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Talent International rethinks bid for Nakama

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logoPrivately held IT & Telecoms recruitment company Talent International has decided to throw in the towel in the race to acquire troubled digital media and IT recruitment minnow, Nakama (see Nakama rethinks meaning of life) leaving the field open for AIM-listed IT recruitment firm ReThink Group (RTG). If the deal with RTG goes ahead it will not exactly reshape the IT recruitment industry – more likely place a millstone around RTG’s neck (see Nakama still battling profit woes).


Zoo in the poo!

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logoTroubled media industry production and workflow software and services provider ZOO Digital issued a warning that it will miss its FY revenue forecast by a couple of million dollars and will instead likely end the year (to 31st March) at $9.5m with a pre-tax loss “significantly greater than the previous year”. This is not the best news given the parlous condition of its finances (see ZOO Digital walking a precarious performance path), despite CEO Stuart Green’s continued optimism about the company’s prospects.

Secure Thinking: Preparing for the inevitable

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Fujitsu LogoIn the current climate, organisations can’t afford to be the next ‘data breach’ story. Yet, despite this, many businesses, and consumers, are still failing to see the reality of the situation we are now facing. The effort required to combat breaches is industrial. Companies are no longer fighting against individuals, but a sophisticated criminal industry, designed solely to access their data. This is why we describe organisations in two groups, those who have been hacked, and those who will be.

Businesses who fail to sit up and take notice, instead relying on outdated systems that provide them, and their customers, with little to no security, will fall short of ever-rising consumer standards.

Thanks, in part to wider awareness, consumer tolerance for data loss is at an all-time low, a point which came across heavily in recent research undertook by Fujitsu in conjunction with OnePoll. It showed consumer trust had significantly reduced, with less than 10% of consumers believing that organisations are doing enough to ensure their data is protected. Couple this with the fact that 1 in 3 consumers said their trust in organisations to keep information secure had declined over the last year and it is clear there is a problem that needs addressing.

With consumers battling to understand the impact on their personal information if a company is hacked, there is no room for error anymore. To remain ahead of their competitors – and trusted in the eyes of the consumer – organisations need to ensure they are robust in their security. Read the full report from Fujitsu here.

Fujitsu Secure Thinking Reputation

Cisco Q2: Another tough quarter

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ciscoCisco has reported an 8% year-on-year revenue decline (to $11.2bn) for the quarter ending January 2013 (Q2). Non-GAAP EPS was $0.47 per share, also down 8%. Margin was hit by an unfavourable mix in sales, with a shift away from Cisco’s higher margin core products towards lower margin products, such as Service Provider video and servers. The company was also hit by a pre-tax charge ($655m) on faulty memory components in certain products sold in previous financial years.

Last quarter (see Cisco shares tumble after revenue warning), CEO, John Chambers, unnerved investors by saying he did “not anticipate material improvement in … order growth”. Chambers predicted revenue would decline between 8-10% - so Q2 results could have been worse. The Europe, Middle East, Africa and Russia region declined 2%, however, Northern Europe and the UK are said to be “showing good momentum”.

Cisco is being hit by declines in the BRIC countries, but also declines in its core routing and switching business. Chambers’ neat phrase for describing this is “managing through the economic and product cycles” – which of course implies this tough phase will be replaced by better conditions further along in the cycle. Cisco is very keen to emphasise that its products are in “transition” as The Internet of Things becomes a reality for more enterprises and as buyers focus more on next generation products and business outcomes (note Product revenue declined 11% and Service revenue increased 3%).

Q2 was mixed news for shareholders. Shares were down c4% in afterhours trading yesterday, but in Q2 Cisco returned c$900m in dividends and $4bn in share buyback. The company also agreed to increase the quarterly dividend by 12%.

For Q3, Cisco says revenue will decline 6-8%, but Chambers expects to return to growth “over the next several quarters”.

EDITD on trend with $4.4m funding round

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logoLondon-based ‘big data’ SaaS start-up EDITD– the modestly self-styled “world leader in real-time market data and analytics for the fashion and apparel industry”– has secured a further $4.4m in funding from Index Ventures and Frog Capital. EDITD was founded in 2009 and raised $1.6m of seed funding in June 2011.

EDITD’s software apparently trawls the net to track fashion price movements and presents its analysis of the data to its clients, which include some of the top names in the sector. They are open with their pricing – from £79 per month per user – and I daren’t guess how many users they need to make a profit – or, perhaps, to find a buyer.

First Sponsored Post

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TMVOn Monday TechMarketView launched Sponsored Posts and today we are delighted to run the very first from FujitsuSecure Thinking – Preparing for the inevitable.

We think this new service from TechMarketView will be of great value to many companies. Our tagline for our Sponsored Posts is – Engaging with OUR audience to get YOUR message across. And that’s exactly what it does!

To find out how you and your company can take advantage of Sponsored Posts Click here or email hmcteer@techmarketview.com .

It’s the experience, Actually

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LogoToday sees the first day of trading for AIM newcomer Actual Experience. The Bath-based company which is a spin out from Queen Mary’s University of London, has an intriguing proposition, describing itself as Analytics-as-a-Service provider focussing on the digital supply chain. Basically it analyses the performance of all the business applications used to enable digital business and operations (e.g. online ticketing, video conferencing), on an end-to-end basis to determine what users (customers and internal staff) are actually experiencing.

The focus on the digital (rather that the physical) supply chain, marks the company as a product of the digital age, addressing a new set of problems. It says the experience aspect differentiates it from performance management systems, enabling it to identify sub-optimal performance across the supply chain and at the point of consumption. So far it has a small but quality set of customers including Accenture (UK), Cisco Systems, Deutsche Post and Verizon Business.

Actual Experience was founded in 2009, backed by a group of early stage investors led by IP2IPO. In November 2013 it raised £4m from a consortium of investors led by Henderson Global Investors. It listed on the AIM at 54.5p with a capitalisation of £15.6m which is shall we say a confident valuation given the size of the business. Revenue for the year to July 31 2012 was £120k, rising to £440k for the 14 months to September 30 2013. There will be plenty to explore once we meet with the management team.

Mixed fortunes for SaaS players

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LogoLogoTwo of the SaaS market darlings had a tougher time yesterday as they revealed mixed Q4 results and guidance that was shy of market expectations.

With a net loss of $15.5m (vs. an $8m net loss) on revenue of $28.2m (vs. $16m), marketing automation specialist Marketo came in below Q4 expectations. The Q1 outlook was uneasy with higher losses than the market is expecting (see here for earlier thoughts on Marketo). Meanwhile social platform provider Jive Software (see here) posted a Q4 net loss of $22.3m (vs. a $15.6m net loss) on revenue of $39.3m (vs. $32.5m) which was below market expectations, and Q1 guidance is also shy.

Now both players are still delivering good growth, especially Marketo, and the results were mixed as opposed to bad, but they suggest headwinds are building and it is costing more to maintain growth. A quarter does not make a pattern – but it could start one. Eyes peeled.


BAE Systems applies intelligence to drop Detica brand

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BAE Systems logoWe’ve just spotted that Detica is no more. BAE Systems Detica, which was formed following the acquisition of Detica by BAE Systems in September 2008, became BAE Systems Applied Intelligence from 1st February 2014. BAE Systems acquired Detica in order to create a global security arm, as part of its aim to diversify its business. But in the early days the approach was very much ‘hands off’. BAE Systems was a defence contractor, and Detica was an IT company. There seemed little desire to cross-fertilise (see Detica – rising to bigger challenges in a tough market).

The dropping of the ‘Detica’ name is, therefore, interesting. It signals a change in attitude. The decision won’t have been taken lightly; the Detica brand was strong within the entities that knew it, particularly in the UK. But the name did not play so well globally, with BAE Systems a far stronger brand worldwide.

But aside from the branding issue, this change is also about the repositioning of BAE Systems and Detica in the market.  We spoke to Morag Lucey, who was taken on as BAE Systems Applied Intelligence Chief Marketing Officer nine months ago. TechMarketView subscribers can read about this new phase in BAE Systems' journey in UKHotViewsExtra. If you are not yet a subscriber and would like to gain access, please contact Deb Seth.

Best Q4 for UK tech VC funding

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chartAn unexpected end of year spurt in venture capital funding for UK and Irish tech companies pushed investment levels to the best fourth quarter on record. According to latest data from corporate finance firm, Ascendant, 77 tech companies received an aggregate £280m of funding in the last 3 months of the year.

However, aggregate investment in 2013 was down 8% on the prior year, at £923m although significantly better than the £800m previously expected. Ascendant CEO Stuart McKnight noted that “2014 has started with some interesting deals and good levels of activity.” He is hopeful that 2014 will be the UK’s first billion-pound year for UK tech VC investment.

Eligible TechMarketView subscription service clients will be able to read our analysis of the UK VC software & IT services scene in the next edition of IndustryViews Venture Capital.

Mastek scores home run at Home Office

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logoMumbai-headquartered offshore services firm Mastek has scored its second contract direct with UK government, winning a “significant” project at the Home Office. The new deal will see Mastek develop and test a Shared Service Bus as part of the Home Office’s Immigration and Enforcement systems. All the work will be undertaken onshore.

The contract comes just a few months after Mastek was awarded its first project on the G-Cloud with NHS Health and Social Care Information Centre (HSCIC) to develop a new corporate and internal identity & access management service as part of the NHS Spine re-procurement programme (see here).

It seems clear that the UK government is taking a pragmatic view on awarding IT contracts, showing a willingness to include India-based firms in the mix on an equal footing with other non-UK (and UK-) headquartered suppliers.

Capita and Updata SWAN off to Scotland

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Capita logoCapita and Updata are celebrating confirmation that they’ve been awarded the Scottish Wide Area Network (SWAN) framework contract against competition from networking stalwarts BT and a collaboration between Vodafone (Cable & Wireless) and Virgin Media Business.

SWAN is a single public services network (PSN) designed for use by all public services organisations in Scotland and it’s valued at up to£325m over nine years (see also our reports on the Scottish Public Sector SITS Market and PSN). So far, four ‘vanguard’ organisations representing 30 public services organisations in Scotland have signed up to the framework – NHS Scotland, Education Scotland, Pathfinder North (five local authorities) and Pathfinder South (two local authorities). These early adopters are expected to generate revenue of £110m over the first seven years. According to Capita, a further 11 organisations are planning to join in 2014.

Updata logoThe high profile PSN contract is the first big deal that Capita has won in networking since it acquired Synetrix and its broadband and infrastructure services capability in December 2009 (see Capita bolsters IT services with Synetrix). A deal on this scale in this space has been a long time coming for Capita and it will be delighted to have proven that it can compete and win against pure networked IT players like BT and Cable & Wireless/VMB. It goes without saying that it’s also a huge win for SME Updata, which is making a name for itself in the PSN market (see also Daisy & Updata secure Essex NGN deal). Capita will also be hoping to use SWAN, which places it at the heart of public service delivery in Scotland, as a platform to offer additional services and build its business north of the border.

Of course failure to secure SWAN is a particular blow to BT, which currently provides networking services to NHS Scotland (as well as the NHS in England) via its N3 contract, which was worth £530m over seven years when first signed in 2004. BT commenced legal proceedings against NHS Scotland claiming the tender process was “flawed” when news broke last December the organisation had selected its preferred bidder. The supplier is now pursuing £20m in damages. The fate of the rest of its N3 contract, which is due to be retendered this year in a competitive PSN marketplace, must now be top of mind for BT (see also UK Public Sector SITS Supplier Landscape 2013-14 if you’re a PublicSectorViews subscriber).

Fidessa's full year foundations

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logoFidessa’s full year 2103 figures met market expectations, with flat yoy revenue (£279m) and reported pre-tax profit of £43m, up 3% as reported, but down 2% after adjustments. These numbers reflect the improving tone of investment markets, growth in derivatives-related business and progress in broadening the company’s service-based portolio and revenue base (see our UKHotView about its post trade move).

The “headwinds” as end users closed, consolidated and cut costs relented somewhat in 2013, with the impact estimated at 5% of revenue, rather than the 7% of 2012. Better market conditions in the US (40% of total revenue) meant that revenue here grew 6%. Asia (17% of the total) grew by 1% as Japan declined with Yen weakness. Europe, (largest area at 43%) declined by 5%.

Fidessa has pushed hard into derivatives with revenue here more than doubling, to 5% of the total. The growth and relative size of the derivatives market (c.60% the size of the cash market) and Fidessa’s recent delivery of global platforms to two large banks gives the management confidence in the momentum and revenue potential here.

Recurring revenue now accounts for 85% of the total and Fidessa’s strategy of delivering services, begun in 2000, will drive further growth here as the company offers compliance services on a SaaS basis, post trade services and service-based trading platforms. As cost pressures hit end users, more large companies are looking to this approach, confirming FinancialServicesViews theme of customers relying more on third-party vendors.

Management today re-iterated their confidence in medium term double-digit growth with margins around the current level (15%). They are certainly building the foundations for this, but with 2104 likely to deliver mid single digit revenue growth, we must still be patient. Fidessa probably needs sustained market improvement to realise its full potential.

NEW RESEARCH: What Nadella means for Microsoft

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LogoAfter the first buzz of excitement following the appointment of Satya Nadella as the new CEO of Microsoft we reflect on what it will mean for the company. It's too early for a distinctive Nadella vision to emerge – we expect that will come after the Nokia deal completes and into Microsoft’s new financial year (its year ends in June). We can be confident it will be cloud first and heavily mobile led but expect it to err on the side of protecting the company rather than disrupting it.

It could be a lot more cross-platform focussed if the ‘leaks’ over the last week have substance – that Android apps will run natively on Windows, and that a touch-optimised version of Office for the iPad will be out this year, earlier than anticipated and before the Windows version is available. Rumours should be viewed with caution naturally, but Nadella has been opening out the Azure platform over the past year, so he has proven cross-platform credentials. Breaking the link between Windows and Office would be the strongest statement that Microsoft is prepared to make bold changes.

Eligible TechMarketView subscribers can read our thoughts on the shape of Microsoft under Nadella, here

Telecity: “Gradual” UK improvement

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telecityLast week, Telecity, a provider of carrier-neutral data centres in Europe, reported topline revenue growth of 15.1% (to £325.6m) for FY13 (year ending December 2013). Removing the impact of acquisitions, organic growth was 9.5%, of which 2.7% arose from the year-on-year movement in foreign exchange rates. Adjusted EBITDA was up 18.4% to £153.2m. UK revenue increased 4.7% to £143.9m, which is some way off the 16.9% it achieved in FY12 (see Telecity’s confident start to FY13– subscribers only). The company says that churn in the early part of FY13 impacted revenue growth. Projected FY14 revenue for the Group is expected to be in the range of £355m to £362m (or +9 to +11%) – a rate that is lower than FY13.

Some investment analysts in particular are of the view that there is oversupply in the data centre market, and that prices are being forced downwards. That may well be the case at the Amazon end of the market, but, Telecity’s, CEO, Mike Tobin, says that pricing remains “fairly stable”. With regards to capacity, this is something Telecity has been building up across Europe to address demand. During 2012, the company undertook a substantial programme to expand data centre capacity in Manchester and London. It was a huge operational undertaking and, at the time, Tobin told us that it was “the toughest year we’ve had to endure” - but went on to say that in 2013, Telecity would “reap the benefits of that effort”. However, after significant investment (cash and effort), the promise did not flow through to sales as expected. So does 2014 look better? Against a backdrop where demand and prices remain strong, we look at some of Telecity’s key challenges and how the business is facing up to these. Subscribers only: Telecity’s “gradual” UK improvement.

If you would like to subscribe to TechMarketView’s research, please contact Deb Seth.


TIG splashes c£50m on M&A brace

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lInsurance software and business process services player The Innovation Group (TIG) is shifting into serious acquisition mode as it enters 2014, with not one but two acquisitions, together worth just under £50m. TIG plans to pay for the two deals via a £65m share placing and fundraising exercise.

Firstly, TIG is wading into the 'wet perils' claims market via a £35m cash deal for LAS Claims Management Ltd (LAS) from PE firm Gresham Private Equity. TIG will take on some 160 people mostly based in Birmingham.

LAS is a strategic push by TIG to expand its addressable market beyond property subsidence (dry perils) into the much bigger ‘wet perils’ which covers claims for burst pipes, flooding and such like. Following yet another record breaking wet spell in the UK, it certainly seems like the right time to be making such a significant investment. We can only see demand for this sort of service rising over the next few years as insurers grapple to hold down their costs amid rising claims volumes.

CE Andy Roberts gave us a heads up about his plans for the new wet perils business in December (see TIG breaks £200m revenue mark (update)). We learned from him today that this is more than just about floods. LAS offers a ‘common service platform’ for both dry and wet perils enabling both civil engineers and loss adjusters to interact on the same platform. There is even a Facebook-type wall app for all parties to check whereabouts the claim is in the process. Roberts expects this to develop new mobile interactions with suppliers and customers, better collaboration and new data, which it plans to exploit with innovative pricing models.

The second, smaller deal is for motor repair network business Crash-worth Ltd (Crash-worth), in a deal worth £11.75m. TIG’s intention is to create ‘the number one motor claims management business in the UK in terms of client experience, customer experience, operational efficiency and profitability’. There’s the gauntlet handed down to Quindell. Crash-worth will also add a consultancy proposition – this will be new for TIG since generally speaking consulting tends to be wrapped up within its software/BPS engagements.

These deals look set to give TIG even more impetus as it moves through 2014, which by the way has delivered a solid start.

UNIT4: working towards sustainable SaaS business

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LogoUNIT4 saw a modest 4.4% rise in revenue in FY13 to €490.5m (which is less than in the previous year – see here) and was due to the shift to SaaS and subscription revenue, which rose strongly by 42.3% to reach €68m. That compares to €72m revenue from on premise product sales (a 5% yoy decline). What those figures mean is that UNIT4’s move to the SaaS model is continuing at a rapid pace and is overhauling the traditional on premise business.

It is costing in the short term with hits on profitability as well as revenue growth (net profit dropped from €23m to €14.8m which includes €6.2m in costs relating to the Advent offer that aims to take the company into private ownership and is known as Project Unique), but UNIT4 is managing costs to minimise the impact. With most SaaS seekers pressure-pumping money into market share and product acquisition it is refreshing to see a more measured approach. EBITDA (including FinancialForce but excluding Project Unique costs) was up 13.2% to €98m, excluding both items it was up by 14.7% to €109m.

There was a bigger shift to SaaS in Q4 and from a timeline perspective it is interesting that many new potential customers are considering cloud deployment, which indicates cloud-based ERP momentum is finally starting to increase. SaaS ERP provider Netsuite had a strong year too (especially in Europe), and saw the average cost of sales rise which suggests deals with larger enterprises (see here).

FinancialForce also had a strong year with revenue up 85%, new customer deals up over 50% yoy, more customers using both the billing and professional services automation applications, and deal sizes also growing. UNIT4 is being true to SaaS vendor form where FinancialForce is concerned however, and is acquiring to expand the business - in November 2013 it acquired HCM provider Vana Workforce and the SCM assets of Less Software - which are moving FinancialForce towards more of a full bodied ERP suite.

Overall, UNIT4 is making what looks like sustainable progress and continues to be a pain point for Oracle and SAP, especially within the UK government sector.     

BBC & Atos: Looks like an extension, barks like an extension....

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Atos logo... chances are it is an extension! We’ve just been looking at the detail of the OJEU notice released by the BBC this week. The notice is masquerading as a ‘tender’, but is actually a “voluntary ex-ante transparency notice”, which contracting authorities can publish if they intend to award a contract without prior publication.

So, while at some in the media have taken this as notice that the BBC is looking to break down its existing £2b contract with Atos into a SIAM/‘Tower’ model and seek out new suppliers, what it is really telling us is that Atos has been awarded a contract extension from 2015 through to 2017. The contract value is £285m.

The contract is described as an “interim transitional arrangement” (the BBC has been careful to avoid the "extension" word). It appears that things have not gone as planned. The notice states “during the planning phase, several unforeseen circumstances arose”. These appear to be numerous but include changes to the senior leadership team including the project sponsor and acting Chief Technology Officer (CTO). In addition, the BBC has determined that it will be necessary to establish the SIAM first, rather than concurrently with procurements, “to make the model and transition work effectively”.

So while there remains a presumption against extensions in UK Government, it is clear that transitioning from a major end-to-end IT outsourcing model to a Tower Model is a complex journey... and one that can be upset by numerous internal disruptions. For the incumbents – like Atos – this is clearly good news in the short-to-medium term. But we would advise any company looking at UK Government opportunities to assess potential stumbling blocks. Another example might be the DVLA: while it is looking replace its existing IT arrangements in 2015, a review was launched in October into how the agency should deliver services. Could that have a similar impact as at the BBC?

King of Candy Crush for NYSE IPO

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CCI guess it really was too much to hope that King (the makers of Candy Crush Saga) would IPO in London. Today they have filed for an NYSE IPO set to raise up to $500m. Although no idea yet the number of shares that would imply, a valuation of $5b would not be that surprising. Although King was founded in 2003, it recently relocated its financial and admin HQ to London although the main development operations are still in Stockholm. Anyway, this is another bit of ‘good news’ for the UK even if the shares are listed elsewhere.

King made revenues of just $164m and PBT of $7.8m in 2012. But then Candy Crush exploded. In 2013 King had grown to $1.8b and PBT of $714m in 2013 (wow, that’s the kind of margin most just dream of). Growth is therefore stellar. Candy Crush is c75% of revenues and is the most popular app on Facebook and the #1 free app on the iPad and iPhone. 128m users play the game 1.2b times a day. Although mind-blowing, anyone on the train or tube will testify that the most likely thing the person next to you is doing is playing Candy Crush. Other titles include Pet Rescue Saga, Farm Heroes Saga and Papa Bear Saga (Apparently very popular too although I haven’t heard of these either!)

The problem – and it’s a big problem – is whether King is a one hit wonder a la Zynga/Farmville and, well, let’s face it, almost every other games developer. Stellar stocks can also equally quickly fall back to earth. They all think that their product will transfer into cuddly toys and theme parks. They also believe that they can invent a whole new wonder game. But most just flog the ‘one-hit’ literally to death.

Although we steer away from giving any advice, I think I can safely say that this is not a stock for ‘widows and orphans’.

New European head for Hinduja Global Solutions

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logopicIt’s taken a few months for the news to filter out that Matthew Vallance – the first Brit to have headed up an Indian BPO player – has recently surfaced at Hinduja Global Solutions (HGS) as head of European operations.

Vallance was appointed worldwide CEO of Mumbai-based BPO firm Firstsource in April 2010 (see here) and stepped down two years later (see here). In April 2013 he joined US-headquartered (but India-centric) peer Sutherland Global Services (more about which soon) as Managing Director, Europe and Emerging Markets but left in November to take up his current post at HGS.

HGS is the IT/BP services arm of family-controlled Indian industrial conglomerate Hinduja Group, and was created out of the merger of the IT captive of Hinduja-owned motor vehicle manufacturer Ashok Leyland with Hinduja Finance Corporation.  The UK arm of HGS was created in 2010 by the acquisition of UK call centre firm Careline Services. HGS is expecting revenues of $420m this year but is aiming to reach $1bn over the next three years.

It has to be said that this is a ‘bold and courageous’ move for Vallance given the colourful history of the Hinduja organisation, but we have to assume he has gone in with eyes wide open and likes what he sees. Given his background and experience, it looks like the Hinduja brand will become a little better known in the UK Business Process Services (BPS) market.

You can learn much more about the supplier landscape in the UK BPS market from our UK BPS Supplier Rankings and Landscape report– but only if you subscribe to BusinessProcessViews! If you don’t, press here and ask!

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