OLM: Evolving with the social care IT market

I’ve known Peter O’Hara, CEO of OLM Group, for a number of years and it’s hard to find anyone more passionate about what their company does. Privately-held OLM has provided software and services to the UK social care market since its formation 1991. In the ‘old days’, OLM jockeyed with Anite’s social care application business, which is now part of Northgate, for the leading position in the sector. Our estimates suggest OLM Systems, home of OLM’s flagship CareFirst application, still leads the UK social care case management application market in terms of installed base. But there’s no doubt that competition from ‘younger’ market entrants – such as CareWorks, CoreLogic and LiquidLogic (now part of System C Healthcare, and soon to be McKesson) - has intensified. Local government software and IT services (SITS) market leader Capita has also been making waves in Children’s Services where there are obvious synergies with its education software.

Twenty years after its birth, OLM is still a ‘household name’ in social care IT but it remains a £20m company in a niche market: a company that has traditionally been driven more by a passion for social care than high margins. The Group’s latest financial results, which have just been released, show a company in transition following the acquisition of Hytec, a public sector-focused technology infrastructure player, and Pavilion, a health and social care publisher, in 2008. Having taken steps to cut costs (by £1m) and improve operational efficiency, OLM turned FY09’s £2.6m operating loss into a small profit in FY10 (£250k at the operating level). But revenues declined slightly to £19.9m (FY09: £20.9m).

Improving margins is one challenge for OLM in the years ahead. They are currently very low at just above 1% but Peter promises to squeeze out further unnecessary costs. Of course, OLM will also be hoping to return to revenue growth despite tough market conditions. To grow the business in a static case management market, OLM will need to focus on pulling together its various offerings to meet the needs of an evolving sector. It’s already started on this journey and plans to develop a ‘social enterprise platform’ across the care sector that combines content, data, applications and business transactions.

In the meantime, developments in government policy – including a planned £1b investment in the closer integration of health and social care in England – are only likely to encourage more SITS providers to express an interest in the sector. We’ve already seen significant consolidation in the space – think Civica buying in4tek, System C buying LiquidLogic and Advanced Computer Software buying Cerrus over the last couple of years. There is still scope for further consolidation with the likes of CoreLogic and CareWorks potential targets, as well as OLM itself of course. However, our sense is that the price would have to be very attractive to tempt Peter to sell. His long term focus is very much on maintaining OLM’s independence and improving profitability.

For more analysis on OLM’s strategy and how it fits with trends in the UK social care IT market, TechMarketView Foundation Service subscribers can read our latest CompanyViews note - Social Care IT: OLM evolves with the market – which has just been published.

Posted by Tola Sargeant at '16:21' - Tagged: results   socialcare