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As you will have read, our upgraded website www.TechMarketView.com is now LIVE.
This now incorporates our own 'Blogger' CMS system so we will be making no further posts here.

If you want to continue to enjoy Hotviews from TechMarketView, it is still free but only available from our website.

If you have this Blogger site on your RSS feed, I strong suggest you delete it and replace it with the RSS feed you can find on www.TechMarketView.com .

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Bye Bye and hope to see you again 'in another place' soon!

Things slowly improving for in-line Parity

(By Philip Carnelley, 13 Nov 09, 09:00) IT staffing agency and project solutions provider Parity has issued an IMS saying that trading, 5 months into its second half, has been in line with expectations. It saw “no material change” in conditions. As in its first half, the company is managing to largely maintain revenue and profitability in its primary resourcing division – not an easy feat for an ITSA – and is focusing on diversifying its client base. Its small SI group (c 16% of revenues, around £22m last year), which has been rather struggling – down 13% in the first half – has seen sales ‘improve’. It is also slowly improving profitability, in part due to increasing sub-contracting of work to its new Indian partner, Sonata (see Parity switches offshore partners). Across both divisions, the company says that even short-term visibility of revenues is low, and it does not expect any “near-term strengthening of the markets in which it operates.”

Steria UK revenues drop 15% in Q3

(By Tola Sargeant, Thursday 12th November, 2009, 19:00) Steria’s revenues were €372.9m in Q3, 9.1% down on the same quarter in 2008 on a like-for-like basis. The main culprit was the UK where quarterly revenues dropped by an alarming 15% on an organic basis to €141.7m. Apparently the decline in the UK was mostly due to the delay in the start-up of a number of contracts and a lower than expected level of discretionary spending.

The good news for the UK business, however, is that the company expects positive organic growth in Q4 as the delayed contracts begin. New orders in the UK remained strong in Q3, thanks to wins such as those at the IPCC (see Steria to handle police complaints) and the UK passport office BPO deal (see Steria wins BPO side of CSC’s passport contract), leading to a book to bill ratio of 1.18. This may not be enough to take the UK into positive growth territory for the full year – in the first nine months of FY09 UK revenues declined by 6.5% (organic) to €462m.

For the company as a whole, it’s actually the managed services and business process outsourcing business that is finding it toughest going. Organic revenues in the business unit were down 9.2% in the first nine months of FY09 to €429.3m. By comparison, the Consulting and Systems Integration business only saw a 1.6% drop in revenues in the same period to €749.0m.

BT and CSC bear the cost of delays to NHS IT deals

(By Tola Sargeant, Thursday 12th Nov. 2009, 17:30) I’m grateful to Leo King at Computerworld (see NHS IT project delays cost BT & CSC) for drawing my attention to yesterday’s written parliamentary answers which reveal that the Local Service Providers (LSPs) implementing the National Programme for IT in the NHS (NPfIT) at a local level – now just BT and CSC - have so far been paid less than a quarter of the £5b their contracts were originally projected to cost.

In London, up to 31 Mar ’09 – five years into a ten year contract - BT had received just £326m out of total projected lifetime costs for its contract of £1.0b. While in total, £784m of an anticipated cost of £3.0b had been paid to LSPs responsible for the North East, East, North West & West Midlands regions (£110m of that went to former LSP Accenture, the rest to CSC). The statement also reveals that Fujitsu, former LSP for the South of England, had received £133m by the end of March from a contract that should have been worth £1.1bn.

There is no great surprise in these figures: the suppliers are supposed to be paid on the delivery of working systems and the LSP part of the programme is running several years late. But it does emphasize just how important it is for the two remaining LSPs to meet the crucial deadlines set by the NHS (see November NHS IT deadline draws near for BT and CSC) and ramp up deployment in 2010. It might also make it more tempting for a cash-strapped government to try to claw back some of the funding by curtailing the programme. Taxpayers will, however, welcome the news that for once they’re not bearing the cost of delays.

TechMarketView website upgrade

We are delighted to announce a major upgrade to the TechMarketView website (http://www.techmarketview.com/ (Note - same address as before) This will be live on Monday 16th Nov. 09.

TechMarketView LLP update

TechMarketView only launched its first research programme in April this year but already we have around 40 Foundation Service clients including the top ranking companies in each of the sectors we cover – HP (IT services), Microsoft (Software) and BT (Telcomms). Indeed, companies responsible for around half of the UK’s SITS revenues are now TechMarketView Foundation Service clients.

HotViews is firmly established on the UK scene. The email is sent to thousands everyday and is viewed by around 10,000 people every month. It’s also a major comment source for key media like the FT, the Times and BusinessWeek.

And, of course, we have been adding to our team. It’s not just Richard and Anthony anymore. Puni Rajah is our Client Services Director. Philip Carnelley is our Software Research Director and Tola Sargeant is our Research Director with special responsibility for the Public Sector. More new joiners to be announced very soon!

TechMarketView is about to get even better!

On Monday we launch HotViewsExtra. Each morning HotViews will continue to carry our immediate views on the events of the moment. But, when we have been to the analyst briefings, talked to the CEO or have a more considered view, we will put this exclusively on HotViewsExtra. This is only available to TechMarketView Foundation Service clients who can either access it via the website or request a second HotViewsExtra email which will be sent at around 4.00pm each day.

HotViews, HotViewsExtra and our rapidly growing range of research reports (MarketViews, CompanyViews, IndustryViews, OffshoreViews, SoftwareViews and AnalystViews) now form a superb and fully searchable archive library. So if you want up to date information on a particular company or topic the TechMarketView archive should be your first port of call.

HotViews will continue to be free – but clearly TechMarketView Foundation Service clients get an even more enhanced service!

From Monday we are also enabling Comments on HotViews items. We already get loads of comments. If you still want these to be ‘not for publication’ then send them to us as normal via comments@techmarketview.com. But if you want to share your views with 10,000 others – then post away on HotViews! They will be ‘moderated’ though to avoid the junk and libel actions!

You will notice loads of other changes on the website – like a freely available TechMarketView News section and greatly enhanced Product and Services descriptions.

For our Banner advertisers

HotViews really is one of the best ways of getting to the CXOs of the UK SITS sector – indeed anyone senior with ‘skin in the game’. We have revamped our banner advertisements so even on the email they have live hyperlinks to your very own website. Please contact us (PRajah@TechMarketView.com) if you are interested in using our banner ads.

For TechMarketView Foundation Service clients only

Our TechMarketView Foundation Service clients have been asking us to change to a more industry standard ‘email address + password’ way of access. From Monday your old Username and Password will no longer work.

By Monday every TechMarketView Foundation Service client will have been emailed their new ‘email address + password’. For our larger clients with many people accessing the site, your Company Administrator has not only been given their ‘email address + password’ but this enables them to setup multiple user ‘email address + password’. On Monday, if you haven’t received your ‘email address + password’ from your Company Administrator, please contact them (not us) in the first instance. You will be able to request to receive the HotViews AND HotViewsExtra emails from your account profile on the new website.

Of course, we’d be happy to help if you have any problems. Email Puni on PRajah@TechMarketView.com.

Thankyou, once again, to all our many supporters. ENJOY!

Extended decision making hurts IDOX

(By Tola Sargeant, Thursday 12th Nov. ’09, 09:40) IDOX, a supplier of software and services to the UK public sector, has revealed that revenues and profits will be lower than expected for the year to 31 Oct. ‘09. EBITDA is now expected to be about 9% below market forecasts.

Delays to procurements and a shift towards longer term managed services and maintenance contracts have impacted 2009 revenue recognition. But IDOX claims demand in the local government markets remains strong with high levels of tender activity as local authorities remain under pressure to reduce costs and improve services, which bodes well for 2010.

As to the recruitment side of the business, like its peers IDOX has seen permanent placements suffer as a result of the recession but contract recruitment remain broadly stable. There are however, signs that permanent recruitment is beginning to recover according to the company.

CSC reports a 'solid' Q2

(By Tola Sargeant, Thursday 12th November 2009, 09:15) CSC has published what it describes as a ‘solid’ set of Q2 results. Revenues are down almost 5% on the previous year’s quarter at $4.0b (Q209 $4.2b) and EPS came in at $1.4, above the financial analysts’ consensus estimate of $1.35 (but down almost 50% on Q209 because that quarter included net tax benefits of $2.27 from the resolution of tax audits). Overall, cash flow, operating income and margins all improved sequentially and year on year.

The North America Public Sector business is driving any growth with revenues up 8.5% from the previous year at $1.62b. Managed Services Sector revenue was down 12.5% (7.4% in constant currency) at $1.58b, but management claim new business activity in this line of business is now strong as businesses look to outsourcing to cut costs. Unsurprisingly, demand for short term IT consulting projects remains subdued and Business Solutions and Services revenue was $0.86b, down 10.7% (7.5%cc).

As usual, CSC provided very little granularity on the performance of the business geographically other than commenting on the analyst call that in Europe most larger locations are doing pretty well apart from Germany, which is ‘a bit weak’. We’ll have to wait for more detail on how the UK is holding up although there was plenty of talk on the analyst call about CSC’s NHS contracts. The company appeared positive about the outlook for the c£3b of deals, describing the go-live of iSoft’s Lorenzo Regional Care at NHS Bury earlier this month as a ‘major turning point’. While we agree it is an important achievement, the real test will be the next milestone - getting Lorenzo working smoothly in Morecambe Bay, a much more complex acute Trust, by next March. Even iSoft’s UK-based MD Adrian Stevens admitted to me earlier this week that Morecambe Bay was going to be the real challenge. If it is successful - and there are no major changes to the National Programme for IT in the NHS as a result of a change of government - then CSC’s UK performance should get a boost in 2010.

No stopping Acer

(By Richard Holway 8.30am Thurs 12th Nov 09) I have played a little game recently, asking people who is the #1 suppler of PCs in the European market. Everyone answers either HP or Dell and are surprised when I tell them it's Acer – because they are King of the low cost Netbook.

This situation was maintained in Q3 according to Gartner. In Western Europe Acer had a 28.3% market share compared with HP’s 21.5% share. Overall, the number of PCs shifted was down slightly. As units get cheaper and cheaper, I expect the revenues earned declined quite significantly.

UK PC sales were down 2.3%. If you want another example of ‘Diversity of Performance” this is about the best. Acer sales were up a massive 35%. At the other end of the price scale, Apple was up 3.8%. Conversely Toshiba, Dell and HP slumped 26%, 15% and 10% respectively.

To repeat, Gartner figures are volume/unit based – by revenue it must have been even more awful.

BT Global Services on the right road?

(By Richard Holway 8.00am Thurs 12th Nov 09) BT’s results for Q2 were bad but not as bad as expected. At £5122m, revenues were down 3% or down 6% on an organic, constant currency basis.

Of course, it is BT Global Services which most interests us. Certainly, at the profits level there is cause for mild optimism. EBITDA of £95m was up 53% on Q1 although still down 10% on Q2 2008. However, an operating loss of £94m was reported. The revenue situation is complex. Down 3% at £2024m at the headline’ level, down 8% organically but ‘only’ down 5% if you adjust for the ‘major contract milestone’ payment made in Q2 2008. As you can see, even at the EBITDA level, profit margins are still <5%.

Order intake, at £1.4b, was the same as Q1. But orders are for lower values and BT reports continued delay in customer decision making due to “the current economic climate”. BT GS intends to focus on “higher quality new business” which “will lead to a lower order intake compared with the last FY”. That’s sounds like a good policy to me!

The informal feedback that we get certainly indicates a BT Global Services that has faced the abyss and has realised and reacted to its significant problems. There seems to be a mood of ‘we are on the right road’. Of course, the spectre of the NHS IT programme still looms as the deadline of all deadlines fast approaches.

BT Global Services, as we have reported on many occasions, is quite different in the UK than internationally. In the UK it is much more your standard IT services player. Outside the UK it is just a network management company for large enterprises. It faced even more problems in its international operations than in the UK. They have since sold off units in France in Germany.

My own view is that BT are clearing up parts of BT Global Services for a sale when valuations improve. They at least seem to be on the right road to achieve this.

Aveva finds new business hard to come by

(By Philip Carnelley, 12 Nov 09, 08:15) Aveva, the CAD/CAM software company, has reported that its half year revenues fell 7% to £69.9m, while PBT fell from 20% £29.2m to £23.3m. Still, a PBT margin of 33% is pretty good in the present climate. The drop in sales is not unexpected: as we reported back in May (Aveva shines – but storm clouds loom) a general funding squeeze in its core areas of oil, gas, power and marine is inhibiting its clients’ major capex projects. The biggest difficulties were in marine in Asia Pacific, and in North America. The company is increasingly reliant on recurring revenues – now 69% of the total. This is in part because of a drop in license fee sales, but also due to an increased number of customers adopting a rental purchase model - with lower payments in the first couple of years, likely paid from opex not capex, but higher over the longer term. Aveva restructured operations during the half and so profitability should rise going forward. Meanwhile the still-healthy margins helped a rise in net cash from £101m to £134m.

HP augments networking capability with 3Com

(By Philip Carnelley, 11 Nov 09, 22:00) HP has announced that it is to boost its networking capability by buying venerable network products provider 3Com, for $2.7b in cash – around 2x revenues and a 53% premium on its closing price yesterday. 3Com’s board has approved the deal.

Founded in 1979, 3Com has been almost synonymous with Ethernet products. Ethernet is the basis for most local/wide area networking today and was invented at Xerox Parc by a team including 3Com’s co-founder, Bob Metcalfe.

This is a direct response to Cisco. Cisco has been increasingly looking to move up the IT food chain, taking on increasing numbers of software applications, and setting up with EMC to sell data centre solutions (Cisco and EMC combine to form Acadia, take on HP and IBM). HP is now expanding in the other direction. This move also helps HP match IBM in yet another arena. As networking is – unlike other areas of IT – largely standards-compliant, then increased competition is likely to drive down margins through extended user choice.

In a linked move – to "facilitate communications with investors regarding today's announcement" – HP issued a trading update for its FY09. Q4 revenues were down 8% (5% at constant currency) to $30.8bn. Eps was however up 18% on the prior year. The one snippet of information in the release was that sales were boosted by significant growth in China. A full earnings release is scheduled for 23rd November.

More for a lot, lot less at Vodafone

(By Richard Holway 9.00am Wednesday 11th Nov 09) There are very few FTSE100 constituents that fall into the TMT category. Vodafone is one of them. Which is one reason why I have always taken a keen interest in their fortunes. The other is that I have been a long term shareholder ever since I got my first brick of a mobile phone back in the 1980s. For almost all that time, I have been used to uninterrupted revenue, profits and share price growth. Mobile was afterall the place to be.

Although Vodafone did indeed report revenue growth of 9% (to £21.8b) in the six months to 30th Sept 09, its excellent profits growth of 73% (to £5.75b) was fuelled by CEO Vittorio Colao’s £1b cost cutting programme last year.

The news that struck me most was Vodafone’s performance in India. If there was ever a growth market for mobile phones then the BRICs are it. Vodafone’s future probably lies in making it big there. But the price competition in India seems to be immense. Vodafone boosted customer numbers by 50% in India but its revenues were up just 20%. A price war between at least 12 competing suppliers is dragging down prices to levels unimaginable here. And with it margins.

The same trend applies in the UK and the rest of Vodafone’s established markets. The availability of the iPhone on Vodafone, O2 and Orange in 2010 will create price competition even at the premium end of the business. Also the huge increase in the use of mobile data services will put a strain on the network requiring additional investment.

So from almost every direction a case of More for a Lot, Lot Less.

Micro Focus integrations ahead of plan

(By Philip Carnelley, 11 Nov 09, 08:00) Micro Focus has issued a trading update on its first half results. It expects to report revenues of c$195m - a rise of 44%. Like-for-like growth would be around 5%. On a call this morning CFO Nick Bray said they weren’t overly excited about that 5% figure, but they are pleased with the performance of the new acquisitions. The revenue run rate from the Borland and Compuware businesses is 8-10% ahead of expectations and Micro Focus is making rather faster progress on cost reductions, improving EBITDA significantly: 30% anticipated rather than 15% as previously. On the call, Bray commented that the much-needed new product road map is now being unveiled to analysts so we are hoping for an update very soon. No word on the hunt for a new CEO.

The market really liked all this! MicroFocus shares currently up 19% at 406p. That's a 38% rise this YTD.

Adobe pinning its growth hopes on the Enterprise

(By Philip Carnelley, 10 Nov 09, 20:00) Last week we attended an analyst event addressing “Adobe in the Enterprise.” Adobe is, in a sense, one of the industry’s better-kept secrets. Despite the ubiquity of its pdf reader and Flash website software, few appreciate that it is one of the top dozen software vendors globally, with over $3b in revenue. Even fewer probably appreciate that around 30% of that is its "Enterprise" business. But sharp-eyed TechMarketView subscribers will have seen in our CompanyViews report earlier this year that we ranked Adobe the 11th biggest software supplier to the UK market, with an estimated £115m in software revenue. The proportion of Enterprise sales is lower in Europe than the US, but the UK is one of Adobe’s ‘tier 1’ countries, and we estimate "Enterprise" is north of 25%. However Adobe has struggled to maintain revenues of late and indeed they're down 18% in the first nine-months. Today, it announced layoffs of 680 jobs, around 9% of its workforce.

Adobe is anticipating that "enterprise business" will be the main source of revenue growth for the next couple of years. That said, its traditional desktop publishing business should receive a fillip next year when the new version of its Creative Suite is launched.

For Adobe "enterprise business" means automating business processes using a range of products. Its USP (this is our assessment, not Adobe’s) is that it has a holistic approach to process automation that can encompass fully-paper through to fully-electronic versions of the same process. It talks a lot about the ‘user-centric’ approach. For example, a pdf form can be filled in online; or it can be printed off, filled in manually, then scanned and reinserted into the process. We had an interesting presentation from the CIO of HMCS (Her Majesty’s Courts Service) who explained that – among many other considerations – young judges work prodominantly electronically, while elder ones never use technology newer than a fountain pen. Their needs must all be met.

Adobe is finding most traction for its approach in heavily regulated sectors, particularly government and banking. Key customers in the UK – in addition to HMCS – include HMRC and the FSA. Enterprise business is driven at least in part by its SI partners including majors like Accenture and Capgemini, and other resellers.

Despite the undoubted pressure on government spending, the drive to put government processes online both for better citizen engagement as well as greater internal efficiencies makes us think Adobe is right to look to its enterprise business for growth. One supportive statistic: Kumar Vora, VP and GM of Adobe’s ‘Livecycle’ product line (a large chunk of the Enterprise business) said that official US government estimates are that in 2005, its citizens spent ten times as much time filling in government forms (a mere 10 billion hours p.a.!) as they did in 1981.

Regent Conference 2010

(By Richard Holway 5.00pm Tuesday 10th Nov 09) Just thought you might like to make a note in your new 2010 diary for the 2010 Intellect Regent Conference. It’s on Thurs 4th Feb 10 at the Lancaster Hotel in London.

Personally I think it has the BEST line up for a long, long time. And I’m not just saying that because our very own Anthony Miller is on the bill.

The complete line up looks like this:

• Jeremy Paxman, Conference Chairman
• Paul Robinson, Director, Chief Sterling Strategist, Barclays Capital
• Andy Green, Chief Executive, Logica plc
• Ben Verwaayen, Chief Executive, Alcatel-Lucent
• Paul Walker, Chief Executive, The Sage Group plc
• Simone Brunozzi, Head of Web Services, Amazon.com Inc
• Steve Prentice, Fellow, Gartner Group Inc
• Peter Rowell, Executive Chairman, Regent Partners International
• Jon Moulton
• Anthony Miller, Managing Partner, TechMarketView LLP
  

For more information or to book your place contact Contact: Tina Compton Tel 020 7331 2011 or tina.compton@intellectuk.org

Sadiq departs Innovation Group

(By Richard Holway 5.00pm Tues 10th Nov 09) The Innovation Group (TIG) announced this afternoon that Hassan Sadiq has “stepped down as both Director and CEO and has left the Group”. Andy Roberts has assumed the role of Exec Chairman until Russell Reynolds finds a new CEO.

This year has already seen Geoff Squire steps down as Chairman of Innovation (see HotViews 6th Jan 09) and Andy Roberts takes chair at Innovation (Hotviews 9th Mar 09). A clear changing of the old guard.

Judging by the emails I’ve had, they all agree with George O’Connor at Panmure Gordon who wrote “News that CEO Hassan has stepped down should be greeted favourably”. Although the shares have fallen 2% to 12p on the news. This is getting further and further away from the offers supposedly made for Innovation by various private equity groups this year. Indeed, further and further away from the 30p the shares reached earlier in the year. No wonder shareholders are 'frustrated'.

I’ve known Roberts (who also chairs Kewill) for many years and he’s a very able pair of hands. Innovation actually has a lot going for it if steered correctly. It also needs to get its message over more clearly. So I too would view today’s developments favourably.

Logica reorganisation revisited

(By Richard Holway 12.00pm Tuesday 10th Nov 09) A number of readers contacted us querying my post on the new Executive Committee responsibilities at Logica. I should have made it clear that these were the new responsibilities from 1st Jan 10. Conversely, Logica should have made it clearer that this was a more extensive ‘shuffling of the deck’ than their RNS led one to believe.

Jean-Marc Lazzari had originally been appointed as global CEO of the Outsourcing line. Lazzari moves to CEO France from 1st Jan 10. The current CEO of Logica France, Patrick Guimbal, takes on the new global service line in Business Consulting. Lazzari’s place at Outsourcing is taken by Joe Hemming, who many of you will know as the current CEO of Logica UK. The role of CEO Logica UK is taken by Craig Boundy (Craig is currently CEO Global Operations)

So if you add this to the various other announcements made today, this is a pretty major reshuffle. Many of the managers have only been in their current posts for less than 18 months.

Reorganisations happen for various reasons. Indeed, some companies do this automatically each year to keep people fresh. Others value stability and experience. Others use reorganisations to clear out dead wood and/or under performing managers. Others reorganise to meet changed market opportunities. I wish I could tell you which of these applies to Logica’s reorganistion. Or perhaps they all do?

Footnote - Since writing the above we've had several comments. Yet again 'not for publication'. But one signed off with "Yet again at Logica, too many chiefs and not enough Indians" - which I thiught was rather good in the circumstances!

Logica realigns Executive Committee responsibilities

(By Richard Holway 9.30am Tuesday 10th Nov 09) Logica announced the creation of a new ‘global service line’ in Business Consulting to be headed by Patrick Guimbal. Earlier this year, Logica established a Global Outsourcing Services line. Amanda Mesler (currently heads Logica North America) takes on the role of Chief Client Officer.

For the record (and those subscribers who increasingly rely on the HotViews archives for such information) the full Executive lineup at Logica with effect from 1st Jan 2010 is:

Andy Green, Chief Executive Officer

Joe Hemming, CEO Outsourcing Services

Patrick Guimbal, CEO Business Consulting

Craig Boundy, CEO UK

Jean-Marc Lazzari, CEO France

Wilbert Kieboom, CEO Benelux

Stefan Gardefjord, CEO Sweden

João Baptista, CEO Northern and Central Europe

Serge Dubrana, CEO Rest of World and Global Operations

Seamus Keating, Chief Financial and Operations Officer

Stephen Kelly, Chief People Officer

Amanda Mesler, Chief Client Officer

Crister Stjernfelt, Executive Committee advisor

Trouble in gamingland

(By Richard Holway 9.30am Tuesday 10th Nov 09) If there is one theme to sum up the technology scene right now it is ‘Diversity’. In particular how some sub sectors are doing extremely well whilst others fade. Computer games have been a buoyant sector for decades – indeed the UK was once the leading global developer. The market was simple. You developed a game for either a PC or a dedicated gaming console like the X Box or Wii. But it really looks as if consumers have turned off that kind of game in favour of handhelds and games played on social networking sites. Indeed, not just any handheld – but the iPhone/iPod Touch in particular. Not just any social networking site, but Facebook in particular

An example of this came to light this morning with Electronics Arts announcing yet another $391m loss in Q3 and the cutting of another 1500 jobs. Their trading statement blamed the slump in traditional console games market. Even though they are responible for the biggest seller this year – the Beatles version of Rock Band. EA have bought Playfish – which makes ‘free’ games for Facebook and MySpace users.

Substitute

(By Richard Holway 9.30am Tuesday 10th Nov 09) The many HotViews readers who attended the ITNEA Dinner at the Landmark Hotel last night will know this story. On Sunday night I was called by Jane Tozer who, amongst a host of other responsibilities like being an NED at John Lewis, heads the ITNEA (a network of Chairmen and NEDs of UK quoted IT companies) called to say that their keynote speaker for their Monday dinner, Vince Cable, couldn’t make it. Could I make a speech instead? I rather reluctantly agreed – mainly because I rate Jane and I wanted to help. So I spent a few hours scribbling some notes and set off to London. During cocktails, I was still expecting to speak. During the starter, I was still expected to speak. Then a rather hassled Vince Cable arrives in between a 3-line whip at the House. He gave his speech between courses and left before the salmon!

Jane was very fulsome in her thanks to me. I wasn’t quite sure if the audience was sorry or relieved that I hadn’t spoken. Anyway, I’ve been asked to come back to address a future ITNEA dinner!

Vince Cable was in his usual downbeat/’Prepare for the End of World’ form. I still think he prays for a hung Parliament with a Government of National Unity appointed with him as Chancellor. If so, God help anyone with a large house (the Liberals will bring in a Mansion Tax), a high income (they will soak the rich) or looking forward to making a capital gain on the sale of their business (the Liberals will equalize CGT with the top rate of income tax).

Kewill holds firm, issues shares to fund future growth

(By Philip Carnelley 10 Nov 09, 09:15) Kewill Systems, the logistics software provider has reported ‘holding pattern’ results for its half year to 30 Sept. Revenue was up 11% to £27.2m while adjusted operating profit increased 25% to £3.5m. At constant currency (ccy) however, revenues were flat at £24.4m and adjusted profits rose 6%. ‘True’ operating profit – ie including amortisation – was up £0.1m to £0.6m. Revenue in Asia jumped 51% (though still tiny at just £1.4m), while at ccy Europe was up 1%: the company is doing rather well in Germany at present on the back of certain new customs legislations, as well as the Nokia deal we commented on previously (Nokia deal underlines Kewill’s SaaS future). However the US was down 8% (ccy).

Paul Nichols, CEO, said the current ‘challenging’ market conditions were not expected to change until 2010 (something we here at TechMarketView have been saying for some considerable time). Good news for Kewill is that its SaaS offering continues to gain ground; aggregate recurring revenue from SaaS, hosting and maintenance rose 19% and now represent 63% of total revenues. However new licence revenue fell 20%. Despite Kewill’s relatively low profitability for a software company (13% adjusted margin) it increased net cash to £2.1m, up from £0.5m.

Looking to future growth, the company also announced today a share placing designed to raise £7m “to help fund future acquisition opportunities.” We await further details on what those opportunities might be.

EU officially objects to Oracle’s Sun takeover

(By Philip Carnelley, 10 Nov 09, 09:00) After a mere six months of consideration (four months to decide it wanted to consider the proposal, plus two months to consider) the EU has finally decided it wants to object to Oracle’s proposed takeover of Sun Microsystems. Oracle must be absolutely livid. As we have reported before, while the deal is delayed, Sun’s business continues to spiral down. As Bloomberg points out, a statement of objections doesn’t automatically mean the EU will block the deal – TomTom was allowed to buy TeleAtlas, despite EU objections. But the pressure is certainly on Oracle to offer concessions.

At this stage Oracle seems to be more concerned with winning the argument, issuing a spirited defence saying that its move would revitalise competition in the server market as well as not affecting the database market materially. While the EU’s statement of objection has not been made public, Oracle’s response certainly has. It pulls no punches, saying that the European Commission has “a profound misunderstanding of both database competition and open source dynamics.’ Interestingly, the FT points out that the US DoJ issued its own statement yesterday reiterating its view that the proposed deal does not give rise to anti-trust concerns. Many other independent commentators have sprung to Oracle’s defence, and indeed, were we to be asked, we would too. Whether Oracle should buy Sun at all we’re less sure, but we believe it should be allowed to do so. It’s also worth saying that if Oracle does walk away from the whole deal, Sun’s future looks pretty bleak to us. It surely has no chance of remaining an independent entity.

Happy Birthday Firefox

(By Philip Carnelley, 10 Nov 09, 08:30) Today is Firefox’s 5th birthday. Mozilla claims 330m users worldwide and the latest stats we’ve seen indicate that it has around 24% share of the browser ‘market’. Certainly it’s made an impact and has more than held its own against Microsoft’s hegemony. Its impact has been manifold, but we’d highlight two areas in particular.

One is that it has actually driven the use of standards across the Internet, as Microsoft has been unable to continue developing proprietary variants of IE on the basis that everyone else will follow. It’s very rare now to find a website that won’t support IE, Firefox, Chrome, Safari, Opera and the rest. Indeed it has made it far easier for Apple and Google to produce their own browsers. This in turn made it possible for the EU to get heavy with Microsoft in the long-running competition dispute over pre-installing IE on Windows – there is an alternative. The second is to help demonstrate that there is a place for open source solutions on the desktop. Other than Firefox, the main impact of open-source software has been server-side. Interestingly, we think that Firefox’s success may help Oracle in its arguments with the EU over its potential ownership of MySQL.

JDA to acquire i2 Technologies

(By Philip Carnelley, 9 Nov 09, 09:30) Venerable mid-market ERP vendor JDA is to acquire supply-chain management company i2 Technologies for an enterprise value of $386m. (That’s the American i2, not the UK-based visual analysis firm). The merger adds i2's SCM software for discrete manufacturing to JDA's software for merchandising, supply chain planning and execution and revenue management. On a pro-forma basis, the combined company will have annual revenues of c$617 million, of which $400m is software licence and maintenance fees, from 6,000 customers worldwide. Both companies have an established customer base in the UK and we believe that combined UK revenues will be circa £16-20m.

The companies tried to merge a year ago but couldn’t agree on price. But the strategic rationale is strong. While Oracle and SAP have more or less sewn up the large-enterprise ERP market between them, thanks to all Oracle’s acquisitions, the upper-middle market is much more competitive – with SAP, Oracle, Microsoft and several others including Britain’s Kewill and K3 all fighting to improve their position. The global giants are steadily but slowly increasing their positions in that mid-market; so the new merged company’s increased ability to compete, through larger scale and span of functionality, is very important – to it and to its customers.

Advanced Computer Software has healthy first half

(By Tola Sargeant, Monday 9th Nov. 2009, 09:30) Advanced Computer Software (ACS), an AIM-listed provider of software and IT services to the UK primary care sector, has revealed strong growth in the six months to 31 Aug ‘09. Its interim results show revenue in the period was £11.0m. EBITDA came in at £2.6m and pre-tax profit was £1.9m, a 17.6% margin.

There are no comparable figures for the previous period since ACS was formed by a reverse takeover of Out of Hours software specialists Adastra in July 2008. However, according to ACS, Adastra reported a turnover of £7.2m in H109, which is 21% up on the same period prior to acquisition. That’s pretty impressive in a market which is characterised by low single digit growth - it is being driven by Adastra’s expansion into Urgent Care and Equitable Access Centres.

ACS’ recent acquisitions are also beginning to pull their weight. Hosting and managed services business BSG contributed £3.6m of revenue over 11 weeks in the period and Staffplan, a provider of roster software for community nurses, contributed £0.2m in the seven weeks from acquisition to 31 Aug ’09. The Group’s most recent acquisition, offshore development capability Oak Labs India, fell outside the period (see also ACS tries and Indian take-away).

But it would be wrong to think that ACS is only about inorganic growth. Organic growth through product innovation remains important to ACS and Adastra has launched three new products for nursing and community care in recent months. Cross-selling between the acquisitions will also be key to the Group’s future success. Indeed, this strategy is already paying dividends, as with the use of BSG’s hosting skills to offer Adastra’s new products on a software-as-a-service (SaaS) basis.

That said, ACS is keen to play a major role in consolidating the fragmented UK primary care software and services market and we don’t see CEO Vin Murria resting on her laurels. She told me this morning she sees two businesses a week at the moment but most have unrealistic price expectations – perhaps a tougher market in 2010 will encourage some more sensible pricing. When ACS does expand it's likely to be into areas like billing, accounting software or business intelligence that will come into their own in a market focused on ROI, KPIs and efficiency (as well as the odd bolt-on acquisition in the clinical space).

Although ACS is relatively well positioned to withstand tougher market conditions, with 65% recurring revenue, Vin is not expecting an easy ride next year. She is predicting a ‘big squeeze’ in the market. We couldn’t agree more, but it’s reassuring to see businesses like ACS planning accordingly rather than living in denial.

Capgemini on the acquisition trail again?

(By Richard Holway 6.00pm Saturday 7th Nov 09) Further to our report on Friday of Capgemini’s Q3 IMS , Paul Hermelin (CEO) told the analyst briefing that he now planned acquisitions, particularly in the US. He wanted Capgemini to be in the “Top Five alongside competitors like IBM and Accenture” but they were “currently #19 in the US IT services market”. By the way, Hermelin also told the FT that he thought the price Dell paid for Perot was ‘crazy’. Well, at least we agree on something!

I well remember Capgemini’s last US ‘adventure’ – or should I say ‘misadventure’ – when they bought the consulting business of Ernst & Young at the very height of dot.com valuations back in December 1999. Now if there was ever a price that was really ‘crazy’, then the $11.5b they paid would certainly qualify. Looking back at my reports of the acquisition at the time, the raison d’etre then was to put the combined group into the Top Five IT Services Groups worldwide. But the acquisition was pretty much a disaster – mainly because the ‘culture’ of E&Y’s prima donna consultants was just a world apart from the ‘body shop’ T&M consultants that Capgemini had at the time in France and the ‘industrial’ type data centres that Capgemini ran in the UK. It took Capgemini many years to work this through – not helped by the biggest slowdown in IT spend on record post dot.com and Y2K.

But Hermelin seems to acknowledge that a big bang approach is unlikely to work this time around either. He talks of a ‘series of acquisitions’ – which is commendable.

One other point of note is that Capgemini will employ more people in India (21,000) than in France (20,000) when their new Bangalore centre opens shortly. Of course, that position was greatly helped by, indeed was built upon, the $1.2b acquisition of Kanbay in Oct 2006. Another acquisition made when the world looked rosy just before a crash. Again, it is interesting to reread Capgemini’s analyst briefing at the time on the announcement of that acquisition when they projected “35,000 staff in India by 2010”. Yet another ambition which is most unlikely to come to pass.

But if Hermelin sticks to the Kanbay size of strategic acquisition in the US, his ambitions of becoming a Top Five player would stand a much better chance of succeeding this time around.

Lenovo back in the black but little cause for celebration

(By Philip Carnelley, 6 Nov 09, 09:30) This morning’s media report that Lenovo is back in the black. George O’Connor at Panmure Gordon also pointed out this morning that Steve Ballmer claims that Windows 7 sales are “fantastic,” and that NPD Group says that “unit sales of boxed copies of Windows 7 in U.S. stores were 234% higher during the software's first few days than they were for Windows Vista.” Return to the good old days?

Sadly not. The secular trends we have noted are still in place. Lenovo’s recovery is the result of cost cutting and growth in the still developing China market. While net income for the quarter rose 130% – after three quarters of losses – sales fell 5.2% year on year. Lenovo has been overtaken by Acer principally because it was late to move to lower cost models. As we have commented many times, Acer has benefited hugely from the rise in Netbooks. Its President said in London last month that it expected to pass Dell “very soon.” Meantime Lenovo says conditions remain challenging.

Earlier this year, I looked to replace my trusty 7-year old IBM Thinkpad with its up-to-date equivalent, as i really liked it, but the prices were just silly. An Apple MacBook was actually better value for money. Lenovo was over-reliant on the corporate market. But it doesn’t expect corporate replacements to kick in until the second half of next year. The turnaround in sales is due to its introduction of lower-end models: While sales were down 5%, shipments were up 28%. But that shift in sales mix means gross margins have fallen from 13% to 10%. To bring about the return to profit, the cost cuts must have been severe.

Indian BPOs – a tale of two continents

(By Philip Carnelley, 6 Nov 09, 08:00) BPO trends are very different either side of the "Pond". Major India-based BPO firm and GE spin-off Genpact has reported third-quarter revenues up 5% year on year, to $284m, and adjusted operating income up 9%: adjusted margins are now 19%. Revenues from its #1 client, GE, declined from 46% to 39% of revenues, principally due to disposals by GE, though adjusted for this they still fell 4% as GE continues to drive down costs. Revenue from other clients was up 17% to more than compensate. Genpact, which is seeing “encouraging signs in the market,” predicts growth of 6–9% this year.

Meanwhile its close rival, WNS, reported Q2 revenues up 2% to $153m. But after deducting auto-repair pass-through payments, (its auto-insurance BPO business pays repair bills, then reclaims from its clients) its net revenues were down 8% to $100m.

With its UK heritage, WNS is much more exposed to the British market (57% of total revenue) which is undoubtedly weaker than the US. Its UK business suffered from the falling pound and lower second-year fees from its landmark deal with Aviva Global Services (WNS wins mega 8 year $1b BPO contract with Aviva) which were not compensated for by other business wins. Consequently, UK revenues fell 13% in dollar terms, to $57m. Its European business (just 6% of revenue) also fell, by 19%.

That said, adjusted operating margin remained a healthy 19% as it cut costs. The company is now expecting to beat its earlier profit and revenue estimates for FY10 – it forecast a flat year – saying that bookings and pipelines in the US are “strong.” The UK (& Europe) “could strengthen” in the next two quarters. We discussed back in September whether there would be a bid for Warburg Pincus’s controlling stake in the company (WNS – in play or not?); but WNS commented in its report that it has received no fresh expressions of interest since that time.

Fujitsu workers to strike

(By Richard Holway 7.00pm Thurs 5th Nov 09) Some Fujitsu personnel in the UK are to to strike for three days later this month in protest at staff cuts, pay cuts and the freezing of their final salary pension scheme. It is understood that the strike will involve only about 720 or about 5% of Fujitsu's 12,500 UK personnel.

I got called by the media for my reactions to this. (Eg see Paul Kunert's article in Microscope) Bluntly, although it is always sad to see job losses, my real criticism of Fujitsu UK is that they didn't take this cost cutting action a year back when most of their UK competitors did. That means that their competitors are now through the pain. Indeed, as you read countless times in HotViews, profits are holding up (indeed increasing) despite revenue declines. This is all due to previous cost cutting. But Fujitsu has still to go through that pain.

I've had to make cuts several times in my career. It is never easy - particularly as I've personally known the people involved. But I've learnt that 1) Delaying the inevitable always makes matters worse 2) Cutting too little just means you have to repeat the pain 3) Cutting TOO much is something I have never seen. 4) Often you need different skills coming out of recession than you needed at the start.

Breakfast with Holway and BDO

(By Richard Holway 6.00pm Thurs 5th Nov 09)

On 3rd December at 8.15am - 10.15am I am giving a presentation for BDO LLP at a Breakfast briefing at their HeadQuarters at 55 Baker Street, London, W1U 7EU. It's entitled Economic Outlook for 2010 and Beyond for the Technology and Telecomms Sectors. In essence it is a repeat of my "State of the ICT Nation" speech that I gave for the Prince's Trust in September.

BDO have kindly offered places to TechMarketView subscribers. I should point out that only senior executives - CEOs, FDs and the like - are eligible. If you fall into those catagories and would like to attend (for free) please contact Mary Elizabeth Hallahan on Email: maryelizabeth.hallahan@bdo.co.uk Tel: 020 7893 3808 Fax: 020 7487 3686 or for more details Click Here.

Charteris revenues slump

(By Richard Holway 9.00am Thurs 5th Nov 09) One of the ‘redeeming factors’ in the Logica and Capgemini results that we have brought you in the last 24 hours has been outsourcing. Unfortunately, Charteris does not have such a benefit as its business is solely ‘business and IT consultancy’. So its not surprising that they have reported a 14% reduction in revenues (to £20.3m) in the full year to 31st July 09 (Yes – you read that right. As everyone else is reporting to 30th Sept, Charteris is bringing us results of three months back). EPS halved and profits fell from £1.4m to £438K.

The reasons are well rehearsed. “Challenging trading conditions”, “Recession in the UK”, “Spending delays and uncertainties”. You won’t get much optimism from the outlook either. “No improvement in the short term”. “Business will continue to perform at a similar level to that achieved in H2”.

So now we have a trio of results all indicating depressed corporate IT spend and no immediate up-tick in prospect.

Is there a crisis in growth financing?

(By Philip Carnelley, 4 Nov 09, 11.30) Together with a good number of HotViews readers, we attended a Knowledge Peers event on the issue “Is there a crisis in growth financing?” (see Prestige networking event for growth company directors). Speakers/panellists included successful entrepreneurs Ian Gott of BPM company Nimbus and John O’Connell (who readers will know well), plus Andrew Garside of ISIS Equity Partners and Robert Donaldson of Baker Tilly.

The panellists generally agreed that “crisis” was an overstatement, but that things were tough. Banks are generally only lending to large clients and have tightened terms dramatically – to the extent that PE financing can be cheaper. The plethora of Government schemes were felt to be of limited use. However, contrary to what may be thought, PE firms (there are over 200 in the UK) still have a considerable amount of money to invest. But, they want to lend on the right terms, and the lack of bank finance is a considerable hindrance. In an interesting development therefore, PE firms are starting to fund "whole deals" because of the absence of gearing. That means they have to accept a blended return, as they are supplying both the debt and the equity. It was generally agreed that PE financing is an expensive way to finance a business – but may be the right or indeed the only way. Meantime the public markets are closed ‘except to the biggest.’

The most contentious issue debated was whether PE firms are too narrow in their expectations. Several attendees thought that PE firms are falling short, in three ways: by being reluctant to back companies run by non-middle-class professional men (there was some consensus on this); by insisting on unreasonable terms (this was hotly contested); and by always expecting owners to trade control for growth funding.

PE firms, attendees said, need to recognize that entrepreneurs “come in all shapes and sizes.” But it was pointed out, private equity is finding returns are minimal, and risks high; while many owners have unrealistic expectations of their worth, a considerable barrier to deal-making. Also owners often do not look hard enough at the cultural fit with potential backers before signing a deal.

To conclude, we leave you with a thought from Robert Donaldson: reviewing the current situation, he said that entrepreneurs needing funding need to get used to the current conditions: for to a large degree, they are here to stay: “This is the new normality – the age of equity.”

Capgemini reports “sharp reduction in corporate IT spend”

(By Richard Holway 8.00am Thurs 5th Nov 09) Logica’s results yesterday (See Logica “stable”) now look pretty good compared with Capgemini’s IMS for the three months to 30th Sept 09. Rather than my words, let me quote the opening paragraph of Capgemini’s release:

“The decline in the economic environment in Q3 fuelled a sharp reduction in corporate IT spending. Against this challenging backdrop, Capgemini reported revenues of €1.946b, down 9% on Q3 2008 (constant currency and like-for-like)” .

These results were much worst than expexted (last night the 'concensus' was a 3% decline) and Capgemini shares slumped 5% on opening this morning.

In other respects, the Capgemini results mirror not just Logica’s results but the general trends we report so often here at TechMarketView:

• Outsourcing was, yet again, the redeeming feature; recording ‘just’ a 2.7% decline.
• Consulting and Professional Services were the worst hit
• UK was the best performing region – growing 1.5%. France fell 9.9% and North America down 7.3%.

The immediate outlook looks grim too with “a similar decline to be recorded in Q4” although “there are signs that activity is stabilizing and even picking up in some market segments”.

We will comment further when more detail is forthcoming. But anyone looking for signs of recovery in the mainstream SITS areas outside of outsourcing will be sorely disappointed by the results from one of the top European bellwethers.

EU likely to stall Oracle’s Sun takeover

(By Philip Carnelley, 4 Nov 09, 11:00) The FT reports this morning that it believes that the EU is going to make a formal objection to Oracle’s proposed takeover of Sun. This is not good news for Oracle, but there’s little it can do at this stage. The irony is that the EU’s concerns are about Oracle’s acquisition of the MySQL open source database, which we’re quite sure was low on Oracle’s agenda when it bid for Sun. So Oracle may even offer to cut MySQL loose; we’re sure it won’t be a deal breaker. But as we have already commented (eg Oracle takes up the Sun server cudgels), the problem for Oracle is that Sun is currently in free fall and delays in closing the deal only make matters worse. Oracle certainly doesn’t look likely to get the company it thought it would, back in the Spring. Maybe it will try to renegotiate the Sun deal?

Cisco and EMC combine to form Acadia, take on HP and IBM

(By Philip Carnelley, Nov 4 2009, 11.00) Cisco and EMC (which includes VMware) have launched a joint venture called Acadia to offer bundles of equipment and services to corporate data centres. Bundling networking, virtualisation and storage – together with the expertise to put it all together – makes perfect sense, and could create serious competition for IBM and HP. Cisco has long tried to broaden its reach in the computing space and the addition of the EMC/VMware offerings could provide the key. Sales of the technology bundles - productised as "Vblocks" - are expected to come via partners, including Accenture, CSC and TCS. The companies are positioning this venture as providing “private clouds” – though in our opinion, a private cloud is just a modern data centre using the latest virtualisation technologies. Meantime, the FT reports that HP is planning to launch, later today, a very similar vision to that of Acadia, using its own products. The battle will be fierce.

NHS IT procurements in the South set for January

(By Tola Sargeant, Wednesday 4 November, 09:30) Having painted a gloomy picture of the world of NHS IT over the last couple of weeks in our previous post (see November NHS IT deadline draws near for BT and CSC), there was a flurry of more positive announcements yesterday. The most significant news for our readers is that the series of procurements of healthcare IT systems for the South of England are due to take place in January 2010 using the Additional Supply Capability and Capacity (ASCC) framework (see also NHS IT Localisation: A world of opportunity?). The procurements, which could be worth as much as £1b to suppliers, are likely to cover patient administration systems and a range of clinical and departmental systems. They are desperately needed to fill the void left by Fujtisu, which had its contract with the National Programme for IT in the NHS (NPfIT) terminated in April 2008.

In another positive step, the Department of Health has spelt out the criteria against which Local Service Providers BT and CSC will be judged come the end of November deadline for progress on the deployment of their patient record systems under the £12b NPfIT (see here for more detail). Don’t hold your breath come the end of November though – there is likely to be plenty of internal debate over whether the criteria have been met and we’re unlikely to get a decision before 2010. On a related note, industry newsletter E-Health Insider reports that NHS Bury has finally gone live with its implementation of iSoft’s Lorenzo (Release 1.9). The deployment is a vital step on CSC’s road to meeting its ‘success criteria’ and the LSP will be hoping all goes smoothly over the next few weeks as the system beds in.