Even small software players can go offshore

(By Anthony Miller – Monday, 6th April 2009 8:15am). In a morning with little real news (OK, maybe IBM won’t buy Sun – or maybe they will – does anyone really think it will change the world either way?) some comments in the prelims from tiny AIM-listed financial services software firm Intelligent Environments (IE) caught my eye (see here). During the year IE boosted its R&D headcount from 6 to 20 FTEs, which now includes 9 in India. Overall headcount rose by two to 50. So, that’s 45% of R&D headcount and 18% of total headcount offshore for those without a calculator to hand.

And, yes, they are profitable. IE lifted operating margins from 14% to 18% on £6.4m in turnover (up 3%). Consultancy revenues declined from 65% of the total to 46%, while ‘recurring revenues’ increased from 24% to 29%. They are also debt free despite two major customers deferring invoice payment from November into January. And, by the way, the ubiquitous private equity investor, Michael Jackson, joined IE’s board as a NED back in December ’08.

I firmly believe that the prosperity – perhaps survival – of our software industry is linked, at least in part, with the rate at which significant proportions of R&D can be moved to low-cost geographies. I also believe this does not have to mean moving the intellectual capital offshore too! IE shows that even the smallest of companies can play - I would welcome other UK software companies who have moved some R&D ‘offshore’ to make contact with me (amiller@techmarketview.com) to participate in some research we are doing on just this subject.