Its Q3 numbers show that SAP’s cloud business is accelerating, with a growth rate in the same sort of area as pure plays like Salesforce.com and Workday but the cost of the cloud transition is apparent too as the company cut its full year operating profit outlook from €5.8bn to €6bn, to €5.6bn to €5.8bn.
In a way that is healthy because it is a sign that SAP is taking hold of the cloud in a determined way, although it also increases the questions about its margins as the business shifts away from up front revenue and a rich and cash generative maintenance revenue stream. Spiralling costs around areas like data centre provision (not to mention sales & marketing) are a problem for cloud companies so it was reassuring to see SAP address the data centre issue last week, with an agreement whereby IBM will manage some of SAP’s software in the cloud.
The actual numbers may be small, but another positive cloud indicator is that the growth in cloud revenue (up 45% to €277m) in Q3 more than compensated for the decline in new licence on premise sales (down 2% to €951m), as licence revenue dropped by around €24m while cloud revenue rose by around €86m. The relative sizes of the two types of revenue streams show how far SAP has to go despite an annual cloud run rate forecast of €1.3bn, and the majority of the cloud growth is from acquired businesses – with more to come when the Concur purchase completes (see here).
Total revenue for the quarter was up 5% to €4.2bn with net profit up 16% to €881m. This steady state masks major transition within the business but we expect things will get choppy sooner rather than later.
Posted by Angela Eager at '09:57'
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Offshore BPS pure play WNS has secured a five year renewal to its flagship BPO contract with UK insurer Aviva (see WNS wins 8 year $1bn BPO contract with Aviva).
WNS will now provide business process services to Aviva through to 31 March, 2022, after the current deal ends in November 2016. It covers all of Aviva’s lines (property & casualty, life, pensions, annuities and health), with support from WNS in sales, policy administration, claims, finance & accounting, actuarial and research & analytics.
Although management called the new terms ‘mutually acceptable’, as WNS’ largest customer, accounting for around a quarter of its total revenue, any terms would arguably have had to be ‘acceptable’. It’s clear WNS will now make far less than the c$125m per annum achieved when the original deal was struck in 2008. Service contractions since then have also caused the annual contract value to drop (see Aviva brings back calls from WNS).
In Q214, WNS blamed ‘pricing and productivity headwinds’ from the Aviva renewal, and the loss of a large online travel agency (OTA) client, for revenue growth being held back 6%. Fortunately this was offset by revenue growth elsewhere and an appreciation in the British Pound against the US Dollar.
The underlying WNS business looks in good health. In the September quarter, revenue less repair payments was up 9.7% to $122.1m, and up 3.7% qoq. Meanwhile, adjusted net income was up 39% to $23.9m – giving WNS an ANI margin of 20% vs. 15% last time. This was driven by 5 new client additions and the company’s third ‘large deal’ of the year.
Other providers are knocking at Aviva’s door too. Rival The Innovation Group now handles Aviva’s subsidence claims (see TIG signs £75m UK subsidence contract), and provides mobile claims services via its Innovation Symbility partnership (see here). WNS will have to keep on its toes to keep the revenue streams flowing in the right direction.
Posted by John O'Brien at '09:32'
After a period of almost two months, Daisy Group has finalised a deal with a consortium of buyers consisting of Toscafund Asset Management, Penta Capital and Matthew Riley (Daisy’s CEO and founder). The offer of 185p per share (cash) equates to £494m. Daisy Group was created in 2009 via the reverse takeover of Freedom4 Group by Daisy Communications Ltd and Vialtus Ltd. At Admission, shares were valued at 80p each.
Since it listed, Daisy has spent c£280m buying 22 businesses – which has not only expanded its range of products and services, but has helped to buoy the top line too. Nevertheless, times have been challenging, and in the last full-year financials (to end March 2014) revenue was more or less flat at £352.7m, but operating loss had widened to £17.9m from £16.8m.
Once Daisy has de-listed, we would expect some quite ‘major surgery’ to happen behind the scenes, with management indicating it will pursue larger acquisitions than it has undertaken in the past. With this will come the need to raise more debt, and a probable increase in pressure on cash generation - both of which would not be welcomed by shareholders if Daisy were still a public company.
However, Daisy is going to have to do more than just get bigger and bigger. To survive the Race for Change, it is going to have to find a solution for countering the areas of decline in its legacy businesses (e.g. voice). And doing that is going to take guts and time; this is not a quick fix.
Posted by Kate Hanaghan at '09:27'
In a short - and also pretty sweet - trading update, ‘identity intelligence’ company GB Group has confirmed a strong first half (to end September 2014). It is citing both organic and acquisitive growth as it continues to invest in its capabilities and integrate recent acquisitions, such as Australian DecTech, a provider of detection, credit risk and customer management solutions (acquired in April – see GB Group goes global). Moreover, adjusted operating profit is expected to leap 40% to over £3.7m.
We can expect more of the same from GB Group – just last week, we reported on the proposed acquisition of Transactis, see GB Group buys more consumer data, which is set to further add to the Group’s portfolio in intelligence technology to support payments, risk, management, fraud detection and compliance. All the signs are that GB Group continues to successfully ride the wave as demand grows for identity verification services.
Posted by Georgina O'Toole at '09:08'
I guess when you are one of a gazillion tech startups you have to ‘big yourself up’ big time. So who knows, maybe London-based Mailcloud really is building “the world’s first universal communication service for teams to work easier and faster in real time on all their devices”. At least Octopus Investments thinks so, having led a $2.5m seed funding round along with Bessemer Ventures and other investors.
Founded barely a year ago, Mailcloud purportedly organises all your email into folders sorted by person. Their website is of little help in understanding how, as you need to enter your email address to get in and all you get back is an email telling you that they’ve started building your Mailcloud. How they can do that without your email password (would you give that out?) I have no idea, so I assume Octopus et al have had a peek under the covers and like what they see.
Personally, what I actually want from my email system is a way to keyword tag all my emails and use the tags to create dynamic virtual folders. You know the address.
Posted by Anthony Miller at '08:47'
Self-styled ‘Innofacturer’, TAL Group, the Hong Kong-based clothing manufacturer, has led a $12m investment in London-headquartered ‘virtual fitting room’ (VFR) startup, Metail, bringing total funding raised since its founding in 2008 by Cambridge graduate Tom Adeyoola to $20m. Metail sells its 3D modelling technology to fashion retailers to allow customers to ‘try on’ their clothes online. Metail’s first live customer was Clothing at Tesco in 2012, and has since added a number of international retail brands to its client list. The additional funding will be used to develop a mobile app.
According to an interview with TechCrunch, Adeyoola eschewed UK VC funding in favour of a strategic investor, reasoning that “The big UK tech business successes weren’t founded on VC money,” oddly citing the ‘success’ of internet and tech stocks such as ASOS, Blinkx and Monitise as examples – all of which are having a rather tough time at the moment.
Unsurprisingly Metail is not alone in the VFR market, with tech startups such as CLO Virtual Fashion Inc. and Fitnect (among others) also in the frame. There’s undoubtedly room for a number of VFR players to make a success of things by focusing on different segments of the retail fashion market. Metail has rather hammered a stake into that ground with its ‘value statement’ that “The Customer is Queen”.
Posted by Anthony Miller at '08:08'
First Derivatives, provider of software and consulting to capital markets, is making strides. It has built a strong position in forex with 15 customers among the big traders in that very competitive market and has won two important orders in the growing area of Market Surveillance, with the Australian SIC and the US IEX (the subject of “Flash Boys”, see here). It is now moving to secure a major component of its success and thus open up more opportunities in “Big Data” and the “Internet of Things”.
First Derivatives Capital Markets propositions are driven from its Delta Platform which is powered by the kdb+ database from Californian Kx Systems. This is a high performance in-memory database that is well suited to fast moving time series data (“up to 8x faster than the previous best” Source: US Securities Technology Analysis Center). First Derivatives has worked with Kx since 2002.
First Derivatives is to take a majority stake in Kx, acquiring a short 50% for £36m, taking its holding to 65%. In 2013 Kx generated revenues of $13.6m and pre-tax profit of $8.8m. The co-founders of Kx will remain in charge of the operation with one of them joining the First Derivatives board.
First Derivatives (now 1000+ people) will provide extra resources as the expanded group moves to exploit additional verticals (e.g. pharmaceuticals, energy and utilities), driving additional database and consulting revenue. However, First Derivatives must avoid being distracted from realising the substantial potential it has within Financial Markets.
Following good financial performance last year, First Derivatives is winning key orders in growth areas of capital markets. Securing a key component of its success adds to the likely upside as Big Data grows in importance. It looks like First Derivatives is on a roll.
Posted by Peter Roe at '10:04'
After a positive Q2 the market had expectations of Google in Q3 and when they weren’t met it meted out punishment in the form of a 3% drop in the share price in after-hours trading.
Although revenue for the quarter ending September 30 2014 was up 20% to $16.5bn it was below expectations while profit showed a 5% drop to $2.8bn as operating costs rose from 33% of revenue to 37%. Management said costs will rise again as it continues to pump investment into data centre infrastructure.
The cost per click metric continues to fall but the 2% yoy decline in Q3 was better than expected (it was down 9% yoy in Q1 and 6% in Q2) as Google continues to experiment with the mobile channel. For Q3 the company improved mobile pricing but this had an impact on lower quality clicks, and there were geography and product changes too which impacted the metric. How it will master mobile remains one of the big questions for Google. eMarketer forecasts Google will account for a 37.7% of US mobile advertising this year, down from 38.6% in 2013 and 47.2% in 2012. Its global mobile ad share is estimated to decline nearly 4% to 44.6%, while Facebook will rise nearly 23% to 20.4%.
Other questions include the potential impact of Apple Pay, and what areas of the business Google will invest in – “Other” business (i.e. non-advertising) saw 50% revenue growth and is 11% of total revenue. For the record, revenue from UK was $1.63bn but still 10% of total revenue (see Google Powerhouse), so growth here is slowing.
The wrestle with mobile is being played out in a very public forum, which is a painful experience for a company the size of Google and one that so many people have so many expectations of.
Posted by Angela Eager at '09:42'
Capgemini is the latest major IT and business process services player to form a Business Process-as-a-Service (BPaaS) partnership with cloud ERP vendor NetSuite. Earlier this year, India-based rival Wipro announced its own BPaaS tie-up with NetSuite for F&A services (see here).
Capgemini’s partnership appears broader in scope, focusing on both F&A and HR processing, aimed at delivering an ‘integrated back office in the cloud’ – effectively a standardised pre-configured platform using Netsuite’s cloud-based software and Capgemini’s global delivery network for the IT and business processing services.
Capgemini is calling this offering ‘the virtual company’, because it is being aimed squarely at organisations wanting to quickly exploit new growth opportunities either via entry into new markets, M&A or through new product launches. The intention is to overcome some of the bottlenecks integrating systems and processes, which are also costly and laden with bureaucracy and administrative burden. Capgemini and Netsuite’s BPaaS offering aims to do away with that – plugging into existing systems and providing in-built governance risk and compliance. Apparently, several multi-nationals are already interested.
This is exactly how we see the BPaaS market emerging. It is dependent on partnering with best of breed cloud technology/software/platform providers, and providing access to infrastructure, applications, people and processes in one bundled offering, on a consumption basis.
We expect BPaaS to evolve over the next few years, from small add-on programmes like this that support growth, innovation and address capacity and capability issues. Going from here to mainstream use however is going to take a lot more work. It will depend on how successful early programmes are at achieving their stated outcome objectives, and how BPaaS offerings can actively address concerns around data security, compliance and service scalability/reslience.
Posted by John O'Brien at '09:27'
Colt has said Hugo Eales will become the company’s new CFO. Eales' appointment follows Mark Ferrari's decision to return to Fidelity (Colt’s largest shareholder) having completed his secondment.
Eales is something of a telco and IT services veteran, and most recently was CFO for BT Global Services where “he drove significant cost transformation, managed positive cash flow and profitability across the organisation and drove cultural transformation within the finance teams”. Prior to that he had various financial roles in CSC, including a stint as CFO for UK and EMEA.
No doubt Colt is hoping this experience will play a role in the improvement of its own finances. The latest set of numbers weren’t inspiring, with H1 revenue (to end June 2014) down 3.3% to €770m. Indeed, the results were red across all business segments, with IT services hit hardest with a 7.6% decline (see Colt H1: IT services takes biggest hit).
Eales will have his feet under the desk from November 1st.
Posted by Kate Hanaghan at '09:22'
Noida-based offshore services major, HCL, kicked off its new FY (to 30th Sept.) at a slightly slower pace than the prior year, though the near-13% headline growth (to $1.43bn) could hardly be called slovenly. On the other hand, unlike the offshore services market leader (see TCS quickens the pace though not the profit), HCL management kept a firm hand on the margin levers, with operating profitability up slightly yoy at 23.9%, though 30bps lighter on the prior (final) quarter.
As expected, HCL kept up its onslaught on the infrastructure service market, which still accounts for over one-third of the company’s worldwide revenues, a materially higher proportion than any of its peers.
More to come in the next edition of OffshoreViews.
Posted by Anthony Miller at '08:36'
After a lightning start to its new FY (see TCS starts as it means to go on), Indian offshore services market leader TCS quickened the pace in Q2 (to 30th Sept.) with headline revenues up by nearly 18% to $3.93bn, over 6% higher than the prior quarter.
However, operating profits were only little better than flat yoy, setting margins at 26.8%, over three points off the 30.2% high the year prior, though 50bps better than the previous quarter. The yoy hit was pretty much due to a drop in gross margin from 48.0% to 44.4% despite the fact that utilisation was higher, perhaps suggesting fiercer pricing pressure than a year ago.
Quarterly revenue growth in TCS’ UK business has been in gradual decline over the past year, falling below double-digits (in local currency) for the first time since 2010. However, TCS UK revenues over the trailing 12 months totalled £1.54bn, still 12% up yoy, all organic.
As usual, we'll have much more to say about the India-centric IT services players – including their UK performance – in the next edition of OffshoreViews.
Posted by Anthony Miller at '08:10'
The management of StatPro have published 9-month figures that show some progress and according to the management everything is “on track” or “in line with market expectations”. This is a welcome statement, marking another milestone in what is turning out to be a long journey as the company transforms itself into a fully cloud-based provider of portfolio analysis and asset pricing services for asset managers.
In August they announced interim figures hit by Sterling’s strength and a sensible shift of focus to larger customers, see here, and re-emphasised their pursuit of top-line growth and building market position for their cloud-based service. At the nine month stage, year-on-year growth of the StatPro cloud-based Revolution product has advanced by 35%. This marks a significant slowdown on the 85% advance reported at the six-month stage, with only a 5% sequential increase on the half-year figure, highlighting the challenge facing the management. EBITDA fell by a third to £2m as costs increased with bigger sales and development activity.
Some of the news is more positive however; over the year the number of StatPro Revolution customers is up 50% to 320, new Revolution capabilities are building share of wallet, revenue from their largest revenue generator (StatPro Seven) is holding up well and there is continued growth in the sales pipeline.
When in September StatPro announced a big contract win and re-emphasised their confidence that the cloud-based replacement for StatPro Seven was on track, we sub-titled our UKHotView “Two Steps Forward”. We can at least say that the 9-month figures are not “One Step Back”, but rather another small step in the right direction, albeit on a rather long road.
Posted by Peter Roe at '10:09'
The possibility of an HP/EMC merger has received much discussion in the media of late. There has never been any formal confirmation from the parties involved that talks were underway, but rather we as industry watchers have tried to piece together the ‘clues’ that are out there. One possible ‘clue’ that emerged yesterday was a statement issued by HP that announced it is to resume its share repurchase program. This closely followed a report on Reuters – citing “sources” – that HP had ended merger talks with EMC after “months of fruitless negotiations”. HP goes on to say in yesterday’s statement that having previously suspended activity due to “the possession of material non-public information” it is now “no longer in possession of such information”.
Following the news of HP’s proposed split (see here), we wondered whether rumoured talks might be resurrected – given that an HP enterprise business without a PC/printer component was likely to make more sense/be more appealing to EMC shareholders. However, just imagine the internal turmoil HP would have faced. Not only would it have the distraction of trying to create HP Inc and HP Enterprise, but it would also have had to negotiate a way to make HP+EMC an elegant entity amounting to more than the sum of its parts. Our fear was always that a combined business would have been big, but far from perfectly formed for today’s market.
A question mark still remains over what EMC might do with its VMware business: Will it remain part of the "federation" after Joe Tucci’s retirement next year, or will “activist investors” (see here) force a spin-off?
What can be said with certainty is that corporate activity of this nature causes huge distraction. Making the HP split a reality is a significant undertaking and we have no doubt that HP competitors are currently rubbing their hands at the thought.
Posted by Kate Hanaghan at '09:55'
Ashok Vemuri, CEO of mid-tier India-centric (though US-headquartered) IT services firm iGate, has been dipping into the management pool at his alma mater, Infosys (see iGate snaps up ex-Infosys exec for CEO job), and brought across Srikanth Iyengar, previously Infosys’ UK lead and head of Financial Services in Europe.
Iyengar joins the iGate executive council as SVP and head of Europe and Australia. He took over as UK lead at Infosys a couple of years ago succeeding Sudhir Chaturvedi (see Changing of the guard at Infosys UK). Charturvedi himself upped sticks a year ago to become COO at New Delhi-based mid-tier offshore services player NIIT Technologies (see here). Derek Kemp, iGate’s executive VP previously running Europe and APAC, now takes over as Global Head of the Strategic Deals Team.
Meanwhile, iGate maintained double-digit growth in Q3 (to 30th Sept.) with headline revenues up 10% to $323m, a 3.5% increase on the prior quarter. However, operating margins took another hit, landing at 16.9%, nearly 6 points down yoy and 160bps lower than the prior quarter. This seems to tie in with what appears to be a disturbing decline in IT services utilisation, which has fallen quarter by quarter from 79.4% a year ago to just 71.0%. It appears that hands have slipped off levers somewhere, though it's not clear whether the problem lies with recruitment or with execution - or indeed with both!
All very interesting turns of events which I will undoubtedly comment on further in the next edition of OffshoreViews.
Posted by Anthony Miller at '09:29'
First half results from Lombard Risk Management, the provider of regulatory and compliance solutions across the financial services sector, show that the progress of the past year continues, see here and work back. The growing success of the company’s portfolio is providing the management with good visibility over second half figures and continued revenue and profit growth.
Six-month revenue was up 28% to £9.3m, with EBITDA of £0.8m after break-even at the half-way mark last year. Additional impetus to growth was provided by a greater than expected take-up of Lombard Risk’s solutions to meet the European Banking Authority’s Common Reporting requirements (COREP), with 121 customers signing up, half of which were new to the company.
The management has several reasons to be confident that it will not suffer from some of the problems met by other companies entering a growth phase. It has cash in the bank, implementation costs are funded by the customer and contracts are generally multi-year and often lead to the sale of further products as regulatory pressures increase. Also, meeting regulatory deadlines is a crucial priority for the customer base, so Lombard Risk will not be plagued by extended contract negotiations or budget restrictions. Visibility over revenue progress is further enhanced by a shift towards a higher proportion of the typical contract value coming from annual fees.
Regulation is a vitally important fact of life across the wider Financial Services sector with a continual flow of new regulatory initiatives. Lombard Risk has established itself as a leading market player, serving 60% of the top banks, with a broad range of standardised approaches to regulatory reporting and compliance requirements. They look to have built a solid base from which they should be able to generate consistent advances in revenue and profit.
Posted by Peter Roe at '09:22'
After a pretty gruesome start to its FY (see here), New Delhi-based mid-tier offshore services player NIIT Technologies managed to hold the top line steady in Q2 (to 30th Sept.) with revenues flat yoy at Rs5.88bn (c. $100m), about 2% higher than the prior quarter. Operating margins recovered 60bps on Q1 to reach 14.0%, though remain over 1 point lower yoy.
Management has much work to do if it is to realise its ambition to be a formidable challenger in the offshore service market (see NIIT Tech: of champions and challengers). It has many mid-tier rivals fighting for market position (e.g. see Mindtree still minding the numbers) so has to quickly find the right ‘space’ where it can shine.
Posted by Anthony Miller at '08:30'
The application deadline for the latest round of TechMarketView's Little British Battler (LBB) programme is tomorrow - to make sure your business is considered fill in our simple registration form now by clicking here.
We want to hear from the CEOs of small, privately-held, UK-owned software and IT services companies that are punching above their weight in UK tech for the fifth in our series of Little British Battler (LBB) events, which will be held in London on Wednesday 26 November 2014.
There’s no specific theme for November’s LBB day, but as always we’re particularly keen to hear from innovative SMEs that have an interesting story to tell. Successful applicants from past rounds have been active in a wide variety of fields from big data analytics and business process automation, through to cyber security and the Internet of Things.
As usual we will select twelve CEOs to meet the TechMarketView research team in central London in closed session to present their company and its market propositions. In return we will give unbiased, constructive feedback based on our extensive knowledge and experience of the UK software and IT services market. Each session lasts 50 minutes and there is no fee or commitment involved.
The twelve companies will also be featured in UKHotViews, the most highly regarded and widely read source of opinion and commentary on the UK IT scene, and in a special research report distributed to selected ‘movers and shakers’ in industry and government.
Many of the CEOs who participated in previous Little British Battler events have seen real benefit to their company in terms of increased market visibility and access to new business opportunities (see here for just a sample). This is an unparalleled chance to get your company on the radar of the UK’s premier software and IT services research firm.
Candidate companies must be headquartered in the UK (i.e. not subsidiaries of foreign firms), privately held (though may have accepted external funding), with annual revenues under £25m. Companies must derive the substantial majority of their revenues from software and/or IT services and/or IT-enabled business process services.
If you want to apply, all you have to do is click here and fill in the registration form (you may apply again if you were previously unsuccessful).
The deadline for registrations is tomorrow, Friday 17 October, so you need to act quickly. We aim to notify successful applicants by Friday 31 October.
Should you have any questions, please email us at firstname.lastname@example.org.
The TechMarketView Little British Battler programme is run in association with corporate finance firm MXC Capital.
Posted by HotViews Editor at '08:19'
After a splendid start to its FY in June (see Mindtree makes its mark), Bangalore-based mid-tier Indian offshore services firm Mindtree’s growth continues apace, with Q2 headline revenues (to 30th Sept.) up nearly by 19% to $147m, just over 4% higher than the prior quarter. EBITDA margins ticked down a point yoy to a still creditable 19.8%. Mindtree has also been making its mark here in the UK with a recent £25m contract at the BBC (see Mindtree minds BBC’s digital testing).
Posted by Anthony Miller at '08:11'
My Worried of Farnham post last week caused much comment. I think they could be summed up as “We really, really hope you are wrong but…”.
Well, I really hoped I was wrong too. But the events this week so far can be summed up by The Times headline this morning “Panic grips investors as world markets fall” or the FT "Fear returns to stalk market". For example, the FTSE100 dropped nearly 3% yesterday; making a near 10% drop in the last six weeks. The reasons behind this were exactly as we summarised back on 1st Oct – just a rising list of global and national problems from IS, Ukraine, Ebola, Eurozone recession, UK political fear etc. The knock-on effect is not just felt in stock prices but in IPOs too. Challenger bank, Aldermore, has just cancelled their IPO and I’m sure other tech floats will suffer a similar fate if the current market sentiment continues.
Perhaps, in tech, investors will abandon the high growth ‘froth stocks’ in search of safety with the ‘Boring (as per the Holway Definition) Stocks’ – ie those making profits with both positive cashflow and decent cash hoards.
One of the major ‘Disruptor Stocks’ – Netflix – fell 26% yesterday as it announced far fewer new subscribers in Q3 than even it (let alone the market) had been expecting. The first mover advantage has been eroded and I, for one, get bombarded everyday with competing services.
Posted by Richard Holway at '08:04'
Despite Serco’s ongoing troubles with UK Government (see here and work back), it’s encouraging to see that it continues to benefit from significant activity in the UK retail sector.
This time Serco has won a significant add-on contract with an existing customer, clothes retailer JD Williams (JDW), to take over some 550 people and responsibility for their Manchester call centre. Although financial terms weren’t disclosed, this is clearly a sizeable deal, albeit not the same scale as its retail megadeal with Shop Direct, where it took over 1,800 staff in a deal valued at £430m over ten years (see here).
Serco will take on the existing JDW staff and commit to protect their jobs while also refurbishing their existing Martin House premises.
The UK retail sector continues to stand out as one of the most active verticals for business process services providers, with big deals for rival Capita also in the past twelve months from O2, Carphone Warehouse, Debenhams. The reason for the activity is channel shift, as customers increasingly demand a better customer experience from their multi-channel interactions.
There are plenty of opportunities to offer analytics and actionable insights in customer management-led outsourced operations (see Outsourced analytics - emerging opportunities for BPS providers). In its bid to keep the boilers stoked, Serco needs to make sure that it doesn't lose sight of where the real value in such deals lies, for both the customer, and itself, the supplier.
Posted by John O'Brien at '08:03'
First half results from South Africa-headquartered Datatec show that its resale and services subsidiary, Logicalis, has taken a hit in its product business. Top line revenue declined to $714m from $767m. However, a better mix of services and some high margin product deals pushed gross margin up to 25% from 23%. Logicalis now accounts for 24% of Datatec group revenue and 42% of group EBITDA. Services revenue is now 35% of total Logicalis revenue, however we estimate the service mix could be even higher in the UK business.
In Q1, management warned Logicalis revenue had been hit by a World Cup ‘ripple effect’ from telcos and banks who had suspended activities on their networks – see World Cup knocks ‘Team Logicalis’. This has contributed to a 13% decline in product sales at the Group level. In the UK, the product business has been hit by a decline in revenue from IBM products. However, sales of Cisco kit are going some way to counter this.
One of the challenges the UK business faces is filling the gap that will be created following the loss of its contract to supply broadband to the Welsh public sector (won by BT). The company is looking to its cloud services – which have been building in momentum over the past year – to counter some of that decline.
Logicalis at the Group level is expecting “sequential and comparative improvement” in H2 of this year.
We’ll have more analysis once we’ve spoken to UK management.
Posted by Kate Hanaghan at '08:51'
Although I am sure that shareholders of Cambridge Silicon Radio (CSR) will be celebrating the $2.5b agreed bid by Qualcomm (@900p – a massive 56% premium on the share price before the bidding started), it is really a crying shame that Britain has lost one of its most innovative companies. The contest started in August with a bid from US Microchip. But Microchip then unsettled the whole semi conductor market with its warnings on a slow down in orders from China (and therefore implications further down the buying stack). Microchip shares tanked; possibly putting paid to their ability to raise their offer.
CSR is a world leader in Bluetooth technology and I’m sure you have some of their technology in your headphones, speaker docks etc. What we need is British companies that go through the ‘mid-sized’ barrier and become truly global big companies. But it always seems that the candidates just get bought before they can assume greatness.
Footnote – Intel rather defied the dire warnings resulting from the Microchip forecasts. Last night Intel’s Q3 results beat expectations mainly on the back of a revival in their PC division where sales rose an impressive 9%. The end of support for XP played a role here but that uplift could well prove short-lived. Intel has been one of the best performing tech stocks this YTD. Up 23% and up another 3% last night after hours.
Posted by Richard Holway at '08:46'
Today’s short Q3 bookings update from WANdisco shows the usual pattern of rising bookings (up 21% to $5.3m ) with virtually all coming from the more established Application Lifecycle Management product line - $4.9m, a 15% increase. There was a minor increase in big data bookings which made it to $0.4m (vs. $0.1m in the year ago quarter) due in part to a new customer, a Fortune 100 technology provider. Meanwhile product trials continue with several customers, including some going into live production trials. When a vendor highlights this type of development it shows the glacial pace of evaluations.
The rate of growth on the big data side of the business is painfully slow, although to be fair this is not something that is exclusive to WANdisco (see WANdisco and the Big Data market). If it takes so long to prove the business case to prospective customers, that suggests vendors across the board have to do some serious work around clarifying the value proposition and making solutions more enterprise-ready.
Posted by Angela Eager at '08:45'
It didn’t reveal much but what SDL’s Q3 trading update (to September 30) did indicate was that the company is performing to plan, profits are in line with expectations and it even managed to reverse the £1.8m of net debt of December 31 into net cash of £4.9m. The recovery journey for the customer experience management company that was first evident in H1 is slow but it is happening, which was far from certain during the dark days of FY13 (see SDL exits a dark year). There was an increase in new licence bookings within the Technology segment of the business in Q3 which indicates growing confidence not just in the products but the company itself. With customer experience improvement high on the agenda for enterprises, this is a time of opportunity but the market is crowded and SDL has a legacy to overcome.
Posted by Angela Eager at '08:43'
Earthport, the cross-border payments services provider, has extended its range of services into the pre-paid card market with a contract with Banco do Brasil Americas to support their pre-paid student multi-currency card product. As this card is also intended to enable transfers into local bank accounts, the criteria for success in this contract would have included high levels of regulatory compliance as well as the extent of Earthport’s cloud-based network and its low and predictable fees.
Pre-paid cards are one of the fastest areas of growth in the global Payments business, their use rising at 20% p.a. over the past four years (Source: RBS/Capgemini World Payments Report). Their growth has been focused in the US, but other regions are now adopting them. They offer good security, the ability to budget and can be used to support people without bank accounts. Increasingly, pre-paid cards can be “topped-up” on-line or via SMS messages or smartphone apps.
In September, Earthport raised £26.6m to accelerate Earthport’s plans in Asia and fund other initiatives, see here. It looks as if the rapidly growing pre-paid card market will be one way for Earthport to get more traffic over its infrastructure. The management are talking about breakeven (on a run-rate basis) by June 2015, and profits only come with volume. Payments is a scale game, but Earthport seems, so far, to be playing it well.
Posted by Peter Roe at '08:34'
Although its portfolio mainly comprises pharma, meditech and engineering/materials startups, Imperial Innovations (IVO), the AIM-listed technology commercialisation arm of London’s Imperial College, is also nurturing three companies that fall into our SITS (software and IT services) space. IVO’s FY results give an interesting insight into the fortunes and prospects of its portfolio which, as would be expected for venture-backed tech startups, is a mix of ‘swings and roundabouts’.
IVO’s long standing investment in London-based visual search software developer, Cortexica, is still proving challenging. IVO’s original 30% stake (2009) had a fair value of £5.4m prior to a recent £1.5m top-up funding round (see IVO hopes to ‘find unique’ in Cortexica’s FindSimilar), after which IVO now holds just over 73% of the equity. However, things have not been going quite to plan at Cortexica and IVO has impaired its investment by nearly £4m.
In contrast, IVO’s more recent investments in TechMarketView Little British Battler ‘big data’ analytics startup Featurespace (see here) and in smartphone-based loyalty-programme app start-up JustYoYo (see here) appear to be yielding a better return, with modest gains in the fair value of its stakes. IVO’s 28% interest in Featurespace is valued at £2.6m, and its 36% interest in JustYoYo is worth £2.9m.
Net net, the fair value of IVO’s investment in its entire portfolio of 95 startups increased over the year (to 31st July) by 22% to £252m, with cumulative cash investments of £156m. A total of £315m cash was invested in its portfolio companies from all sources during the year.
As I have said before, it’s great to see our leading universities nurture and commercialise home-grown technology.
Posted by Anthony Miller at '08:20'
Things have changed again since The Innovation Group (TIG) updated the market earlier this month. Then, TIG was still in talks about a motor business process services (BPS) acquisition (see here). But the protracted transfer has now fallen through. No details about what caused the issue, just a comment that ‘appropriate terms could not be reached’.
TIG isn’t being put off its ambition to buy in the motor BPS space however, and will update the market again once it’s found a suitable new target.
Posted by John O'Brien at '08:12'
Leo Quinn, the CEO of ailing defence IT services provider Qinetiq is moving to take on the CEO role at another struggling business, infrastructure and support services giant Balfour Beatty (BB).
Quinn will assume the top job on 1 January 2015, by which time BB will have been without a CEO for seven months. Previous CEO Andrew McNaughton left in May following a string of profits warnings.
BB is in real turmoil. Profitability took a real hit in FY13 (PBT down 32%) due to a slump in its construction business. Its attempts to fight back with a £2.1bn offer for UK rival Carillion were shunned numerous times. Quinn stepping in will provide much-needed new direction for the group. It’s unclear what direction that will be however.
Quinn was previously CEO of bank note printing firm De La Rue, global president of Honeywell Building Controls and COO of production management at Invensys. Quinn apparently began his career at BB in 1979 as a civil engineer. He will be earning considerably more than he did when he first joined, with a basic annual salary of £800,000, plus pension and benefits.
Posted by John O'Brien at '08:06'
Having dangled its analytics bait recently, Salesforce.com delivered with the launch of the Wave analytics cloud. According to Salesforce.com it will disrupt the analytics market with its cloud base, mobile capability and business/marketing user self-service focus but from what we can see it is essentially operational BI with a visualisation layer. That is a much needed addition to the Salesforce cloud portfolio but it does not look disruptive so far. However, it does not pay to underestimate Salesforce.com.
Wave is the first cast at catching up with the market and is a significant development for Salesforce.com’s customer base but is not feature rich at the moment. It does do the crucial job of reaching outside the Salesforce.com environment to connect with third party data sources. However, it is not clear yet whether this process will be easier than it is with Tableau and QlikTech that are part of circle it will be competing with (QlikTech recently launched Qlik Sense which is biased towards mobile and business user self-service).
The number and type of integration partners lined up alongside Wave - from Accenture and Deloitte Digital, to Appirio, Dell Boomi, Mulesoft and Jitterbit - indicates there is more than enough complexity to generate business for partners, while ISV partners like Informatica suggests that the Wave functionality is entry level.
However, analytics is one of the high growth markets and Salesforce.com now has an offering directed at a broad user base, and with the Wave connections (technical integration and partners) it will open the solution up to external data sources and vendors, while drawing in more partners keen to tap into the extensive Salesforce.com user community. That is a win-win situation – and essential for Salesforce.com’s growth story and its move towards profits (see the HotViews archive here). The main reservation is that it is presenting analytics as supremely simple but there is always a level of complexity and underplaying that could backfire. Indeed, executives do make reference to it being useful sometimes to get analysts to validate the insights users are garnering.
Posted by Angela Eager at '10:00'
The deadline for registrations is this Friday, 17 October, so you need to act quickly. We aim to notify successful applicants by Friday 31 October.
Posted by HotViews Editor at '09:58'
Allocate Software looks set to be taken private by HgCapital, via its newly formed Bidco, in an acquisition that values the healthcare-focused software firm at nearly £110m. The recommended cash offer for Allocate, which is subject to shareholder approval, entitles shareholders to 153.55 pence per Allocate share. It’s hard to see shareholders not approving given that this represents a 35% premium on the 113.5 pence price of Allocate shares the day before the announcement, and is over 30% higher than the highest closing price over the last ten years.
The deal looks like a sound one for Allocate, which we sense will relish the opportunities provided by being private and under less pressure to meet shareholder expectations quarter after quarter. Political change and a peak in its product renewal cycles will make it harder for Allocate to continue on its growth trajectory in the medium term, yet it also needs to invest in strategic product and market initiatives.
HgCapital should provide that committed investment and longer-term view, together with relevant experience in the UK software industry. The group is an independent provider of private equity finance to European companies with a focus on companies in TMT, amongst other sectors. It has assets under management of some £5.2bn, including acquisitive Iris (see here and work back) and Group NBT. Others will remember HgCapital for having sold Computer Software Holdings (CSH) to Advanced Computer Software (ACS) for a healthy profit last year (see here). With HgCapital on board, Allocate hopes to continue its strategy to drive broader and deeper into the healthcare market and it should have the financial flexibility to do so with a partner like HgCapital.
Posted by Tola Sargeant at '09:51'
EMC is to acquire San Francisco-based Cloudscaling. Cloudscaling’s Openstack technology helps customers operate private and hybrid clouds. Terms of the deal have not been disclosed. In July, EMC made a similar move with its TwinStrata acquisition (see here). TwinStrata’s storage appliance technology enables data to be moved/copied into a public cloud.
These acquisitions are about bringing in credible OpenStack cloud technologies, but they are also about ensuring EMC’s core storage portfolio works well in the hybrid environment that most enterprises are shooting for. And that is critical because EMC’s core storage business is under pressure (see here). Like every other established software and IT services provider, EMC is trying to become more relevant in the cloud landscape, and not surprisingly, we’ve seen similar moves by other players. For example, Cisco acquired Metacloud and HP bought Eucalyptus.
Of course, EMC is potentially at the centre of a much bigger acquisition/sale story. In the summer, activist investor, Elliott Management, took a $1bn stake in the company – prompting speculation that it could push for VMware to be spun out. More recently, the media has been awash with rumours that EMC and HP were in merger talks. There are a lot of unknowns at the moment - and a lot of speculation. Time will tell.
Posted by Kate Hanaghan at '09:45'
Digital Barriers’ share price has nudged up marginally this morning following a reasonably positive trading update from the Group. UKHotViews readers will recall that the share price dived by 16% in August (see August share indices) following a warning that Digital Barriers’ business in Africa was affected by the Ebola outbreak (see Break even continues to elude Digital Barriers).
Today’s trading update offers a glimmer of hope for the full year. A major contract with a US federal agency has been delivered on schedule and, moreover, the final contract value was larger than anticipated. In addition, the Board highlights a much stronger contracted backlog and sales pipeline than at the same point last year. This has given enough confidence to forecast that results will be ‘in line with expectations for the full year’. Despite the Ebola outbreak it looks like the Group will report significant International revenue growth. And the product platform investment is starting to pay off. There’s no mention though of the UK business. Though the aim was always for the UK business to be a launch pad for international sales, we should remember the UK accounted for the majority of revenues at this time last year (see UK is Digital’s Barrier to stronger growth).
Unfortunately you still get the sense that it is all still an uphill struggle for Digital Barriers despite some positive signs. Today the Group has announced the Zak Doffman, previously Business Development Director, will now have the CEO role. While Tom Black, will continue to service as Chairman but in a non-Executive capacity. Colin Evans, once Group MD, but more recently responsible for the Group’s engineering and operations, will become COO. Doffman has a big challenge on his hands, not least to bring Digital Barriers into the ‘black’. Losses are set to reduce in H1, with the reduction accelerating in H2, but there is no promise of break-even this year despite that having been cited as an aspiration just a few months ago. Black now talks of break-even being achieved in the 'near future'....
Posted by Georgina O'Toole at '09:40'
HP has confirmed it has a new leader for its services business in the UK (and the Middle East and Middle Africa - MEMA). Jacqui Ferguson, who has just spent almost three years working as Meg Whitman’s Chief of Staff in the US, is to replace Craig Wilson. Prior to her CoS role, Ferguson was Global Account Exec for HP’s BP relationship, and can be credited with helping to haul in a $500m global data centre outsourcing deal with the oil and gas firm.
There is no confirmation on Wilson’s next move, although an official statement says he “has been asked to take on a new and exciting global role within HP”. (Hat tip to Paul Kunert at Channel Register for breaking the story on Friday - see here.)
Ferguson joined the HP family through the EDS acquisition. We suspect management hope her strong track record in sales will enable her to return the UK services business to growth. There are of course far fewer large ITO deals in the market these days and, as we’ve said countless times, the big outsourcers really have to perform faultlessly when bidding for those that do come to market.
Ferguson’s challenge is significant. However, her experience in winning the big deals – HP services’ ‘bread and butter’ – will be highly valuable. And having the ear of Whitman can’t do any harm either.
The news of course follows the announcement that HP is to be divided into two businesses - see HP confirms split.
Posted by Kate Hanaghan at '09:39'
Video tagging technology is not a new idea but narrowing the focus to specific sectors – in this case fashion and retail – does make things more interesting. Such is the case for London-based tech startup, Smartzer, which recently scored $400k in angel investment, following a seed funding round earlier in the year. Smartzer had also raised debt funding through the UK government funded Start Up Loans scheme, which claims to have lent over £100m so far to more than 20,000 startups.
Smartzer founder Karoline Gross had pitched her business on BBC TV’s Dragon’s Den earlier this year, asking for £100k in exchange for 10% of the equity, though was not successful. Apparently the ‘Dragons’ were concerned about the business model, in which clients pay £42k p.a. to licence the technology and 50% commission (!) on sales generated. I would imagine Gross significantly revamped the business model in order to attract the angel investment, though it is not clear how much of the business she had to give away to get it.
I’m all for taking generic startup technologies and tailoring them for specific vertical markets. But of course the commercial model just has to make sense for that market.
Posted by Anthony Miller at '09:26'
It is less than 18 months since Eckoh bought Veritape and its now patented plug and play “CallGuard” proposition, enabling payments to be transacted by call centre agents securely and in compliance with PCI DSS. It has been a very busy period for the management team, especially in the US where they have set up a direct sales organisation as well as a partnership with an as-yet unnamed BPO and communications services provider, see here.
Today they have announced a 3-year deal with Cooperative Response Center Inc., a 325-member collective for the utility industry, handling outage, customer service and billing calls and alarm monitoring across 41 states. Eckoh can now offer their solution in the US as an on-site implementation or hosted service and report that the reseller is building a significant sales pipeline.
The Eckoh management team points out that the US call centre market is ten times larger than that in the UK and they seem to be laying the foundations to exploit the opportunity. Management repeat their expectations that interim results, due November 25th will show significant growth in revenue and margin. However, investors probably need re-assurance. The shares, which had trebled since the Veritape acquisition, have worryingly fallen by 20% since the publication of the company’s Annual Report at the end of September. Worth watching.
Posted by Peter Roe at '09:00'
The UK recruitment market grew even faster in Q3 (to 30th Sept.) for recruitment firm PageGroup (aka Michael Page International), with UK net fee income up nearly 14% yoy, compared to 10% growth in H1 (see PageGroup cements double-digit UK GP growth). CEO Steve Ingham alluded to ‘notable performances’ in all UK regions as well as public sector, with candidate shortages in niche markets such as ‘digital’. He said that wage inflation was ‘subdued’.
Ingham was not as sanguine about the group’s international businesses, seeing ‘challenging’ markets in many regions (notably emerging markets), leading to a ‘cautious’ view on short-term outlook. Adverse currency moves knocked 7 points off NFI headline growth, reported at 4.7% vs 11.6% at constant currencies.
So, as for most peers, good news about the UK - shame about (some of) the rest!
Posted by Anthony Miller at '08:39'
It has been a growth year for SaaS marketing provider dotDigital Group and what is particularly notable is that is has expanded its portfolio with its Magneto ecommerce connector giving it a broader base to build further business on. This is a positive move as it brings ancillary business around the core dotmailer product as well as the existing but still emerging email creative and managed services capability. It also goes some way to making up for the closure of its dotAgency business last year.
It was a year of positives. dotDigital is spreading its wings outside the UK so international business now accounts for 10% of revenue, vs. 3%. A sales push for mid-market companies has resulted in a 35% increase in average recurring revenue per customer for dotmailer, taking it to £410/month. The equivalent figure for the Magneto connector is £700/month. The overall result was annual revenue for the year to June 30, of £16.2m from continuing operations (following the closure of dotAgency search marketing and design line) which was a 33% increase and EBITDA up 13% to £4.7m, with £5.2m generated in cash.
These results are the latest in a line of upwardly mobile results (see here). dotDigital has had its issues but is making progress. While it is benefitting from a rising market, it is finding growth despite the presence of heavy weights like SAP, Oracle, Adobe and Salesforce.com who have all muscled into the marketing automation market via acquisitions. dotDigital is targeting smaller business than many of these vendors so is not in direct competition but is gradually moving upwards in terms of its target market. Its progress and area of speciality will attract attention and make it an acquisition target by mid-market vendors though.
Posted by Angela Eager at '08:39'
We have been seeing a revolution in how people work. The proliferation of multiple devices, applications delivered by the Cloud, the expectation of processes being accessible at any time and from anywhere have all been driven by the user and will continue to be so. Collaboration and connectivity are at the heart of the workplace.
For the Enterprise, it is not just about productivity improvements. There is a bigger picture to consider which starts with the Business case ROI and real business outcomes focused on driving down costs, improving customer service and increasing revenue through employee effectiveness.
A balance has to be achieved between individuals’ convenience and corporate control. To do this, we must understand the needs of different types of worker to target the right people with the right technology and the right policy
In this latest White Book from Fujitsu, the focus is on starting with the required business outcomes, not the device, in order to effect business and IT change through mobilising the Enterprise. It discusses how to manage this change and how to build the business case within a context of the future of mobile solutions.
Posted by Fujitsu at '00:00'
GB Group Plc (AIM:GBG), the identity intelligence specialist, has paid £6m (mostly cash) to acquire CDMS Limited which trades under the much sexier handle of “Transactis”.
Transactis has collected the transactions history of 40m UK consumers across a broad range of retailers. It uses this data to deliver anti-fraud services to companies and organisations in both the public and private sectors based on consumer behaviour patterns. Transactis generated £6.3m in the year ended June 2014. The GB Group management report that the deal is expected to be earnings accretive in year one.
This acquisition follows on from the purchase of Australian DecTech Solutions in April, see here, and further adds to the group’s portfolio in intelligence technology to support payments, risk , management, fraud detection and compliance.
GB Group was one of the top performers in our “Industry views – Second Quarter” report, available here. After a first half that showed strong operating profit growth, see here, the underlying growth of the market and the breadth of the group’s portfolio, boosted again by this deal, should result in continued progress in both revenue and profit.
Posted by Peter Roe at '10:05'
We have been looking at the fortunes of Fusionex and the progress of its big data analytics platform GIANT. As with many offerings in this area, suppliers are investing heavily upfront but have to be patient when it comes to the returns. Fusionex has secured early customers for the platform which was launched at the end of 2013 (see here) and the pipeline is growing, so it expects to meet full year forecasts. However, it looks like most of its sales are coming from the Asia-Pacific region (its home market despite its London listing), not for example, the UK. But it has ramped up its partner channel and is broadening its geographic reach so UK sales may yet materialise.
Posted by Angela Eager at '10:04'
The future for Enterprise Software & Application Services (ESAS) is firmly rooted in digital transformation but before the market can bloom, suppliers have the task of unlocking digital spend. Enterprises are predisposed to investment but are held back by uncertainty: about the where to start the journey, where it will take them, the ROI and whether they can access the skills they need.
As always, uncertainty creates opportunities for suppliers but where digital transformation is concerned, capitalising on it requires substantial change. The latest major report from the ESASViews research stream, ESAS Market Trends & Forecasts 2014/15 - The Digital Transformation Journey, analyses the current and future digital impact and the core issues ESAS suppliers have to adjust to, namely low levels of revenue related to digital transformation compared to the overall ESAS market but much higher growth over the coming years - 10%-15% growth in digital investments vs. sub 2% for the overall ESAS market, along with the shift to ‘little and often’ spending and serial projects. Business and go-to-market models also need to change to reflect the new buying environment. Just as digital transformation is about businesses and government being brave enough to do things differently, so suppliers need to be bold enough to think, engage, deliver and price differently.
Eligible subscribers can read the report here, if you’re not part of the TechMarketView community as yet, contact Deborah Seth for information on how to join.
Posted by Angela Eager at '09:44'
It sounded like “Infosys 4.0” in all but name when new CEO Dr Vishal Sikka laid out his strategy for the company on the Q2 earnings calls last Friday after his first full quarter in the job. The messages were nuanced slightly differently for the two audiences (mainly Indian investors on the first call and mainly US investors on the second) but the underlying message was essentially the same – a new-age Infosys built around software-driven services.
The thrust appeared to have two fronts: firstly, using artificial intelligence and automaton to make core service delivery smarter and slicker; and secondly, incorporating proprietary IP (not necessarily from Infosys) to make (vertical) solutions more compelling.
Now this is all fine and dandy and you can’t find fault with the general aim. But these are long-term, ‘turn the supertanker around’ type initiatives. Meanwhile, big holes have appeared in Infosys’ hull (see One in five leaving Infosys) and it was not clear (to me, at least) precisely how Sikka intends to patch them and then sustain growth and profitability in the short-medium term.
There still seems to be some degree of secrecy over Sikka’s appointment of (now) three ex-SAP executives to senior roles in Infosys. The only one that has been officially revealed (though not formally 'announced') was that of Michael Reh, who takes over control of Infosys’ troubled proprietary banking package Finacle. The generally well-informed Economic Times of India reported that SAP Head of Design, Sanjay Rajagopalan, and (SAP acquisition) SuccessFactors chief architect Navin Budhiraja had also been brought in as senior VPs.
I’ll undoubtedly have more to say on this in the next edition of OffshoreViews. Meanwhile we await the quarterly results from the other Indian players over the next couple of weeks.
Posted by Anthony Miller at '09:16'
After upgrading profit guidance for 2014 back in August (see here), Quindell has now downgraded revenue expectations for the year.
In August, Quindell was expecting revenue of £800m to £900m in FY14. It now expects £750m to £800m. However, whichever way you look, this is still a huge uplift on FY13’s £380m. Of course, Quindell had something of a setback last month, with RAC pulling out of its flagship connected car venture (see Quindell buys out RAC from connected car JV).
Quindell also narrowed in on Q3 for the period ended 30 September, showing revenue more than doubling to £198m (vs. £92.1m), and an adjusted EBITDA margin of 42% (vs. 36% in FY13). Apparently, less than 10% of the revenue was from acquisitions.
Quindell’s business model is based on volumes of work taken on and administered for clients – which can of course go down as well as up. Today customers want to buy services today based on work load and volume demand, rather than being locked into long-running outsourcing deals, which have proven over time often more weighted in favour of the supplier. Volumes-based contracts may be the way forward, but they come with greater risk to the supplier, and less certainty over revenues.
Posted by John O'Brien at '09:07'
Last week we saw that Caixa Bank in Spain had decided to make its contactless payment-capable wristbands available to all of its customers following its 15,000 user trial announced in July, see here. This relies upon technology supplied by Gemalto and is linked to the user’s existing payment card account. For transactions above €20 the user will have to enter his/her PIN.
Elsewhere, Barclaycard is giving its bPay wristband a push to coincide with the acceptance of contactless payments on the London transport network. This will increase the availability of contactless payments, make life a little easier while commuting and go some way to avoid the new problem of “card clash”. Barclaycard are also targeting new users, as you only have to be 12 years old to get a bPay band (as long as it’s linked to a card account).
All well and good, and for certain niche markets (sun-seeking holidaymakers in Spain, commuters in London), you can see some appeal. However, at TechMarketView we remain convinced that wristbands (and other wearables) will only catch on big-time when they can do multiple things, with multiple sensors. These schemes may provide good publicity and ways to develop the supporting systems, but we will be looking among the companies who can combine several use cases onto the same device for the winners in this growth market.
Posted by Peter Roe at '08:12'
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