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No more posts to this site

2009-11-16T13:21:00.002Z

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 .

You can sign up for our free HotViews dail email on www.TechMarketView.com too.

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

Things slowly improving for in-line Parity

2009-11-13T09:06:00.008Z

(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

2009-11-12T19:29:00.004Z

(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

2009-11-12T17:55:00.005Z

(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

2009-11-12T16:04:00.006Z

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

2009-11-12T09:39:00.005Z

(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

2009-11-12T09:30:00.004Z

(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

2009-11-12T09:06:00.002Z

(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?

2009-11-12T08:55:00.003Z

(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

2009-11-12T08:16:00.010Z

(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

2009-11-11T22:49:00.010Z

(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

2009-11-11T09:21:00.001Z

(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

2009-11-11T08:07:00.005Z

(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

2009-11-10T19:43:00.009Z

(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

2009-11-10T17:45:00.004Z

(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

2009-11-10T17:25:00.003Z

(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

2009-11-10T12:38:00.003Z

(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

2009-11-10T09:32:00.004Z

(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

2009-11-10T09:30:00.002Z

(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

2009-11-10T09:28:00.002Z

(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

2009-11-10T09:16:00.008Z

(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

2009-11-10T08:45:00.004Z

(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

2009-11-10T08:41:00.004Z

(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

2009-11-09T09:49:00.008Z

(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

2009-11-09T09:37:00.005Z

(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?

2009-11-07T17:59:00.001Z

(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

2009-11-06T09:21:00.003Z

(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

2009-11-06T08:14:00.010Z

(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

2009-11-05T18:43:00.004Z

(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

2009-11-05T18:30:00.004Z

(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

2009-11-05T09:03:00.003Z

(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?

2009-11-05T08:30:00.003Z

(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”

2009-11-05T08:21:00.009Z

(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

2009-11-04T11:11:00.003Z

(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

2009-11-04T09:49:00.008Z

(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

2009-11-04T09:34:00.005Z

(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.

Logica stable

2009-11-04T09:23:00.002Z

(By Richard Holway 8.00am Wed 4th Nov 09) Logica’s IMS for Q3 to 30th Sept 09 shows revenues down 4% on Q2; at £2.73b, that’s 3% down YTD.

The picture is now pretty familiar:

- Outsourcing was the star driver. Up 11% in both Q3 and YTD. Looks like order intake is strong too as Book to Bill is 103% YTD.
- Consulting and Professional Services suffered a 12% decline “based on lower volumes and pricing agreed in the first half”. In other words, new projects are hard hit and companies are demanding ‘More for Less’ squeezing rates.
- UK put on the strongest performance – up 7%
- The Nordics (Logica’s biggest geography) was down 2%, France down 5% but Benelux down a whopping 23% .

It was particularly interesting that Logica is taking another stab at cost cutting; putting aside a further £20m provision for 2009 (total now £145m) resulting a total headcount reduction of 2200 since the start of 2008. Perhaps the clue is that Logica’s attrition rate is ‘only’ 7% compared with a 12% decline in its main ‘people-based’ activities.

Even more interesting was Logica’s ‘slowed addition of headcount in offshore and nearshore centres reflecting weaker market demand”. At 5275 – 13% of the total workforce – Logica does not expect this to change anytime soon. I’m sure my colleague Anthony Miller (who is on a well earned holiday at the moment) would have had much to say about this. But I have to say that I have heard this kind of comment from quite a few others recently. The cost gap between offshore and onshore has narrowed because of the economic downturn. Clearly that same climate means more availability of skilled onshore staff.

I see nothing in the Logica IMS to indicate any change in the SITS climate or outlook. (Readers will know that since Q3 2007 we have said we do not see an up-tick in SITS spending until H2 2010) Everything ‘new’ (people, projects, software) is still in the doldrums. Outsourcing and everything connected with ‘More for Less’ and cost saving is ‘the place to be’. In that respect, Logica is a microcosm of the market as a whole. Where Logica can be given credit is their UK performance. Here Logica makes 63% of its revenues from the Public Sector – about twice the UK SITS market share. Public Sector revenues were up 13%. This high reliance on Public sector could be risky with a change of Government. UK private sector revenues did nothing more than “stabilise”.

Logica shares have opened up 5% at 120p.

Alterian grows as North America recovers

2009-11-04T09:09:00.002Z

(By Philip Carnelley, Nov 4 2009, 09:00) Marketing analytics and content management vendor Alterian has reported revenue up 40%, to £14.4m, for the half year to 30 Sep. The company showed an adjusted operating profit of £255k, but an operating loss of £259k – a big improvement on the previous year’s loss of £2.3m, which included £1m ‘pre-integration costs’. Net cash rose from £5.7m to £7.3m despite the Techrigy acquisition.

The big revenue jump was in part due to acquisitions (Mediasurface, back in July 08, and Techrigy), and also exchange rates: at constant currency (ccy), revenue was up 28%. But it’s a good performance, as we anticipated at year end (Alterian rises with Mediasurface). Alterian showed growth in all regions: North America was slightly weaker than other regions with 18% growth (ccy) – but as last (full) year’s figure for the

was just 2% growth ccy, that’s a big improvement.

The key to Alterian’s success is its focus on the marketing vertical. A functional product is just the table stakes. In a crowded market – and analytics and content management are some of the most competitive software markets in the world, with a plethora of competitors ranging from niche specialists to IBM and Oracle – then differentiation has to come from specialisation. Alterian is playing this game very well.

Blinkx share issue as revenues grow but losses mount

2009-11-04T08:15:00.011Z

(By Philip Carnelley, Nov 3 2009, 17:30 - updated Nov 4, 08:00)
AIM-listed video search engine company (and Autonomy spin-off) Blinkx has reported sharply increased revenues for the 6 months to 30 September, together with a share placing raising £5m. Autonomy – which remains Blinkx’s largest shareholder, with 19% before the placing – underwrote the issue and took some of the shares. It's not yet announced how much Autonomy took.

For the half year, reported revenue rose 106% yoy, to $13m, and usage grew dramatically with a 238% increase in advertising campaigns over the previous half; video streams increased by 170% and the company entered the “Top 10 Video Sites” measured by comScore and Neilsen. But operating losses widened from $4.3m to $7.4m, and cash burn rose from $4.7m to $8m - hence the need for the placing. That sum does include $1.4m of infrastructure investment. Blinkx shareholders have seen pretty poor returns since the 2007 IPO: the shares have never regained their price of 65p reached immediately post-launch, and fell 10% on the day's news to 17.5p. Perhaps shareholders' best hope is that the company will soon be bought!

TechMarketView setting the agenda

2009-11-04T07:29:00.006Z

(By Richard Holway 7.00am Wed 4th Nov 09) TechMarketView is still less than a year old but we are really delighted with its progress. In particular, how TechMarketView has become an 'Agenda setter' - indeed just like we were with the Holway Report.

The first report in our new SoftwareViews research stream - on the State of the UK HQed Software Industry - has created great press coverage and favourable comment.

I was particularly pleased that BusinessWeek used the report as a basis for their weekly CIO debate. The article was under the headline Why the UK will never create a software giant to rival Microsoft, Google or Oracle "That's the sobering conclusion of the silicon.com CIO Jury which voted 10 to two against, when asked whether the UK could create a global software business to rival the technology industry's most powerful companies."

It's a really good read - I commend you to it.

TCS breaks into UK local government

2009-11-03T16:38:00.007Z

(By Tola Sargeant, Tuesday 3 November 2009, 16:30) Offshore SITS supplier Tata Consultancy Services (TCS) has won its first contract in Local Government in the UK. In what is a landmark deal for offshore players in the traditionally conservative local government sector, Cardiff Council has chosen TCS to help drive the Council’s Strategic Transformational Change Programme. The Indian player will support the Council’s ICT Service “to help deliver more efficient systems and ensure both parties benefit from an exchange of knowledge and experience”. TCS beat IBM and BT to the deal, which is rumoured to be worth £150m over 15 years.

This deal is interesting on many levels. For TCS it is a fantastic win and vindication of its concerted efforts to woo the UK public sector over recent years. The contract follows TCS’ success at the UK’s Child Maintenance and Enforcement Commission back in April (see TCS wins Child Maintenance Enforcement contract) and is surely evidence that areas of the UK public sector – even local government - are now willing to engage directly with offshore suppliers despite the risks of a political backlash.

Indeed, as we’ve said before, we wouldn’t be surprised to see more public sector organisations turning to lower cost offshore providers as spending cuts begin to bite. Cardiff Council Leader Rodney Berman’s comments on the TCS contract award were interesting in this respect. He said: "It is clear that the public sector needs to adapt to the changing world around us to ensure we are equipped to deal with the effect of the recent global recession and the ongoing squeeze on the funding that is available for spending on public services.”

That said, this contract is about more than labour arbitrage. Cardiff is at pains to stress that no Council staff will be transferred to the private sector, and it clearly values TCS’s onshore abilities and global public sector experience. TCS is particularly strong in local government in India, where its systems support populations larger than that of the whole UK.

All in all, this is great news for TCS and, if the contract is successful, potentially a fantastic entree into the UK local government market.

Cognizant reports record growth in Q3

2009-11-03T15:24:00.004Z

(By Tola Sargeant, Tuesday 3 November 2009, 15:30) New Jersey-headquartered, India-based SI Cognizant has revealed a very strong set of Q3 figures and raised its guidance for FY2009. Quarterly revenue rose to $853.5m, up an impressive 16% from the year-ago quarter and 10% sequentially as the volume of business (rather than prices) increased. In fact, the sequential revenue increase of $76.9m was the highest in the company’s history. Profits were also up: GAAP net income was $136.6m, compared to $112.8m in Q308, and the non-GAAP operating margin was 20.2%, above the company's targeted 19-20% range.

Thanks to fairly broad-based growth across all horizontals, verticals and geographies, Cognizant now expects FY09 revenue to be at least $3.25b, up 15.5% or more compared to 2008 and ahead of equity analysts’ previous consensus estimate of $3.16b. Areas of particular growth in the quarter include the banking and financial services sector (which has stabilised and returned to growth – up 9.5% sequentially); retail (+15% sequentially) and Infrastructure Management and BPO (up 18% sequentially on a combined basis).

Like other Indian players, Cognizant appears to be benefiting from the global economic slowdown and claims more clients are thinking about offshore and optimising their offshore processes as a result. Interestingly, however, Cognizant has seen conversations with its clients broaden beyond cost and labour arbitrage to include discussions about how the Indian-based player can help them improve their business processes and innovate. These increasingly strategic conversations with clients are bringing it more into competition with traditional consulting and SI firms, as well as its Indian peers.

Going into 2010, Cognizant is assuming customers’ budgets will be ‘flat to slightly up’ and is not expecting a repeat of the record growth it has seen in Q3. Nevertheless, the company will be looking at opportunities to promote non-linear growth by developing more transaction and outcome-based pricing models across its horizontal and vertical businesses. It is also still open to small ‘tuck under’ acquisitions like the purchase of UBS’ captive Indian service centre announced in October (see Cognizant snares UBS captive).

November NHS IT deadline draws near for CSC and BT

2009-11-03T10:01:00.009Z

(By Tola Sargeant, Tuesday 3 November, 10.00am) It has been a pretty depressing week for followers of NHS IT in the UK. Back in April, the Department of Health’s director general of informatics, Christine Connelly, set an end of November 2009 deadline for ‘significant’ progress from the National Programme for IT in the NHS’ (NPfIT’s) remaining Local Service Providers (LSPs) BT and CSC. But as that deadline draws nearer, we learn that CSC’s make or break deployment of iSoft’s Lorenzo software at NHS Bury is behind schedule and, perhaps more worryingly, that there are only about 174 ‘regular users’ of Lorenzo across the five NHS trusts that are already using early versions of the system. We’ve no word yet on how BT is performing against its milestones in London.

The figures on Lorenzo usage were released by health minister Mike O’Brien last week in response to an MP’s question and relate to Release 1 of the software, which provides limited clinical tools on top of an existing patient administration system (PAS). They clearly show deployments to date have been restricted to specific areas of a small number of hospitals – indeed the highest recorded number of concurrent users of the software is just 19.

At the moment, it is hard to argue that the c£3b of contracts that CSC has with the Department of Health (DoH), the earliest dating back to 2003, are providing value for money on a per user basis! For the contracts to be considered a success usage would need to be in the tens of thousands. In CSC’s defence, usage should improve significantly if the fuller version of Lorenzo (Release 1.9), which includes a PAS, is successfully deployed, first at NHS Bury and then at the big acute Trust Morecambe Bay, which would have thousands of staff using Lorenzo.

But according to Board papers at NHS Bury - the strategic Lorenzo deployment against which LSP CSC will be judged in relation to the November deadline – the Trust has missed its initial planned go-live date of 26th October. The Trust claims, however, that it is still on track to deploy Lorenzo R1.9 before the end of November. CSC, and the DoH, will be hoping this is indeed the case.

It is still not clear what would happen if CSC and BT fail to make ‘significant’ progress by the November deadline. One possible option is the extension of the local procurement model being used in the South of England following Fujitsu’s departure from the Programme (see NHS IT Localisation: A world of opportunity), which would inevitably lead to further delays as fresh procurements are organised.

As a footnote, we were sad to note that maternity systems supplier EuroKing Miracle looks set to be liquidated next week. EuroKing’s software has proved popular with the NHS and no doubt the company will be missed.

Microgen sells billing services division as trading improves

2009-11-03T09:35:00.008Z

(By Philip Carnelley, 3 Nov 09, 09.30) Microgen reports that it has entered into a conditional agreement for Swiss Post Solutions Ltd., part of the publicly owned Swiss postal service, to buy its Billing Services Division (BSD) for £7.5m in cash. The disposal will require shareholders’ agreement, to be sought at a meeting on 30 November. BSD, at £2.9m in revenues, accounted for c18% of Microgen’s revenue and 27% of operating profit in the first half of this year. The company also said that 76% of its revenue for the first half came from software-based activities – up from 73% in the prior (full) year.

Microgen has also issued an IMS for the 3 months to Sept 30, saying that results are “ahead of the annual plan.” The company now has £17.5m of cash - before the BSD disposal, which will yield £7m after costs - including £0.8m from the disposal of 54% of the Group's shareholding in Scisys plc. The company comments that its “strong balance sheet… provides the resources to consider acquisition opportunities…”

The Power of the Apple App

2009-11-02T21:07:00.004Z

(By Richard Holway 9.00pm Monday 2nd Nov 09) Anyone looking for further proof of the power of the Apple App should read Pizza Hut iPhone app generates an extra $1m sales from econsultancy.com. The app has been downloaded 1m times in three months. It allows pizzas to be ordered 'on the move'. Exactly what you want to do from your 'mobile' smartphone. Pizza Hut reckons they have generated $1m extra sales as a result.

The further uses of such 'mobile' apps are infinite. Reservations, hair appointments, taxis, flights, flowers, groceries...all the kind of things you think of on the train or wherever you are outside your home/office. Of course, if you have the Pizza Hut App installed, you are less likely to order from Burger King. This 'first mover' advantage is so powerful (as Apple knows full well) A year back I signed up for Amazon Prime 'One Click' with free next day delivery. It's just so easy that it is my first port of call for almost everything I need. Amazon.co.uk have now launched an Apple App - making my purchasing even easier!

Bluntly, the retailers I now pity are those that haven't woken up to the Apps Store.

IndustryViews Quoted Sector Q3 2009 Review

2009-11-02T21:02:00.001Z

Sorry to our subscribers who yesterday rushed to download the latest IndustryViews Quoted Sector Q3 2009 Review. It would have helped if we had loaded it onto the website before announcing it! It is now there. Sorry for the inconvenience.

Telecity – building for the future

2009-11-02T08:31:00.005Z

(By Philip Carnelley, 2 Nov 2009, 08:30) Data centre/hosting services provider Telecity has issued an upbeat trading statement for the last 4 months, saying that trading is strong across all markets. Revenue growth across the business is yielding ‘strong’ operating profit growth, as the cost base is largely fixed, pricing is robust and pipelines are healthy, continuing the trends we have previously reported on (Telecity shows how ‘boring’ can be profitable).

“Telehouses” suffered greatly in the early 1990s when the dotcom boom turned to bust and the industry suffered from massive overcapacity. But now, the continued move into the ‘Cloud’ that we comment on so often is continuing apace, and is of course exactly what Telecity is set up to provide. Consequently, the company is continuing to expand capacity: having already upgraded London, Frankfurt, Milan and others, it will deliver a new centre in Paris in December. The upgrade programme stretches out to 2011 - when capacity will be up 25% on today - as the company anticipates demand growing as far as the eye can see. Telecity says it can fund the expansion programme without further borrowing facilities.

Sanderson reports 'increased trading momentum'

2009-11-02T07:09:00.003Z

(By Richard Holway 7.00am Monday 2nd Nov 09) Sanderson has issued a positive IMS saying that, since they concluded a new debt facility with RBS in Aug 09, they have experienced ‘an improvement in trading’ and expect the performance in the year to 30th Sept 09 ‘to be slightly ahead of expectations’. The new FY has seen ‘increased trading momentum’.

I wrote in Aug of the frustration the Sanderson directors had experienced with their bank. This had put a cloud over the whole operation for a year and seen their share price collapse from 30p to 7p. Once the new facilities were in place, the directors were free to ‘vote with their wallets’ and went a buying. Since then the share price has doubled.

(Note – I have been a Sanderson shareholder since their 50p IPO…)

New from TechMarketView

2009-11-01T11:48:00.004Z

It’s been one of our busiest periods ever for new research from TechMarketView.

SoftwareViews – our new research stream – was launched with Philip Carnelley's report on the State of the UK HQed Software Industry. See TechMarketView launches new Software Research Programme. We are very pleased with its reception. It created some great media coverage including BusinessWeek – See British Software Industry is still Alive.

IndustryViews. Last week we published the IndustryViews Quoted Sector Q3 2009 Review. IndustryViews also includes quarterly reports on M&A and Private Equity funding which were published the week before.

AnalystViews. Tola Sargeant, our new Research Director and one of the UK’s leading experts on IT in the Public Sector, produced two new AnalystViews on the UK Public Sector 2010 – Threats and Opportunities.

- In Public sector spending cuts: Which contracts are at risk? Tola identifies over £26b worth of major UK public sector SITS contracts at risk of cancellation, curtailment or ‘de-scoping’, and calls out the suppliers most exposed.

- In UK Public Sector 2010: Spotting the opportunities, we tell you the good news. Tola identifies the many opportunities for SITS suppliers to the UK public sector market in 2010 and where to find them. This research features Tola’s unique ‘heat map’ showing at a glance where the opportunities are and which are the hottest.

Plus an AnalystView entitled Clearswift eschews the Cloud.

Since the launch of TechMarketView in April 2009, we have attracted a superb group of paying subscribers including HP and Microsoft. Indeed, companies representing nearly 50% of the revenues of the SITS sector in the UK are now paying subscribers.

Only paying subscribers get access to our full research programme – including the reports listed above. Our subscriptions are ‘per company’ not ‘per user’. So the cost of providing this invaluable research to ALL your employees is extremely modest. Can you really afford to be ‘out of the loop?”.

Just email Puni on prajah@techmarketview.com and could soon be enjoying the privileges of being a TechMarketView subscriber.

Welcome Attenda

2009-11-01T11:45:00.002Z

We are very pleased today to welcome Attenda to our growing band of Banner advertisers on HotViews and the TechMarketView website. Attenda is Europe's leading specialist in the provision of managed services solutions for operating Internet and enterprise applications. I’ve known Mark Fowle, the CEO and founder of Attenda, since its formation about 10 years ago. Attenda is a private company with revenues (to Nov 2008) of c£26m. I’ll bring you an update on the current FY soon. They really are ‘in the right place at the right time’ to ‘Ride the Cloud’.

And what better way to get the message over to you? By a TechMarketView banner, of course. Puni on prajah@techmarketview.com would be delighted to supply you with more details of our advertising rates.

Share indices in October 09

2009-11-01T11:40:00.004Z

(By Richard Holway 12.00pm Sunday 1st Nov 09) Was October the ‘Start of the Great Stock Market Correction’? Or merely another minor blip in one of biggest ‘Tech Bull Rallies’ I have ever seen?.

I was intrigued to read of a new ‘’shape’ to describe the 'recovery' – LUV. L-shaped in markets like the US and UK, U-shaped in markets like Germany and V shaped in the BRICs. Certainly, in all the conversations I have had recently with the CEOs of our major players, none has detected any increases in IT spend – merely the continued desire for ‘More for Less’ -coupled with outsourcing contract churn (good for the winners, bad for the losers but usually meaning a lower amount spent on IT overall)

The ‘problem’ is that the stock markets seem to be reacting to good earnings results (which have been achieved by cost cutting) thinking that they represent IT revenue growth revival. They are then highly selective; pointing at the ‘winners’ (like Apple) as evidence of a tech rebound whilst ignoring the ‘losers’ (like Nokia).

Personally I think the tech stock rebound has been overdone and just must be due a correction. As I have said countless times, tech trends towards the FTSE100 over any medium term. YTD the FTSE100 is up 14% but our FTSE SCS Index is up 55%.
October did see a first, albeit minor, correction towards that trend line with the FTSE100 down 1.74% but the FTSE SCS down 6.4%. The FTSE SCS Index is weighted – the largest companies have the greatest effect. So it was Autonomy (down 17.6% - See For Autonomy growth seems easy; profitability less so), Computacenter (down11.5% - See Computacenter exits distie business), Logica (down 10.9% despite winning a £110m deal at CPS) and Sage (down 8.5%) that really ‘done for it’. Outside the FTSE SCS constituents, Morse continued its power run with another 20% to 38.5p. See Morse’s margins march on. I take my hat off to Mike Phillips for the turnaround that him and his team are achieving at Morse – making himself a well deserved packet in the process!

Outside the UK, results from SAP caused a 8% slump in their share price (See SAP software decline slows). Capgemini (down 11.7%) and Steria (down 16%) joined the UK SITS bears. Adecco slumped 16% as it Goes shopping again. Sopra bucked the trends with an 8% increase – See Sopra flying high with Easyjet. In the US Microsoft put on 7.8% as everyone (except us) interpreted their outlook as pointing to a resurgence in corporate IT spend. See – Microsoft all in the outlook. However NASDAQ overall was down 3.6%.

Twitter ye not

2009-11-01T11:38:00.001Z

(By Richard Holway 12.00pm Sunday 1st Nov 09) So Stephen Fry might be resigning from Twitter. All because a fellow Twit suggested his posts were ‘boring’. So Fry ‘blocked’ him.

As readers know I am continually trying to ‘get into Twitter’. We post many of the TechMarketView pieces on Twitter. But so do all the other researchers. Bluntly, I get a better service on this via their RSS feeds. Everyday, I wade through a morass of Twitter posts which usually saps my will to live.

With the risk of depressing Mr Fry even further, I do find the vast majority of his posts ‘Boring’. But he shouldn’t take it too badly, as I find the majority of ALL Twitter posts Boring.

For business, I can get my news feeds from other, better sources. For personal stuff, I find Facebook much better. I think it’s because of the ‘convention’ that ‘one post a day is about the max’. So the posts tend to be more interesting as a result.

So, my view would be that Twitter is a passing fad (just like it was for Mr Fry) but Facebook is probably in for the long run.

Views? Via @TechMarketView on Twitter if you wish!

Patni tracking to plan

2009-10-31T17:47:00.003Z

(By Anthony Miller – Saturday 31st October 2009 5:30pm). I’m really not sure why Patni decided to report its Q3 results on a Saturday. It didn’t seem to be because they were trying to hide bad news – indeed the numbers were a little above guidance and the trends seemed in line with larger peers. As reported, revenues grew 3.3% qoq to $167m and margins expanded over 100bps both yoy and qoq to 16.2%. Observing rising volumes and stable pricing, management guided to a flat-plus-a-bit Q4. As I mentioned a week or so ago (see Patni – making room in the mid-tier), Patni seems to really be getting its act together; indeed its stock is the best performing among the major India-based SIs so far this year. There’ll be more in the next issue of OffshoreViews.

Hitchhikers Guide to the Galaxy

2009-10-30T16:23:00.004Z

(By Richard Holway 4.00pm Friday 30th Oct 09) Jane Tozer's comment that the iPhone was The Hitchhiker's Guide to the Galaxy has produced yet more comment. Because it's Friday, I thought I'd bring you the cartoon below (source http://xkcd.com/) sent in by John Hamer (Chairman of Fidessa) which was entitled "Kindle The Hitchhikers Guide to the Galaxy?

Dassault buys in PLM unit from IBM

2009-10-30T09:46:00.008Z

(By Philip Carnelley, 30 Oct 09, 09:45) In a surprise move, Dassault Systèmes is acquiring the IBM operation devoted to re-selling Dassault’s manufacturing software products. It will pay $600m and take on 700 IBM staff. This brings it direct contact with 1000 big accounts.

Why surprising? After all, it’s quite common for a software producer to take control of its regional sales from a distributor once the market is established. Yet IBM has been successfully selling Dassault’s products since 1981 (a good Computerworld article here outlines the history of the relationship). Dassault obviously now believes it can do a better job itself by cutting out the middleman – and its margin.

A more interesting question is: why didn’t IBM buy Dassault? Being focused on manufacturing, Dassault is not so well known in the broader software scene, but it’s one of the few big European players – its €1.3bn 2008 revenues make it similar in size to Sage. And IBM has the cash – it spent $37bn on share buybacks in 2006-8, and another $4bn this year. IBM is certainly not averse to big software acquisitions, although with a mooted €5-7bn price, such a deal would trump the $5bn it paid for Cognos last year and $3.5bn for Lotus way back in 1995.

But first IBM would have to persuade French conglomerate Group Marcel Dassault, still a family-run concern, which owns 44% of the stock and 48.6% of the voting rights. Second, and perhaps most important, IBM got out of the apps business many years ago and shows no signs of wanting to get back in. But we wonder whether this position is sustainable, especially as Oracle prepares to buy in Sun and presents a complete offering ‘from the metal up’. Or maybe that’s not such a threat after all!

Up, up and away!

2009-10-30T08:27:00.003Z

Our regular quarterly review of the UK software and IT services quoted sector is now available for download for TechMarketView subscription service clients. Valuation increases have been absolutely eye-watering – even including IT staff agencies (ITSAs), usually the ‘poor relations’ of the industry. But we lost four more AIM-listed players in the quarter – some of their stories make grim reading.

European, US and Indian IT services stocks also did well – and news today that the US is now out of recession should likely bring even more joy to the markets. But to find out the detail, you’ll have to read IndustryViews Quoted Sector Q3 2009 Review.

Fujitsu finally bags Highland Council renewal

2009-10-30T08:10:00.002Z

(By Tola Sargeant – Friday 30th October 2009 8:00am). Fujitsu has been chosen as the preferred bidder for a £66m/5-year ICT services contract with The Highland Council, where it has been the incumbent for more than eleven years. Fujitsu beat rivals Atos Origin, which partnered with educational software vendor RM, and desktop reseller/services firm Computacenter to the deal. It’s a welcome win for the Japanese company, which revealed bleak first half figures (see Fujitsu posts gloomy first half results) and has a chequered past in the UK local government market.

Under the new contract, Fujitsu will manage the entire ICT estate for The Highland Council, including the provision of Curriculum ICT to all schools across the Highlands. Major projects in the pipeline include a new CRM system (from local government CRM specialists Lagan Technologies) and the rollout of 'unified communications' across the Council. Given the additional scope of the contract the £66m price tag doesn’t seem unreasonable (the original value of Fujitsu - or rather ICL’s - 1998 deal with the Council was reportedly £48m over ten years).

For the Council, there were several key considerations in their choice of IT partner including being able to extend standard systems across local government and education; enabling flexible and mobile working; lowering their carbon footprint and meeting efficiency targets – all points that chime with our latest analysis of the UK public sector market (see UK Public Sector 2010: Spotting the opportunities).

Fujitsu has struggled to strengthen its local government business, which includes Newcastle City Council, Bolton and Cambridge and Northants. Highland is now its most significant deal in this sector and the renewal was a ‘must win’. The Japanese giant will be hoping success in the Highlands will pave the way to more ICT deals in a sector where relevant experience and reference sites are highly valued. Indeed, Caroline Thompson, an Account Director at Fujitsu, told us that she hopes to use the deal to develop Fujitsu’s Scottish business, particularly in multi-agency working and shared services.

Clearswift eschews the Cloud

2009-10-30T07:39:00.004Z

Further to our post on Cisco’s acquisition of UK security software player, ScanSafe (see ScanSafe falls to Cisco), we have just published a short note on peer Clearswift in the AnalystViews section of our website. For subscription service clients only, of course.

SAP Q3 Report Card: Could Try Harder

2009-10-29T18:31:00.007Z

(By Philip Carnelley, 29 Oct 09, 18:00) We have already given the key messages regarding SAP’s Q3 results issued yesterday (SAP software decline slows). But having reflected, and having listened to the conference call, we’re left with the thought: shouldn’t SAP be doing better? The key question raised is: is it all the fault of the economy? Should other companies be content with, or expect, similar declines? Well, it ain’t necessarily so. Even the good news – that SAP’s OP margin is up 2pp to 24% – isn’t so great when you look at other global software players: say, Oracle: Oracle’s OP margin last quarter was 34% - up from 28% the prior year. Let alone Microsoft, which just reported OP margin of 35%, despite deferring $1.4bn of revenue and thus showing 14% decline in revenue and 25% drop in operating profit. OK, so Microsoft has a very different business model and business lines. Oracle has its infrastructure sales. But, even so... SAP has a 'medium term' goal of 35%. It still looks a long way off.

As to SAP’s 30% decline in new licence sales (35% for the 9 months): we don’t think that’s just the economy. We suspect that SAP’s customers have taken as much new stuff as they can cope with, and they don’t want any more. That isn’t exactly SAP’s fault, but it does seem to be a SAP-specific problem. Maybe SAP could make it easier to buy new stuff in small increments. SAP has now reduced its full year revenue forecasts by a further 2 pp – it is now forecasting a drop of 6–8 percent. While company fortunes are varying wildly at the moment, our analysis shows that they’re averaging out at about a four percent decline, globally.

The most comparable data point, in our view, is Oracle’s applications business. Oracle’s sales of new licences for its applications in its last reported quarter were down 1%. New apps sales were down 11% and 4%, respectively, in the previous two quarters – all at constant currency. So we’re left with the thought that, no, it’s not just the economy. It must be SAP – at least in part. If its core high-end market is saturated, it still hasn’t managed to sufficiently broaden its reach into SMBs or worked out its SaaS strategy – things which could give it more resilience and flexibility. On the call, CEO Leo Apotheker talked of us learning more about on-demand solutions for SMEs and large companies “in 2010.” Till then we'll have to continue to speculate. The markets seem to be wondering about all this too – SAP shares have dropped almost 9% since the results announcement.

Invite to the Prince's Trust Christmas Reception

2009-10-29T18:13:00.004Z

The Prince's Trust Technology Leadership Group is pleased to announce that the Christmas Reception for 2009 will be held at the prestigious Tate Britain overlooking the Thames at Millbank on the evening of Thursday 17th Dec 09. We have secured exclusive use of the gallery and a private view to ‘Turner and the Masters’, an unforgettable show of masterpieces by Canaletto, Rubens, Rembrandt and Titian on display next to some of JMW Turner's most dramatic paintings. This is the first exhibition ever to explore the full range of Turner’s challenges to the past, and his fierce rivalry with his contemporaries. Many works are reunited here for the first time in hundreds of years and others have never been seen together before in this light.

This intimate event will see key executives from the technology industry in attendance, many from The Prince's Trust Technology Leadership Group, the UK’s leading collection of technology companies committed to reducing youth disadvantage. The Christmas reception is always an ideal opportunity to show your support for The Prince's Trust, to network with your industry peers as well as entertain your most important clients and to thank key staff. TLG member McAfee will be sponsoring this year’s reception.

The whole TechMarketView team (plus partners) will be there...so please come and join us, start your Christmas celebrations and support a fantastic cause!

Tickets are priced at £250 each or £400 for a pair, contact Olivia Clark at The Prince's Trust on 020 7543 7411 or Olivia.clark@princes-trust.org.uk to buy tickets

HMRC wants ‘more for less’ from Capgemini

2009-10-29T10:41:00.002Z

(By Tola Sargeant, 30th October 2009, 10:30am) There’s more evidence of the UK public sector putting pressure on IT suppliers to help it reduce costs this morning with news that HM Revenue & Customs (HMRC) has revised its Aspire contract with Capgemini and major subcontractors Fujitsu and Accenture. HMRC has committed to channel all core external IT spend through Aspire, which runs until 2017, while the suppliers have agreed to save HMRC £110m a year – that’s in addition to the £70m per annum savings committed to in 2007. We can expect to see many similar contract revisions over the next few months as other government departments look for ways to reduce costs in the face of budget cuts.

Fujitsu files gloomy H1 results

2009-10-29T09:45:00.005Z

(By Tola Sargeant 10.00am 29th Oct 09) It is difficult to find much positive news in Fujitsu’s first half results this morning. The decline in revenues in the six months to Sept 30th is particularly striking: net sales were 10.9% down on the same period in FY08 to 2,186.6b yen (US$24.3b). The group made an operating loss of 18.2b yen (US$202m), compared with a 38.5b yen profit in H108, but income did improve reaching 43.2b yen ($480m) compared to 4.6b yen last year.

Wading through the detail of the numbers yields some clues as to how the new look Technology Solutions business is performing outside Japan. ‘Overseas Technology Solutions’ revenue declined by 6% to 540.8b yen (having adjusted for currency fluctuations and the impact of bringing Fujitsu Siemens Computers into the business). That’s pretty close to the 7% decline in Fujitsu’s UK revenues reported in FY08 (see Fujitsu announces major UK redundancy programme). Technology Solutions also saw profitability worsen – Q2 operating income for the segment was 37.6b yen (US$418m), 11.4b yen down on the same period last year.

Unsurprisingly, Fujitsu cites the recession, which it says has adversely impacted the IT services business, particularly in the US and Europe. But the fact that the Japanese firm is behind the curve with its cost cutting and redundancy programme hasn’t helped profitability – almost all its competitors went through this pain some 6-12 months ago while Fujitsu is still in the consultative process in the UK with redundancies due to be announced in November. And, unfortunately, we haven’t seen Fujitsu winning many new contracts in the UK recently – even the £430m Home Office deal was the restructuring/extension of an existing deal (see here).

But it’s the hardware side of Fujitsu’s business that is suffering most. Net sales in the Ubiquitous Product Solutions segment (which produces PCs, mobile phones, HDDs, optical modules) were down a staggering 28% in Q2 outside Japan while the Device Solutions business reported a 23.2% decline in sales overall in Q2. Could it be time for Fujitsu to follow in IBM’s footsteps and sell its PC business? If not, where are the netbooks, tablets and smartphones that could turn the business around?

ScanSafe falls to Cisco

2009-10-29T09:09:00.009Z

(By Philip Carnelley, 29 Oct 09, 09:00) Cisco is back on top acquisitive form, using its muscle to pick up ‘bargains’ while prices and competition are relatively low. It has just announced its third purchase this month – doubling its total for the year – after Tandberg (Cisco conferences in Tandberg) and Starent. Cisco has now turned to the UK, buying SaaS web security specialist ScanSafe, which it is purchasing for up to $183m. This week’s lucky winners of Cisco’s bounty are two British former investment bankers, Eldar and Roy Tuvey, and their private-equity backers. The brothers will reportedly pick up around $60m.

This news will be less than welcome at another British security software company, Clearswift, which operates in a similar space: scanning and securing employees’ web surfing. As we comment in our AnalystViews review of Clearswift (which our subscribers will receive very soon) a gap in Clearswift’s strategy is a strong story on SaaS and the Cloud. Further, IronPort, another Cisco company, is also a Clearswift competitor, so it's facing Cisco's might on two fronts.

While this year’s tally of six acquisitions is well below Cisco’s peak form – for three whole years from 2004 to 2006, it was buying one company per month on average – the company has now passed its 2008 total of five, and three in one month appears to be a Cisco record. As we commented on Tuesday (UK SITS M and A activity reverts to type), there are a lot of sellers out there. For companies like Cisco there are some rich pickings to be had.

For sellers, the news is more mixed: there are companies prepared to buy, but the price you get may be lower than you would like. In ScanSafe’s case, the price paid has surely not disappointed the sellers: ScanSafe’s 2008 revenues were just $23m. But the company is growing at 100% pa, and, of course, software-as-a-service players are getting the richest software market valuations today. According to the FT, Balderton Capital will see a return of 4 times its investment in ScanSafe, and ten times on its first investment tranche – it has been a ScanSafe backer from its earliest days.

Unisys’ pulse beats stronger

2009-10-29T08:52:00.005Z

(By Anthony Miller – Thursday 29th October 2009 8:30am). It seems rather counterintuitive, but the biggest margins in Unisys’ business last quarter were in Technology (hardware), where operating margins almost doubled to 21.2%, mainly due to ‘a stronger mix of high-end enterprise servers’. Technology comprised just 13% of Unisys $1.16b Q3 revenues, but every bit of extra profit helps. The core Services business saw margins more than double, from 3.1% to 7.7%, which in aggregate pushed Unisys’ group margins up from 2.9% to 10.2%. That’s a result!

The revenue story was equally interesting. Technology revenues declined 3% yoy (constant currency) whereas Services revenues fell 8%. Outsourcing, now 40% of Unisys’ group revenues, declined 10%, SI/Consulting (28% of group) fell 9%, and Infrastructure services fell 27% (12% of group). Even core maintenance revenues fell 14% (7% of group). However, management reported that services orders are up substantially, driven by outsourcing contract renewals. Indeed, we noted yesterday a £300m+ BPO deal for Unisys UK (see Unisys checks in again at UK banks).

This is now Unisys’ second consecutive quarter in net profit, but no one is calling the recovery job anywhere near done. But it’s hard to see where Unisys fits in the global IT services ‘new world order’ – the answer probably isn’t as an independent player. Unisys ranked as a Top 20 supplier to the UK SITS market last year and is heavily embedded in the UK public sector (see UK Public Sector 2010: Threats and opportunities) as well as in financial services, so its fortunes – or failures – will affect the shape and size of the UK market.

Now that Oracle is a hardware vendor, maybe they should also take Unisys under its wing. It’s barely $1b in market cap, though has about the same amount in long-term debt – small change for Larry! Of course, the most natural ‘homes’ for Unisys would be with the major systems vendors, IBM and HP, but they didn’t seem to be interested when Unisys was trading at under $5 a share earlier in the year, so I doubt they’ll make a play now the shares are over $25. But who knows what will happen in this crazy world of M&A?

Google Apps scores ‘watershed’ win

2009-10-29T08:22:00.004Z

(By Richard Holway 8.30am Thurs 29th Oct 09) Further to my Gone Google post earlier this week, I note that the Times today (Google beats Microsoft to LA deal) is reporting that Google has beaten both Microsoft and IBM to a $7.2m deal to supply Google Apps to 30,000 workers at the Los Angeles City Council. Google branded it ‘a watershed deal’.

In the scheme of things, it’s pretty small. But there does seem to be a momentum building behind Google Apps. At $50 per user per year (free for firms with <50 employees) it is a very compelling proposition. As firms strive to cut IT costs and wrestle with an ever more mobile workforce, so more will look to cloud-based office-type solutions like Google Apps.

UK Public Sector 2010: Threats and opportunities

2009-10-29T07:42:00.009Z

Today we launch not one but two AnalystViews research notes crafted by Tola Sargeant, widely recognised as one of the top analysts on the UK public sector software and IT services (SITS) market.

With public sector spending under scrutiny and the government looking for ways to save money to balance the national books, larger public sector SITS contracts are attracting unwanted attention. The Labour government is debating which projects could be sacrificed, but the risk to IT projects is significantly higher if there is a change of government at the election.

In Public sector spending cuts: Which contracts are at risk? Tola identifies over £26b worth of major UK public sector SITS contracts at risk of cancellation, curtailment or ‘de-scoping’, and calls out the suppliers most exposed.

Then in UK Public Sector 2010: Spotting the opportunities, we tell you the good news. Tola identifies the many opportunities for SITS suppliers to the UK public sector market in 2010 and where to find them. This research features Tola’s unique ‘heat map’ showing at a glance where the opportunities are and which are the hottest.

It’s really very simple. If you are supplying software, IT services or BPO to the UK public sector – or you have aspirations to do so – then you must read what Tola has to say. But only TechMarketView subscription service clients have the chance to do so. You don’t need to respond to an RFP to become a subscriber – just contact Puni Rajah (prajah@techmarketview.com) and she will tell you how you can unlock the ‘government gateway’ to TechMarketView research!

How laptops took over the world

2009-10-28T21:46:00.002Z

(By Richard Holway 10.00pm Wed 28th Oct 09) Very interesting article in the Guardian by Charles Arthur - How laptops took over the world. Made more interesting because of the extensive quotes from what Arthur describes as “Holway, the veteran analyst who is chairman of TechMarketView.” Unfortunately I don't think I have valid grounds for a complaint to the PCC.

Axon still dragging HCL’s revenues

2009-10-28T09:56:00.005Z

(By Anthony Miller – Wednesday 28th October 2009 9:45am). It looks like Axon is yet to restore the fortunes of HCL’s enterprise application services (EAS) business as management had so richly hoped. EAS revenues fell nearly 5% qoq (constant currency) in HCL’s Q1 10 (to 30th Sep), steeper than the 1% decline the prior quarter. The Axon acquisition more than doubled the size of HCL’s EAS practice, and the combined operation now contributes 22% of HCL’s total revenues. However, even this appeared to be a better result than at TCS and Infosys, which both showed steeper qoq declines in EAS revenues (as reported). Wipro’s EAS business grew slightly qoq (as reported).

Across the board, HCL’s revenues rose 2.3% qoq (in line with peers) to $630m, and margins remained flat at 18.0% qoq, but down 60bps yoy (peers did better). HCL’s European revenues grew 1.5% qoq and the region now generates 29% of the total. Chairman Shiv Nadar referred to “signs of an early recovery in sectors like Financial Services” but didn’t expect to see sustained recovery till next year.

We’ve got a lot of digging to do around these numbers and will write more in the next issue of OffshoreViews.

Unisys checks in again at UK banks

2009-10-28T09:01:00.004Z

(By Anthony Miller – Wednesday 28th October 2009 8:45am). As if to remind us that they’re not dead yet, Unisys has renewed its cheque processing BPO contract with Lloyds TSB, Barclays and HSBC in a 5-year deal worth over £315m. The service is provided through iPSL, a JV between Unisys and the banks, established in 2000. iPSL has been chaired since 2006 by Royston Hoggarth, well known to many in the industry from his time at Logica and more recently (and briefly) at BT Global Services (see BT and Royston Hoggarth). Unisys UK is now led by Rob Chapman, who previously headed Unisys’ Global BPO business. He succeeded Duncan Tait, who left for Fujitsu earlier this month (see Duncan Tait joins Fujitsu). Get it? Got it! Good.

SAP software decline slows

2009-10-28T08:18:00.005Z

(By Anthony Miller – Wednesday 28th October 2009 8:00am). SAP’s software revenues were still in steep decline in Q3, down 30% yoy (all percentages at constant currency) to €525m. But this was a little better than the 35% ytd decrease, suggesting a slight easing in market conditions in the quarter.

Total SRSS (software and software-related services) revenues ‘only’ fell 5% in Q3 to €1.94b (all hail the power of maintenance fees), and total revenues were down 10% to €2.51b. Margins expanded by 110bps yoy to 24.2% (26.9% ‘adjusted’). Management maintained its ‘adjusted’ FY margin guidance in the range 25.5%-27.0%. Given that the ytd ‘adjusted’ margin is 24.0%, it seems there’s more cost-cutting yet to do, as it’s hard to see how revenues are going to drive this number. Indeed, SAP has already spent €186m of the forecast €200m FY restructuring provision leaving only €14m for the rest of the year. I wonder if that’s enough?

A couple of interesting – perhaps confusing – messages in the press release over SAP’s mid-market hosted services. The company appears to be toasting its channel-driven success with the legacy All-in-One offering, but simply announced the availability of a new ‘feature pack’ for what we presumed was the successor product, Business ByDesign. No mention of success – or otherwise – on BBD sales. Don’t get me started.

Anyway, as ever, SAP’s results are a masterpiece of Germanic precision, so we will need some time to pore through the minutiae and listen to management’s sage words on the concall before bringing you more.

iPhone - the Hitchhikers Guide to the Galaxy?

2009-10-27T17:25:00.004Z

(By Richard Holway 5.00pm Tuesday 27th Oct 09) We get many emails from readers here at TechMarketView. Most we cannot publish for various reasons. But Jane Tozer (who many of you will know well) has agreed to the publication of the email below – which we think is priceless!!

Hi Richard

Your piece today about MyTop Revisited reminded me of the thought I had while brushing my teeth this morning, namely that the iPhone is effectively (among other things) The Book from the Hitch Hiker's Guide to the Galaxy.

It's the ultimate reference book about anything in the Galaxy, wherever I am! It tells me 'grown up' things such as trains running late or motorways being blocked, news and views from the BBC and Time, share price updates and so on. But it also tells me fun things such as what stars and planets I am looking at, and gives me info about them. It gives me maps and a compass good enough to navigate by on a walk. It tells me what music I am listening to and where I can buy it, and if it is from a film or TV programme I can link and find all the info I want about the show, the actors, the director and so on. I have the complete works of Shakespeare in it, and Wikipedia, and the London A-Z, and a free emergency coin-tossing app for those moments when you just have to toss a coin but don't have one to hand!

My iPhone also has ~8,000 personal photos on it, and I can pass any of these + other stuff to any fellow iPhone user I meet with a mere Bump of our phones.

I can upload updates, either for the whole world in Wikipedia or to share things with selected people (eg I am using DropBox to share interesting Radio 4 programmes with my son, pictures of a walk with a friend, and crucial files with a colleague, all for free). And with the free Skype app I can make free international phone calls. And so on and on - as you can see I am a total convert!

Arthur C Clarke invented geo-stationary satellites ahead of their time, Douglas Adams invented the iPhone

Best wishes

Jane E Tozer

Computacenter exits distie business

2009-10-27T10:01:00.002Z

(By Anthony Miller – Tuesday 27th October 2009 9:45am). Just time to note that Computacenter has completed its exit from trade distribution with the sale of CCD, its distie arm, to Ingram Micro (no terms given). This was increasingly a low-margin, low-joy activity for Computacenter, so now they can concentrate on their core product resale and services operations, which seem to be going pretty much OK given last week’s IMS. Indeed, its UK services business continues its march forwards, with revenues up 10% in Q3, vs the 25% decline in product revenues. Net net, UK profits were up yoy, helped by cost-cutting too. Good stuff.

‘Pricing’ drives Wipro’s growth

2009-10-27T09:47:00.002Z

(By Anthony Miller – Tuesday 27th October 2009 9:30am). Or so it would seem, given the apparent 3.4% onshore and 2.5% offshore price uplift that drove Wipro’s Q2 IT services revenues 1.9% higher qoq (all constant currency) to $1,065m. This despite a 1.5% decline in volumes.

But things are never quite what they seem. On deeper questioning, management revealed that the pricing uplift (‘price realisation’ in the Indian vernacular) was due to a whole host of factors, including favourable FX, higher fixed-price contract mix, higher productivity, better ‘non-linearity’ (i.e. disconnecting headcount growth from volume growth), more working days – in fact everything other than ‘we charged more for our services’. But this is in fact the point. Wipro is able to ‘pull the operational levers’ in the business to drive revenues – and indeed margins – forward, even when less work is being done.

Otherwise Wipro’s results and market observations pretty much mirrored those of Infosys and TCS, in seeing a business uptick across most verticals. I will get more detail on the UK/European story later in the week and will bring you (as in TechMarketView subscription service clients!) up to date on this in the next issue of OffshoreViews.

BusinessWeek

2009-10-27T07:51:00.002Z

(By Richard Holway 8.00am Tuesday 27th Oct 09) We really have had excellent coverage of our new SoftwareViews report on the UK headquatered software industry. See TechMarketView launches new Software Research Programme. To add to last week’s coverage – see It’s not all about Windows 7 – I was particularly pleased with the excellent article – British software industry is still alive - in BusinessWeek (and Silicon.com) today. A big vote of confidence in awarding our PR work to Brands2Life.

I’ve been a BusinessWeek reader for longer than I can recall and have ranked it as one of the Top Three publications that I always read. I was a bit sad when several years ago they stopped printing the European edition. So I now read it ‘for free’ online. Indeed, ‘that was the rub’. Last week BusinessWeek was in the news itself when it was bought by Bloomberg for a pretty miniscule sum – rumoured to be <$5m. See Businesweek article - Bloomberg wins bidding war for Businessweek. Businessweek was started 80 years ago just before the Great Depression. The latest ‘Great Depression’ hit it really hard and losses of $40m were recorded last year on revenues of $130m. Hence McGraw-Hill’s decision to stem the haemorrhage. Bloomberg is as good a home as you are likely to get. The combined readership will now exceed 20m unique visitors per month with over 100m page views.

If you want more information on SoftwareViews email Puni on PRajah@TechMarketView.com.

UK SITS M and A activity reverts to type

2009-10-27T07:39:00.003Z

After the Q2 UK software and IT services ‘buying spree’, the M&A market reverted to type in Q3, with more sellers than buyers. The value of the top 10 deals involving UK SITS companies was up 16% to $617m, with the two biggest deals accounting for over half.

And that’s just a taster!

As ever, with the invaluable support of Regent Partners, TechMarketView brings you the latest round-up of M&A activity in the UK software and IT services scene, with the Q309 edition of IndustryViews M&A.

TechMarketView subscription service clients can download it right now. Everybody else, please form an orderly queue to contact Puni Rajah (prajah@techmarketview.com) who will be only too happy to let you know how you can join the cognoscenti.

MyTop revisited

2009-10-26T17:45:00.003Z

(By Richard Holway 6.00pm Monday 26th Oct 09) Back in 2006, I introduced you to the MyTop concept at my Prince’s Trust ‘State of the ICT Nation’ presentation. I remember that I asked the audience of CEOs if they had a social networking page – less than 5% had. When I suggested that social networking would be one of the defining aspects of IT over the next period it was greeted with derision!

I ended the presentation introducing MyTop. MyTop would be my social networking homepage. I could access it “any time, any place and from any device” (Holway’s Martini Moment introduced in my Prince’s Trust speech in 2003) It would allow access to my contacts, my calendar, my music, my data, my photos. More significantly it would allow access to all my (Cloud) applications too.

A year later, I was so convinced that this was the way forward that in 2007 I wrote an Open letter to Mark Zuckerberg at Facebook. He never replied!

I say all this because today I seem to have read article after article suggesting that something remarkably similar to this concept will be the Next Big Thing. Today’s Leader in the FT – Social cash making - suggests that Facebook is the de facto platform for “communicating and sharing information”. Sherry Coutu sent me a link from the Web 2.0 summit she is attending in the USA. Sean Parker (a founder of Facebook) had given a speech about how Network Services would dominate the next phase of the web. “Parker believes we’re shifting from the first phase of the Internet, which was dominated by what he calls “information services” These are companies like Google and Yahoo. But next up to dominate the web will be the “network services” like Facebook and Twitter, he believes”. Then in StrategyEye today I read that Email, calls and social networking will merge, says Gartner. “The distinction between messaging, conferencing, voice calls and social networking for business users will disappear within the next four years, according to a new Gartner report”.

I gain both satisfaction in seeing the world come around to my way of thinking – and not a little irritation at the reaction to the concept when I first introduced it!

But, what is much more interesting is that the ‘Race for MyTop’ is still wide open. I have suggested that Microsoft should buy FaceBook and make it their “Portal to the Microsoft Cloud”. Trouble is that consumers are very fickle and Microsoft owning Facebook could have the same ‘Kiss of Death’ as News Corp owning MySpace or ITV owning Friends Reunited. But Facebook, with over 300m users (and rising across the key demographics), is clearly the flagbearer at the moment.

I’m sure I’ll return to this topic again (just try to stop me…) But remember you heard it all first on HotViews three years ago!

Mindtree – the long march to $1b

2009-10-26T14:30:00.002Z

(By Anthony Miller – Monday 26th October 2009 2:00pm). It’s a long way from here to there. ‘Here’ is the $255-270m that mid-tier India-based SI, Mindtree, expects to turn over this FY (to March 2010). ‘There’ is the $1b in revenues it’s aiming for in 2014 (see Mindtree eyes a billion – from a distance!). That’s 40% cagr, which clearly isn’t going to happen organically. Indeed, Mindtree’s Q2 revenues (to 30th Sept.) were down 9% yoy to $65m, though up 5% qoq, a sequential growth rate much in line with larger peers. About a fifth of Mindtree’s revenues derive from UK/Europe.

Mindtree took another small step on the M&A trail just at the end of the quarter, acquiring Kyocera Wireless (India), the ‘captive’ wireless product development, software engineering, and product testing unit of Kyocera Wireless Corp. It’s a much smaller deal than Mindtree’s acquisition of (now) 80% of Aztecsoft in May ’08, worth some $80m, with just $6m being paid up front for KWI and the expectation of $9m in revenues over the next 6 months. That’s really not going to get them much closer to the ‘magic billion’.

I do believe there’s a role for smaller offshore players like Mindtree, but it’s really more to do with serving mid-tier clients rather than trying to do battle with top tier Indian SIs on their home turf. The problem is, I really haven’t heard much to make me think that Mindtree’s management are staking out a differentiated and defensible market position in any market, let alone a credible growth path to $1b.

Microsoft - all in the outlook

2009-10-26T09:36:00.003Z

(By Richard Holway 9.00am Monday 26th Oct 09) Sometimes it feels a little strange to report a pretty massive (c8%) rise in a company’s share price when they have just announced what, at the headline level, was the worst performance in its history. But that’s what happened to Microsoft last week when it announced its Q1 results showing profits down 18% to $3.57b on revenues down 14% to $12.92b. See FT 23rd Oct 09 Microsoft’s earning beat forecasts.

It’s all in the outlook. Analysts seem to think that Windows 7 will boost demand and that even enterprise IT spend will rebound in 2010. I have problems here. Firstly, anyone upgrading from XP to Windows 7 is in for a lot of pain. I wouldn’t advise it. So the outlook for Windows 7 really relies on the new kit market. Here, Windows 7 is just one option. Apple, Google etc have growingly viable alternatives. Netbooks are the order of the day but Microsoft cannot succeed by the reduced revenues it will get from that sector alone. Smartphones are yet another alternative which could rob Microsofft of marketshare.

Microsoft’s outlook depends on enterprise IT spend. Not so much an increase but that enterprises will continue to spend with Microsoft. As you can read in my Gone Google post below, enterprises have new non-Microsoft options. Frankly, I think the analysts are being too optimistic calling an end to Microsoft’s woes just yet. Indeed I think Microsoft is entering the most vital period in its history.

Moulton the Phoenix

2009-10-25T14:36:00.004Z

(By Richard Holway 2.00pm Sunday 25th Oct 09) “You can’t keep a good man down” they say. Certainly seems to be the case with our friend Jon Moulton. Less than two months after that rather spectacular exit from Alchemy (which he had founded) – see our 3rd Sept 09 post Moulton resigns from Alchemy – there is much media speculation that Moulton is about to announce that’s he’s setting up Better Capital. The name is said to have been inspired by the last sentence in that wonderful ‘leaving letter’ he wrote to shareholders and others when he said “I would do it again, but better".

As I said back in Sept, I've always rated Moulton - not least for his ability to call a shovel a bloody spade.

Initially Better Capital will use Moulton’s own cash but, once the FSA licence comes through, Better Capital will raise £100m listing on the Stock Exchange. Although not unknown, most private equity firms raise funds directly from investors like pension funds etc.

Bluntly, I can’t think of a better time to do this with valuations still depressed. Mouton has always had a bit of a soft spot for the IT sector – with investments like Radius, Phoenix, Sanderson (Civica, Talgentra, Tallyman and the 'new' Sanderson), Datapoint, INSTEM and, of course, Cedar/COA Solutions etc. So I wouldn’t be at all surprised to see Better Capital include a sprinkling of IT in the portfolio.

Gone Google

2009-10-25T14:35:00.002Z

(By Richard Holway 2.00pm Sunday 25th Oct 09) I don’t normally get my IT news from the Mail on Sunday but I was interested to read Jaguar turns to Google’s cloud system today. (In my defense, my wife insists on the Mail…) Google launched their Gone Google campaign last week claiming 2m enterprises had adopted its cloud systems. The Mail article references Jaguar’s 15,000 user licence and Rentokil’s 35,000 users. Rentokil claims to have replaced 180 email domains and 40 mail systems in 50 countries with a single Google based email system allowing calendars, chat, document sharing,etc.

Google Apps is now a very compelling system. Indeed, you would have to ask why any new business (like Techmarketview…) would use anything that wasn’t cloud-based. What is really impressive is to see big name enterprise users going that way too.

Xchanging steady despite Cambridge IT slowdown

2009-10-25T11:13:00.002Z

(By Anthony Miller – Sunday 25th October 2009 10:45am). UK-based international BPO player, Xchanging, is holding a steady course (see here) despite weakness in the IT services business of its Indian delivery arm, Cambridge Solutions. Last quarter, Cambridge reported revenues of some $59m, just under flat yoy. However, its IT services revenues – now 21% of the total – declined 28%. The core mainly US-focused BPO business grew 10%. Xchanging CEO David Andrews commented that customers were still deferring ‘discretionary’ IT services spend, but expected Cambridge’s BPO activities to take up the slack.

I have been supportive in principle of Xchanging’s acquisition of Cambridge (they hold 76% of the stock) though I raised concerns about Cambridge's performance at Xchanging’s interims in August (see Xchanging needs steady hand on its US course). Indeed, Cambridge’s net losses deepened substantially to $5m last quarter due to a near-$6m restructuring charge in its BPO business, though ‘adjusted’ margins, at 4.4%, were near double yoy. However, ytd 'adjusted' margins (1.7%) were under half those of the same period the prior year. More significantly, Cambridge’s IT services business was loss-making in Q3 09, reversing the situation in Q3 08, when IT services was profitable (14%!) and BPO registered a small loss.

It seems to me that the volatility in Cambridge’s performance will drain a lot of management time to rectify. The risk is that this will pose an unwanted distraction to Andrews and his team at a time when all eyes need to be on the bigger ‘ball’. Nonetheless, Xchanging CFO Richard Houghton is still forecasting 5% organic growth this year which, against 4% growth in H1, suggests management are not unduly concerned.

Fidessa slows

2009-10-23T09:13:00.008+01:00

(By Philip Carnelley, 23 Oct 2009, 09:00) TechMarketView subscribers who have had a chance to look at our just-published SoftwareViews report will already know that financial services software provider Fidessa is now the 4thbiggest UK software company. It moved up from 6th, with impressive revenue growth last year of 48% (34% like-for-like). Things have quietened down since then, with growth in H1 of 19% (at constant currency) which, considering the turmoil amongst its key customers (including Lehmans) was pretty good.

Things are even quieter now. The company has issued an IMS commenting that market conditions have continued to improve “as stability and confidence have begun to return to the financial markets.” However, pressure on its smaller customers is leading to spending reviews and consolidation. So, while "resurgence continues" amongst larger customers, Fidessa’s overall growth has continued to fall and, as suggested at its H1 results (Fidessa tempers expectations), growth for the year will be below the H1 levels. Also, headline growth will be lower because the currency tailwind has fallen away. And yet, organic growth at anything even approaching that 19% would still be a solid result going into 2010, in our view. We think Fidessa is doing a good job in difficult times.

It’s not all about Windows 7!

2009-10-23T08:46:00.002+01:00

Just thought you’d like to know that Windows 7 was not the only software story these past couple of days. We’re rather chuffed to say that the launch of our new SoftwareViews UK Industry Report (see TechMarketView launches new Software research programme) has grabbed a lot of column inches in the press too, such as:

* Mike Simon’s comment in Computerworld

* Cliff Saran’s report in Computer Weekly

* Simon Quicke’s article in MicroScope

This great coverage is in no small part due to the fantastic efforts of TechMarketView’s newly appointed PR company, Brands2Life. George Wright and the team have really done us proud!

We have some great new research coming out over the next few weeks, including a detailed analysis of the opportunity for software and IT services companies in the UK public sector. You’ll hear all about it soon from us (and Brands2Life!) but to see it, you’ll have to be a TechMarketView subscription service client. And Puni Rajah (prajah@techmarketview.com) will be only too happy to tell you how to become one.

Windows 7 – today’s the day

2009-10-22T09:13:00.003+01:00

(By Philip Carnelley, 22 Oct 09 09:00) At long last – is anyone unaware? – Windows 7 is finally released today. After many months of beta releases, reviews, column inches there seems little more to say. But what, actually, are its prospects? Actually we think they’re quite good, but uptake will be quite slow.

That’s not because of competition, though. It’s inertia. There is a pent-up demand created by the real and deep-rooted reluctance of enterprises and government to move from XP to Vista. They tell us they are going to move to Windows 7 – eventually. But not till it’s proven (service pack 1, probably). And the only as part of their hardware refresh cycles. But they are unlikely to choose something else. Consumers too will not switch en masse. Also, despite the high level of pre-orders, most consumers will not upgrade their PCs unless it’s free and / or automatic.) As we said yesterday, it requires too much skill, time and knowledge for too little return.

The spectre at the feast is Google, but our view on Google operating systems is that the impact will be slow burn, limited in impact for the foreseeable future. It is very relevant that Linux never took off on Netbooks. XP was more familiar and worked well enough. That said, Chrome has two potential plus points that Linux didn't: first, the halo effect if Google Android becomes really popular and people want the same on their netbook. The second is if a new form factor takes off (Apple iPad shall we call it?) and people may prefer to take the Google branded version.

So today’s battleground is the desktop but the war is being fought across the whole mix of form factors. Apple has done brilliantly to establish its consumer devices and then exploit the halo effect of its iPods and then iPhones. (Yet on PCs/laptops its marketshare is still low: see Snow Leopard won’t change Apple’s spots). But that precedent doesn’t mean Google is more likely to succeed. Both it, and Microsoft now it have to compete with Apple, as well as with Nokia (which was slow to respond but is doing so), and Palm. Even so, that’s mainly the consumer angle. We don’t see Google Chrome as any more than an interesting dot on the horizon for enterprise and government today. A decade ago there was much talk of industry and government switching to ‘open systems’ for its desktops – even, in the case of government, making them mandatory – but it never happened. In some ways not much has changed.

Microsoft reports its Q1 results tomorrow afternoon. It will be interesting to get their comments on the events of the last few days.

Patni – making room in the mid-tier

2009-10-22T08:13:00.003+01:00

(By Anthony Miller – Thursday 22nd October 2009 7:45am). I have to be honest. A couple of years ago, while I was still working ‘on the dark side’ as an equity analyst, I had all but written off India-based mid-tier SI Patni as something of a basket case. Founding management were all over the shop, attrition was rampant, and business was going downhill. But over the past year or so, and particularly since the arrival of ex-Mphasis CEO Jeya Kumar to the top job at Patni earlier this year, things have been getting rather better (see Patni getting back on track).

Indeed I spent most of yesterday with Patni’s EMEA head, Brian Stones, global COO, Manish Soman, and VP Germany, Georg Wagner. We also heard from a number of Patni’s marquee UK clients, notably Cable & Wireless, Bupa and Serco. The common thread in the customer presentations was that they selected Patni precisely because they were mid-tier, and therefore a better ‘size match’ to the customer. In our view, this is what will be one of the defining factors in the future opportunity for all mid-tier IT services firms as the industry giants gradually squeeze them out from large enterprise accounts. It’s the “we’re similar size to you, Mr Customer, so you’re business is more important to us than to (fill in the blanks...)”. That, or "we have a truly differentiated proposition" – which Patni does have in some service lines, but does a pretty good job of not telling anyone about them.

But for me, the most interesting story came from Serco, where Patni is its sole applications partner among a list of well known names of IT and BPO suppliers, including ‘our very own’ Computacenter and Phoenix. The relationship with Serco, which dates back to 2003, gives Patni indirect access to the UK public sector market which they would otherwise find near-nigh impossible to approach directly.

I will be writing more about all of this in the next issue of OffshoreViews.

SCO’s end is surely approaching

2009-10-21T15:48:00.004+01:00

(By Philip Carnelley, 21 Oct 09 16:00) It was revealed this week that SCO Group’s combative CEO, Darl McBride, has been'terminated' and the CEO role 'eliminated.' Although this is not the end of the company, this further nail in SCO Group’s coffin will come as some slight relief to software developers using Unix – and particularly to IBM and Novell, both being sued by SCO.

For those who don’t know the whole tortuous story, but want to, we recommend Wikipedia. In a nutshell, about a decade ago a company called Caldera, a Linux distributor, acquired various rights to Unix properties and changed its name to SCO Group. It then decided (back in 2003) that others were infringing IP it now owned. You can’t accuse it of timidity: it then went on to try to sue IBM for $1bn, and demanded that all Linux users should start paying license fees. It even tried to sue former customer DaimlerChrysler. SCO has not won anything yet, and a court has declared that Novell retained the rights to the disputed IP. But SCO has continued to battle on against Novell and IBM, despite going into Chapter 11 in 2007 – where it remains. Litigation is now almost its sole business.

This cloud over Linux and payments has been around for so long now most people have just got used to it, or forgotten about it. But for end-users and software developers alike an end to the story will be welcome. Ownership and licensing of Linux code and variants is complicated enough as it is.

Yahoo stabilising - but Microsoft surely worries

2009-10-21T09:25:00.004+01:00

(By Philip Carnelley, 21 Oct 09, 09:00) Yahoo’s Q3 results yesterday were in some contrast to Google’s upbeat results last week (see Google Powers On). Yahoo’s revenues were a little better than the markets feared, and profits much better. But even so, revenues were down 12% year on year, at $1.6bn, though flat sequentially. (It’s now approximately one-quarter the size of Google). Excluding divestitures and currency, that's down 7%. However search and display revenue is falling (search down 19% year-on-year) and the gap with Google widening. The company claimed on the earnings call that things are ‘stabilising’ – but that’s not as good as ‘improving.’

Immediate implications for IT markets are that Google is growing its relative power, gaining even more freedom to forge ahead in other spaces like operating systems, enterprise search and hosted applications. Microsoft must be doubly worried, about Google’s power and about the Yahoo partnership. Its own Bing search usage continues to rise, but slowly and from a lower base. In September “Comscore” search rankings for the

, Yahoo fell to its lowest share ever: 18.8%; Google rose half a pp to 64.9% and Bing rose from 9.3% to 9.4%. Even combining Yahoo+Microsoft scores, they fell and Google gained. The gap remains huge.

The UK software industry - a “significant investment opportunity”

2009-10-21T07:41:00.003+01:00

Despite numerous claims to the contrary, the UK’s software industry is a thriving and highly profitable business. With the top 50 companies reporting revenue growth of 20% and operating profit growth of 25% last year, it is also a significant investment opportunity for those willing to take UK software to the world stage. These are the findings of a comprehensive report into the UK software industry by TechMarketView, the leading analyst firm focused on the UK software and IT services market.

“There is a tendency to write-off the UK software industry because most of the familiar software companies are in the US. That would be a big mistake,” states Richard Holway, Chairman, TechMarketView. “A combination of organic and inorganic growth has resulted in the top 50 UK headquartered software companies growing c20% in the last year. Perhaps even more surprising, to an ever sceptical British audience, is the c70% of revenues that the UK software industry earns abroad. Indeed, the UK is not that far off earning as much from overseas markets as we buy in. Currently £4.6b plays £5.6b with the gap narrowing each year.”

While the report paints a more positive picture of the UK software industry, it highlights a number of “national failings” that have prevented the UK from producing global software giants the likes of Microsoft, SAP or Oracle. “The problem for the UK software industry has never been the quality of its people or its innovation,” argues Holway, citing the following factors as holding the UK back:

* Lack of available financial backing: In comparison to the US, it is much more difficult for UK software developers to gain access to venture capital funding.

* Lack of marketing expertise: Many of the UK’s best developers simply fail in explaining how great their product is to investors and to the market.

* Local not Global: Many of the UK’s software companies focus mainly (if not solely) on products geared to the UK market.

* Lack of ambition: Many UK software companies are run as ‘lifestyle’ businesses. Very few UK software entrepreneurs seem prepared to risk the Merc for the seemingly scant possibility to become a global player.

* Lack of management skills: Growing from a small enterprise to medium-sized is hard enough – but not a fraction as hard as that required to grow to be large. Few founders are up to running large, global organisations; even fewer are prepared to step aside!

* Easily pleased: UK software companies have a long history of being other nations’ ‘acquisition fodder’. Founders seem to want to ‘take the money and run’ rather than take the risk of growing to something larger.

“The UK software industry is often dismissed as an insignificant player in the global market. Our analysis shows that it is thriving as much as it ever has, but most companies fail to break out of the confines of the domestic market,” states Phillip Carnelley, TechMarketView software research director and lead analyst on the report. Anthony Miller, Managing Partner, TechMarketView explained why. “This situation is not due to a lack of talent – we estimate over 40,000 UK nationals work in the US software industry. It’s more a lack of ambition and a nurturing capital structure. The global software industry is a £150b market opportunity. We have the talent and the innovation, but with the right investment, appetite for risk and management panache – all of which are readily available to leading venture capitalists – there should be no reason why the UK cannot capitalise on the opportunity to produce if not the next Google, then at least deliver significant returns for those willing to take the risk.”

For further information, please contact TechMarketView on info@techmarketview.com or +44 (0) 117 230 1796.

TechMarketView launches new Software research programme

2009-10-21T07:22:00.004+01:00

We are proud to announce SoftwareViews, a new research programme led by TechMarketView software research director, Philip Carnelley, specifically directed to companies and investors involved in the UK software marketplace.

We are launching SoftwareViews with our inaugural UK Software Industry Report, which provides a detailed analysis of the UK software industry – its structure, characteristics, size and profitability. In this report we take a critical look at all of the leading UK-headquartered software companies, both publicly listed and privately held. We review the market positioning and prospects for many of the UK’s top software companies, and call out who we see as the ‘Rising Stars’.

The UK Software Industry Report includes rankings of the Top 50 UK-headquartered software companies by revenues, margins and other key financial metrics. We also look at the valuations of the 122 software companies listed on London’s public markets and call out the best – and worst – stock performers so far this year. Finally we analyse recent M&A activity to see who is buying – and who is selling – UK software businesses.

The UK Software Industry Report is just the first of a regular series of reports and research notes on the UK software marketplace from TechMarketView. Subsequent publications will cover market forecasts, market trends, industry dynamics and sector valuations. This information is simply not available from a single source anywhere else. Frankly, SoftwareViews is essential reading for anyone with skin in the UK software game.

The UK Software Industry Report is downloadable TODAY for TechMarketView subscription service clients. And if you are not one already, you’d better be contacting Puni Rajah (prajah@techmarketview.com) pretty smartly.

Windows 7 - Make or break for Microsoft?

2009-10-21T04:32:00.003+01:00

(By Richard Holway 21st Oct 09) Tomorrow, Microsoft’s Windows 7 hits the shops so the news media is full of reviews. Indeed I note that I was quoted in the The Times today giving my views. Windows 7 really is ‘make or break’ for Microsoft. It’s admitted what we all knew for years – Vista was a flop. But that needs a bit of further explanation.

If you bought a brand new, top spec PC or laptop which came with Vista installed, it was fine. We have such a machine and I can’t fault it. But we have quite a few other machines. Firstly we have a clutch of relatively old PCs which work fine with XP but just don’t have the power to run Vista. So we, like the vast majority of others in such a situation, have not upgraded. We then have several netbooks which, although new, have Intel Atom chips which again can’t really run Vista.

Now, here’s the rub. I know that Windows 7 will run on both older/less powerful PCs and on netbooks. Indeed, if I was buying a new netbook today I’d probably opt for Windows Seven. But will I upgrade from XP?

The reviews say that an install from Vista takes about an hour. But that’s not the case from XP where you have to do a ‘clean install’. In other words, you then have to re-install your application programmes and data. Reinstalling applications is a nightmare – mainly because I spend ages finding the discs and then they tell me I’ve used them too many times and I have to go out and buy a new version – which quadruples the cost of installing Windows 7 in the first place! And I bet our various iPods won't work once I reinstall my huge iTunes record collection. Multiply this dilemma in a few hundred million other users – individuals and corporates – and you have a lot of extra hassle and expense.

But there is another dilemma. As you can see from Golden Apple’s wondrous results yesterday, more and more people are saying “to heck with this, if I have to change anyway, I’ll move to Apple Mac”. Of course, you can now substitute Google Chrome too.

Windows Seven is a step forward for Microsoft. But whether it will ‘stop the rot’ is another matter altogether.

Maxima loses QAD distribution rights

2009-10-20T18:35:00.001+01:00

(By Anthony Miller – Tuesday 20th October 2009 6:30pm). In a totally unexpected blow to mid-market software and services company Maxima, US-based manufacturing sector ERP player QAD has just announced it is to sever its relationship with Maxima from Feb next year and will service all UK clients itself. Maxima has been QAD’s sole mid-market UK channel for 23 years and is QAD’s largest channel partner worldwide. QAD already services larger UK ‘enterprise’ customers directly and is one of Maxima’s four key ERP partners (the others being Microsoft, SAP and Oracle).

The cost to Maxima is likely to be some £1.3m in lost profit this FY (to May ’10), representing over 15% of last year’s adjusted EBIT. The longer term impact is unclear, though executive chairman Kelvin Harrison told me he expects existing QAD implementation projects to continue, along with some support contracts. Just a couple of months ago Maxima announced a ‘major’ QAD contract with Scotland-based soft drinks manufacturer and distributor, AG Barr.

This news will come as a setback for Maxima’s new management team, especially following its recent upbeat trading statement (see Sales up at Maxima). Frankly, it makes you wonder what’s going on at QAD, as I understand Maxima is not the only partner to have come under the cosh. If QAD believes it can service mid-market clients from its existing ‘enterprise’ sales and support base, it may be in for a bit of a rude awakening. More likely, these are desperate measures in response to pressures from Microsoft squeezing QAD from below and Oracle and SAP squeezing them from above. It goes to show yet again, how very tough it is out there in the mid-market – both for software players like QAD, and systems integrators like Maxima.

Tech Mahindra hits BT watershed

2009-10-20T14:55:00.002+01:00

(By Anthony Miller – Tuesday 20th October 2009 2:30pm). For the first time ever, less than 50% of Indian-based Tech Mahindra’s revenues were derived from top client – and 31% shareholder – BT. But only just. At 49.8% of Tech Mahindra’s Q2 10 revenues (to 30th Sep.) BT spent about £72m with Tech Mahindra in the quarter, down 17% yoy and 6% lower than the prior quarter (in £s). Nonetheless, this is still more than double the £32m we estimate BT spent with Infosys, for whom the UK telco is also its largest client. BT has cut its spending with all its key IT services suppliers, though remains a significant client for many of the major India-based players.

Beyond BT, Tech Mahindra Vice Chairman Vineet Nayyar talked about “a global recovery at least in sentiment”, saying that they saw “definite signs of revival” in the business. Tech Mahindra was responding to more RFPs than in the past few quarters though Nayyar was still cautious as to when any of these would turn into orders. Indeed, he commented that customer decision-making has not gained pace. Like most players, Tech Mahindra has dropped prices in exchange for committed business. They have negotiated such a deal with BT, wrapping together a couple of its core contracts in order to “assure volumes” though at a discounted price.

Not much news on the Mahindra Satyam front – indeed, management seemed to take umbrage that I even dared ask the question on the concall! The restatement of Satyam’s accounts is still “another four or five months” off, but meanwhile they say customer attrition has stopped and they are winning new clients. I still believe this was not a marriage made in heaven and I really get the feeling that Tech Mahindra management sees Satyam as ‘something that’s happening over there somewhere’, which hardly inspires confidence. Given that Mahindra Satyam is likely similar in size – perhaps even bigger – than Tech Mahindra’s ‘core’ business, you’d think management would have a little more to say!

Prestige networking event for growth company Directors

2009-10-20T09:28:00.002+01:00

If you need to raise £2 million or more to support your growth plans, you're probably asking many questions right now. Is funding available from private equity, bank or other sources? How likely is it that your business will secure the money, and what will financiers expect in return? And what are your options if you can't get the funding that your business needs?

Chris Dines, ex-CEO of Ovum (and good friend of ours) is building an exciting new business called Knowledge Peers, an advice network for directors of growth companies (typically 10 to 500 employees). Aside from their growing online presence, Knowledge Peers hold regular, top quality, networking events. The next is an evening event at the Royal Institution on Monday 2nd November, and we have negotiated a number of complimentary tickets for qualifying UKHotViews readers.

The more formal part of the evening looks at some of the challenges that mid-tier companies will face in order to fund expansion. There’s a very interesting set of speakers and panellists, including tech entrepreneur, John O'Connell (who many of you will know well) and Andrew Garside, of private equity firm Isis Partners. There will be informal networking over drinks and canapés, and private access to the RI’s museum.

If you are a Director of a growth company and would like to find out more, or to register for the event, click here. When registering, please be sure to add "UKHotViews " to the name of your company in the "Company" field of the form else a booking fee will apply!

Be quick – the offer applies only to the first 25 qualifying Directors!

For Autonomy, growth seems easy, profitability a bit less so

2009-10-20T09:04:00.006+01:00

(By Philip Carnelley, 20 Oct 09, 09:00) As expected – see Autonomy continues to see strong trading – Autonomy has unveiled another strong set of results for its Q3. Boosted of course by last spring’s acquisition of Interwoven, revenues were up 51% to $192m for the quarter; organic growth was an impressive 15%, due in part to a long string of new client wins. Its new IDOL SPE – the application of Autonomy technology to relational data – is said to have got off to a good start with a ‘stronger than expected’ response – though no mention of orders.

Profitability growth has proven more elusive, as the company works to integrate Interwoven and launch IDOL SPE. Adjusted operating profit margins fell from 42% to 34%. The company claims that without the product launch, margins would have been 43%. But, hey, isn’t launching new products what all companies have to do? Including a fairly hefty write-down for acquisition amortisation, ‘true’ operating profit margins fell from 37% to ‘just’ 26%. Let’s be clear: these are figures many companies would kill for, but not great by Autonomy’s standards. Margins, as well as growth, support its stellar market valuation – it’s the most valuable UK software company despite being considerably smaller in revenue terms than either Sage or Misys (for more detail, watch out for our analysis of the UK software industry coming very soon!). In early trading, Autonomy’s shares have fallen 7.5%.

IT contractors move homes to ‘box-world’?

2009-10-20T08:41:00.002+01:00

(By Anthony Miller – Tuesday 20th October 2009 8:30am). An interesting piece in today’s The Register on the potential impact on IT contractors of the FSA decision to scrap mortgage self-certification, particularly for those who have recently been cast out from permanent positions. Beneath the witty reportage is actually quite a chilling message which of course extends to all temporary workers, not just IT contractors. Given the UK’s dependence on freelancers, one wonders whether the FSA has really thought this thing through.

Adecco goes shopping again

2009-10-20T08:22:00.003+01:00

(By Anthony Miller – Tuesday 20th October 2009 8;15am). Barely has the ink dried on its acquisition of leading UK ITSA (IT staff agency) Spring Group (see Spring is sprung!), than Zurich-based staffing giant Adecco is at it again. This time it’s US-based professional staffing group MPS Group (nee Modis Professional Services). Adecco will pay $1.3b cash which, at $13.80 per share, is a 24% premium on last night’s close.

Last year MPS recorded revenues of $2.2b at 29% gross margin and 6.6% operating margin, though this excluded a $379m impairment charge which sent net earnings negative. In its most recent quarter (to 30th June), MPS recorded $418m in revenues at 27% gross margin but only 1.6% operating margin. So, based on last year’s ‘adjusted’ numbers, Adecco is paying 0.6x sales and 9x EBIT for MPS. In comparison, Adecco paid 0.2x sales and 15x EBIT for Spring, though that deal ‘only’ cost them £100m.

MPS’ ITSA business trades as Modis International in the UK and Continental Europe. Its revenues last year were $329m, at 18% gross margin and 3.9% operating margin. I believe most of this is UK-based. MPS also runs the Badenoch & Clark professional staffing brand.

So, the relentless consolidation of the staffing industry continues. Will Adecco take another tilt at Michael Page I wonder?

Golden Apple

2009-10-20T04:31:00.004+01:00

(By Richard Holway Tuesday 20th Oct 09) I bought Apple shares in 2002 at $10 and saw my investment soar. As HotViews readers can easily verify from the archives, I sold half my holding in Dec 2007 when they hit $203. I then congratulated myself at how clever I was as they plunged to $80.

Problem was I didn’t then buy again.

So here I am today on the one hand glorying in the fact that Apple, last night in after hours trading, hit an all time high of $204 but kicking myself for only having half the Apple holding I had two years back!

It is difficult to find the right words to describe Apple’s wonderous Q4 (to 30th Sept 09) results last night as they blew expectations out of the water. Profits up 47% at $1.67b is one thing but a 25% rise in revenues to $9.87b in one of the worst consumer recessions on record, is quite another. It was almost ‘across the board’ with iPhone sales up 7% at 7.4m units (‘demand is outstripping supply in most countries’), though total iPod sales were down 8% at 10.2m units (is there anyone left who doesn’t have one?) but iPod Touch sales doubled. This has what many call the ‘halo effect’ as Apple Mac sales jumped 7% to 3.05m. Again this against a falling market in top-spec PCs.

"The future (as we should now say) looks Apple" too. The iPhone is gaining acceptance in the corporate world with over 50% of Fortune 500 companies now using the device in some way – really bad news for RIM. The iPhone launches in China this quarter. The launch of Windows 7 this week might just tip even more down the Apple Mac route – well, if you have to reload all your programs to install Windows 7 on an old XP PC, why not buy a Mac and save yourself the hassle? I can see the advert already! Steve Jobs promised “some really good new products for 2010” when the world and Holway expects the game-changing iTablet.

Apple is one amazing story. In 1983, whilst Group Marketing Director at Hoskyns (now Capgemini), I was given a pre-release Lisa for the weekend. It literally changed my life. There is no other technology brand that has given me so much joy in the last 25 years as Apple. The fact that Apple shares have made me a tidy return too just helps the warm feeling!

Last week I wrote the post Recovery? I warned readers yet again that downturns accelerate change with some companies doing very well and others failing. Add Apple to the Google and Intel list of those doing very well in bad times. But don’t read from Apple an end to tech recession and/or recovery.

There are precious few ‘Apples’ - just ‘Enjoy’.

Atos UK update

2009-10-19T09:48:00.001+01:00

(By Anthony Miller – Monday 19th October 2009 9:30am). I’ve just been speaking to Atos UK CEO, Keith Wilman, about the Q3 results (see Atos UK star shining even brighter). Despite the cracking growth, Wilman remains cautious on demand both in public sector – where large deals are still being delayed – and in the private sector, where bids are continuing but at lower contract value. Wilman sees particular risk that public sector deals pushed beyond the end of the year may end up being postponed until after the election, which bodes for a rather quiet H1 for all vendors with skin in that game.

On the Consulting front, Atos is seeing some renewed activity, mainly around supply chain cost reduction A few customers are also starting to take a closer look at ‘nextgen’ technologies such as Web 2.0 and Cloud. But with the scarcity of consulting projects, competition is fierce, with some vendors bidding “eye-watering” pricing to win the deal.

The fastest growing part of Wilman’s business looks to be on the BPO side, where ‘output-based’ processing – such as Atos Worldline and Medical BPO – now comprises 22% of Atos UK revenues. Today’s announcement of Atos’ new supermarket fuel card looks set to push this percentage much higher. This will be good news on margins – once volumes have ramped. Indeed, Wilman hinted that Q3 margins were pretty much in line with H109 (8.2%), so perhaps this could be pushed even higher.

Q3 acquisitions down despite strong September

2009-10-19T08:11:00.005+01:00

(By Anthony Miller – Monday 19th October 2009 8:00am). A bumper month for European tech M&A in September (see Regent reports strong month for M and A) was not enough to salvage the quarter, according to data just released by Regent Partners.

The total number of European tech M&A transactions in Q309 fell 12% yoy to 574, mainly due to a very slow August. But the September recovery pushed aggregate transaction value for the quarter to nearly $22b, more than double Q209. Valuations also recovered sharply, with Q3 median P/E up to 13.2x and median PSR up to 1.07x. Regent CEO, Peter Rowell, expects valuations to edge up further as buyers become active now that the recession appears to be easing.

We will be analysing the UK software and IT services M&A deals in much more detail as usual in the next issue of IndustryViews M&A.

BT still a drag on TCS UK revenues

2009-10-18T12:39:00.003+01:00

(By Anthony Miller – Sunday 18th October 2009 12:15pm). Despite winning some notable UK deals over the past couple of quarters in both the private and public sectors, TCS has yet to make up for lost revenues at BT. Much like Infosys, TCS saw UK revenues decline in Q2 (to 30th Sep.) both yoy and qoq. However, with UK revenues at £155m for the quarter and £680m over the trailing 12 months, TCS remains the UK’s top India-based supplier, comfortably ahead of Infosys at £96m for the quarter and £420m TTM.

In other respects, TCS’ results echoed many of the trends seen at Infosys last week (see Infosys takes another small step forward). On a US dollar basis, TCS’ revenues grew 4% seq to $1.54b as against +3% at Infosys to $1.15b. TCS also saw EBIT margins expand to 26.3% though still some way away from Infosys’ 30.3%. Sure, more favourable exchange rates helped both players, but ‘great execution’ did most of the work. Both players are reinstating salary rises, with TCS paying 150% of the quarterly variable pay component for Q2. Infosys lifted base offshore salaries by an average 8% and onshore by 2% at the beginning of the month.

The messages on demand were also similar, with both players starting to see ‘discretionary spend’ return in BFSI, though mainly due to M&A driving integration projects. Retail, Utilities and Pharma sectors are also starting to show promise, though Manufacturing, Hi-Tech and Telecom sectors remain deeply troubled. So while there was a much more upbeat tone from TCS management – as for Infosys – it would still be fair to say that both remain cautious, especially with client IT budgets still yet to be nailed down.