Tuesday, 31 March 2009

Bond not sticking its head in the sand

(By Anthony Miller – Tuesday, 31st March 2009 9:40am). Recruitment and HR software and services player, Bond International, which announced its 2008 results today (see here), makes an interesting case study on the challenges that small software firms face in a recession, and the initiatives they take to surmount them. Bond’s approach is a combination of diversification and new business models, both of which come with some pain.

We spoke before about the strains that Bond’s move from a traditional ‘up-front licence fee + support’ model to a software rental and SaaS model is incurring (see New Bond model strains margins). These now represent 17% of Bond’s revenues, up from 14% in 2007. But this move, coupled with a the general downturn, saw Bond's margins dive from 24% to 17%. But this move is not an option. We talk more about this in our forthcoming AnalystViews notes on Cloud Computing tomorrow.

Bond also diversified from ‘pure’ recruitment software into HR and Payroll software and services (seems a logical extension) and, more controversially, into Web Services. To be honest, this latter business, called Abacus, seems a little out of left field to me, primarily serving Media and Public Sectors. Management says that Abacus also helps their core R&D teams with web interface design, but I’m not sure that’s sufficient justification, given that Abacus has the lowest margins in the group (14%). Nonetheless, at least management is not just sticking its head in the sand and hoping for the best; that’s our worst fear for software players as the storm ‘clouds’ – in every sense of the word – gather.

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