.
The framework puts the onus on the schools to be ‘intelligent customers’, meaning the school retains ‘control and management of their own solutions, risks and budgets’. For example the framework’s customers need to select their own calling-off options for items such as service level agreements (SLAs) for support of specific solutions and response times.
Projects such as the London Grid for Learning, Wandsworth Customer Portal, the 'tri-borough' councils and shared service initiatives (e.g. East London Solutions and North East London Partnership) offering encouragement that Lewisham’s framework will be adopted by others and provide suppliers with revenues towards the upper end of expectations.
The Lewisham four year framework is divided into six lots with an estimated contract value between £40-£60m. Suppliers have until 20th October to apply.
Subscription service clients for the TechMarketView PublicSectorViews research stream will be able to read much more about the players in this market in our forthcoming UK Education Suppliers Landscape Report.
Posted by Michael Larner at '09:47'
When you call your IT consultancy slicedbread you are setting high expectations so you’d better get things right. With 236% revenue growth in FY13 and 104% in FY14, Microsoft partner slicedbread seems to be doing that.
What is striking about this UK-based three year old company with its 75 people and focus on work around the topical digital customer experience agenda, is that it embodies the latter day approach to consultancy. It is structured around business outcomes rather than technology or service line practices and its people (known as mash-up architects) have cross discipline and technology experience. This type of structure and skill base is what large consultancies and SIs like Accenture and Capgemini are aiming for with the creation of their specialist digital divisions. Of course, it is easier for an emerging specialist to achieve this setup but nevertheless the company is winning business. It has built a portfolio of brand name customers in professional services areas, especially legal and sectors like case management, so is nibbling away at revenue that might previously have gone to the established services providers.
There are other aspects of the company that stand out e.g. it owns its own Indian operation which helps with rapid and cost effective project delivery, and its emerging outsourcing business. The question is whether is can be more than a customer experience specialist and whether organisations will be comfortable putting increasingly complex and broader-based digital requirements in the hands of a small player. For the moment, there is plenty of headroom for growth and specialist services provides are in the ascendancy.
Posted by Angela Eager at '09:43'
Over the past 2 days, SAP’s London Financial Services conference in London enabled the company to talk with increasing confidence about its operations in the sector.
SAP’s performance in UK FS has been “underwhelming” for several years, its earlier technology-driven approach insufficiently backed by sector insight and direct applicability to business issues. Consequently, a lot of SAP’s UK FS revenue is driven by the acquired Sybase portfolio in mission-critical applications for Capital Markets.
SAP management has worked hard to build on this, by investing in domain expertise (a common strategy across the sector) and by building its solutions portfolio in areas such as Risk Management, Loans, Personal Finance and Wealth Management. These solutions are not dependent on SAP HANA (see here for our recent comment on HANA usage), but the company’s approach is beginning to pay off with several big sector players reportedly lining up to buy SAP’s flagship product over the next few months.
Along with other vendors (and TechMarketView), SAP is expecting big things from Cloud in Financial Services. SAP’s own FS Cloud proposition is increasingly coherent, supported by experience in Payments and in enabling banks to offer hosted solutions for their customers. This could play a major role in medium term growth.
SAP certainly seems to have deepened its relationships with the UK banking majors over recent quarters, as well as paying more attention to a broader range of potential customers. The company also appears to be gaining more traction across its partner ecosystem. All this UK activity, coupled with strong support from SAP HQ, should ensure a much higher run rate at year end with the prospect of some clear evidence of real progress in 2015. SAP’s continued development in UK FS should make interesting reading.
Posted by Peter Roe at '09:25'
We recently caught up with Glyn Dodd, Managing Director of Northumberland-based IT support firm Centrex Services. Revenues were flat last FY at £9m following two years of substantial growth, partly boosted by the acquisition of DMS Ltd, a specialist printer repairer based in Hertfordshire. Margins were a very respectable 13%, but were lower than the prior year’s 15% due to pricing pressure.
Centrex provides the typical range of hardware support services, from initial contact centre triage (from its centre in Milton Keynes) through to dispatch of engineers and delivery of parts. It has around 130 staff – around half of which are field engineers.
IT support is one of the most competitive areas of the IT services market. Price erosion has been a feature for many years, putting immense pressure on profits. Supply of these services can be complicated in large deals: while one supplier might hold the contract directly with the customer, certain support and repair elements might be subcontracted to various partners. Dodd argues that this supply chain set-up can mean that end customers don’t always get the most efficient resolution to a problem. Centrex has tried to address this by developing a more flexible approach to SLAs, which allows customers to prioritise fixes at the time of failure.
However, one of the greatest challenges Centrex faces is the same as the many other SMEs we speak to: developing partnerships with larger suppliers. It works closely with numerous resellers (it’s also a Phoenix IT partner - see Phoenix Q1 profit “broadly in line”), but is yet to break into the larger infrastructure services suppliers. As these suppliers increasingly do less of the IT support work within the larger outsourcing contracts themselves, Centrex (which has nation-wide coverage) could be another option for them to consider.
Posted by Kate Hanaghan at '08:49'
My 10 year old grandson is a Minecraft addict. He even has his own Youtube channel where he shows others what he has built. At a recent visit three other of our ‘Little Ones’ all played Minecraft on their respective iPads together via the WiFi network. A quick survey amongst TechMarketView analysts show that nearly every one of their children are also Minecraft fans. I suspect that applies to a lot of Hotviews readers too.
So, be warned that Micosoft seems poised to acquire Minecraft in a $2b deal – according to acres of media coverage tonight. That will make Markus Pearson – or ‘Notch’ to his many followers – a billionaire at the ripe old age of 35. It will also probably upset most of the 50m Minecraft users.
Minecraft has some pretty unique features. First of all it is generally ‘approved of’ by most parents and teachers. Well it has a lot of similarities to Lego and the way you build the virtual worlds is not a bad introduction to coding. Secondly, it makes a profit! Indeed, rather than the Freemium and/or advertising models of all the rest, Minecraft charges an upfront subscription. $115m profit on $290m revenues last year is pretty nifty in anyone’s books. So far he’s sold 54m copies of Minecraft.
Microsoft, of course, has a huge war chest of cash stashed abroad that it can’t bring back to the States. Minecraft is HQed in Stockholm. Is any European company safe? Probably not (if you’re not French that is)
Can’t see Notch staying with what even he seems to think is the big, bad Microsoft. But you can’t really blame him for taking the money. As we have said many times before, creating the first hit computer game is difficult. Creating a follow-up in near impossible.
Today I’ve been using Notch as an example to my ‘little ones’ of how you can do something in your life that you really enjoy AND become a billionaire. They seemed to think the two concepts were mutually exclusive. It’s also a very good story of a guy from a poor dysfunctional background who goes through long periods of unemployment before finding his niche in life and making good. Rather like the result we try to achieve at the Prince's Trust.
Posted by Richard Holway at '22:45'
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Just last month UK Government COO Stephen Kelly announced his imminent departure from the Cabinet Office. Now, in a sign that Bill Crothers is committed to staying in Government (well, as committed as one ever can be!), we see that he will take the role of Chief Commercial Officer (CCO). Bill was already Chief Procurement Officer (CPO) and Chair of the Crown Commercial Service (CCS). His new ‘title’ comes as the Cabinet Office announces an inflow of private sector experts. They include Ed Smith, formerly the Chief Operating Officer and Strategy Chair of PwC’s Global Assurance business as non-Executive Chair of the Crown Commercial Service.
It does appear that Crothers will have increased responsibility. As CPO he was already responsible for leading procurement and procurement policy and for managing relationships with Government’s largest suppliers. Now he will “strengthen commercial capability throughout the civil service; improve the management of complex contracts, and ensure government acts as a responsible, intelligent and experienced client”. These are some of the areas that are most sorely in need of attention. Crothers appointment highlights that Government is aware and realises there is much that needs to be done.
His appointment also sends out the message the Government is ‘not finished yet’ in its drive for efficiency reforms. From 2010 to the end of 2013/14, numbers scrutinised by the Cabinet Office reveal cumulative efficiency savings totalling £14.3b across Whitehall. The aim is to reach the target of £20b by the end of 2014/15 (i.e. the end of this parliament). We also expect Cabinet Office Minister Francis Maude to have an ambitious new efficiency programme laid out for 2016-17 and into the next Parliament in time for the Autumn Statement on 3rd December. In our view, it is, though, proving harder to find efficiency savings in ICT; one wonders whether additional investment in innovative ICT solutions might be required in the medium term if Government is to achieve further savings in the broader budget.
Posted by Georgina O'Toole at '09:31'
AIM-listed Corero Network Security saw H1 revenue drop from $4.8m to $3.6m, and operating losses deepen from $3.9m to $5.2m. This downward pattern reflects the company’s performance in the last full financial year - see Corero still battling in Network Security.
Revenue in H1 (to 30 June 2014) was derived from legacy products and does not include a contribution from SmartWall, its new network security product that defends against distributed denial-of-service (DDoS) attacks.
First customer sales for SmartWall were made at the end of H1 and the company talks of there being “strong” interest from prospective customers, and a “developing pipeline of opportunities”. This means that all eyes are on H2 for signs that these interested parties are starting to ‘put their money where their mouth is’ – and that Corero’s investment is beginning to pay off.
With legacy revenue streams under pressure, SmartWall – which is targeted at hosting, cloud and mid-tier service providers – is crucial to establishing new sources of revenue growth. We’ll therefore need to see some progress on revenue generation for the H2 period to be confident that Corero is on to something. The Board, meanwhile, “remains confident in the Company's prospects”.
Posted by Kate Hanaghan at '09:25'
Oracle has completed the $5.3bn purchase of Micros Systems, the hardware and software provider to the hospitality industry (see here), and we are beginning to see why it paid so much for this old-style vendor: data, vertical depth and revenue.
It looks like Oracle is after the value from the rich data flowing through Micros’ point of sale systems and applications. Oracle can point its bevy of analytics capabilities at these data sets for tasks such as better understanding customer behaviour and identifying and understanding on a micro level why certain products or services perform better than others, and so on. This purchase is a statement about extracting value directly from data, something we have been exploring in ESASViews - see the Does the market need Big Data driven applications? and Visual data discovery reports.
With businesses shifting towards data-driven environments, domain specific data and expertise is a foundation requirement for suppliers. The hospitality sector was a target because it is exploring digital technologies to drive innovation e.g. mobile and social technologies for secure intelligent room keys, big data for personalised loyalty programmes and pricing, cloud-based restaurant management, and the Internet of Things for remote kitchen asset management and in-room technology. Oracle’s plans for the hospitality sector provide insight into its bigger vision which is to apply the enabling technologies to other industries undergoing transformation – health sciences, retail, asset intensive industries, financial service, communications, and utilities. Organisations need a reason - a known outcome - to invest in digital technologies and vertical depth will provide suppliers with the knowledge to create outcome-based software and services.
Then there is revenue – the $1.3bn Micros generated in FY13 will add to Oracle’s low top line growth level and the $171m profits won’t go amiss either.
Posted by Angela Eager at '09:13'
Hallelujah! After six years of losses, AIM-listed veteran recruitment and aspirant digital media company Parity Group is finally making a profit again – just.
Half-time results (to 30th June) reveal an £88k net profit vs a £605k net loss in H1 2013. This was on the back of a 4% increase in revenues to £48.3m, boosted slightly by the April 2014 acquisition of London-based Golden Square Post Production (see Golden Square brings ‘third half’ to Parity).
As ever, one does need to look under Parity’s bonnet as this vehicle has two engines, one providing the drive and the other the drag.
Revenues at Parity’s core IT recruitment business grew by 5% to £44.5m i.e. over 90% of the total. Segment operating profits grew by 14% lifting margins from 2.6% to 2.8%, about par for the course for this type of business.
However, revenues at Parity’s digital marketing services business – renamed SuperCommunications subsequent to senior management changes (see Parity’s Davies downshifts gears) – fell by 10% to £4.4m after the loss of a major contract. Segment operating profit almost halved to £321k.
As ever, Parity chairman Philip Swinstead exudes confidence on the company’s prospects and expects Parity will start generating cash in 2015. If so, I’d wager that it will be the recruitment business that saves the day.
PS Loved the comment that ‘non-recurring items are down…’ Surely that means they are recurring?
Posted by Anthony Miller at '08:45'
I first wrote about the government’s misguided scheme to roll out smart meters to every premise in the land over five years ago, though it has been a couple of years since I last revisited the topic (see Smart Meter Madness (6)).
Well, it looks like my worst fears are being realised as signalled by a report issued today by the Public Accounts Committee which states “The costs of installing 53 million smart meters will be borne by consumers through their energy bills. It will cost around £215 per home or small business over the next 5 years to install the meters … (yet) they can on average make a saving of only 2% on the average annual bill of £1,328 (i.e. £26) by the time the roll out is complete.”
This assumes, of course, a smooth and successful roll-out of both the meters themselves and the associated IT systems which are absolutely critical to achieving the proposed ‘benefits’.
Let me say again, the only beneficiaries of this madness – if beneficiaries there indeed be – will be the energy companies themselves, who will absorb any possible savings as profits.
There are so many gadgets out in the market today that you and I can use to monitor our energy consumption. And switching suppliers – which I do every year – for most people is a simply matter of a few clicks on the Uswitch website.
Smart meters are a ‘good thing’ – but the government’s cack-handed ambition to build in effect a national ‘smart energy’ network has precisely the same chance of success as a national plan for – let me think, now – oh yes, NHS IT!
Posted by Anthony Miller at '08:10'
As with the announcement of the iPhone 6 and the Apple Watch (See here), the plans of Apple to transform US payments do not disappoint. They have yet to announce their plans for the UK.
NFC (Near Field Communications) technology turns the iPhone 6 into a payments device. The iPhone6 also contains a secure element to provide data security and protection of stored cards. This is further reinforced by the TouchID function and a one-time PIN function. This sets the security standard, at least for the time being.
The Apple Pay function links directly into apps to make payments straightforward. Initial reviews suggest that the user experience (a key driver of acceptance) is good. Competitors will work very hard to catch up here; PayPal for example has just announced One-Touch seamless mobile payments.
Apple also brings the installed base of iTunes account holders with already registered payment cards and an easy familiarity as well as over 200,000 US stores already signed up to use the system. The company is working with the major US banks and credit card issuers to use their “rails” to complete the transaction.
So, in terms of introducing a new payments device that devotees will flock to adopt, Apple has made a good start. However, we expect that Apple is intent on playing a longer game, with a goal of building a much bigger global m-commerce business. The facilitation of payments is a means of “keeping score” and monetising all the other elements of a transaction. Apple will most likely have its eyes set upon capitalising on large swathes of the transaction value chain across many sectors, using its expanding device portfolio as the differentiator and talisman. Consumers, corporates and competitors really need to understand where today’s announcement can lead!
Posted by Peter Roe at '07:49'
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