TechMarketView is continuing its research into the banking software market which is the focus of a lot of attention as challengers enter the market and as incumbents look to modernise. In this report we ask the question, Can Finacle drive growth for Infosys in Financial Services?

The Finacle subsidiary of Infosys is at the core of its EdgeVerve software products business. One-third of Infosys Group revenue is from the wider Financial Services sector where the provision of software and the associated implementation and services is seen as a key generator of revenue and value-add. Finacle has significant international scale and a highly rated, modular software suite. It is also developing more cloud delivery partners and extending the capabilities of its portfolio.

However, despite a large global installed base, Finacle and other software products still generate less than 5% of group revenue. In the UK, Finacle has been limited to supporting niche operations of the major banks and has yet to show progress among the challenger banks. We look for a major contract win in the UK as a sign that Finacle can boost Group revenue growth and help sustain its margins.

FinancialServicesViews subscribers can access this research report, here.

If you're not yet a subscriber and would like to learn more please contact Deb Seth dseth@techmarketview.com.

As French rival Capgemini reveals its FY15 today (see here), Atos has announced a new six-year global outsourcing deal with UK-HQ’d electronics distributor RS Components (RS), a trading brand of £1bn+ revenue Electrocomponents plc.

Terms weren’t disclosed, but it’s clear this is a significant win for Atos in digital transformation. RS operates a network of branches worldwide, and is clearly facing competition from online channels. To support this changing environment, Atos is going to move RS’ infrastructure on to a secure managed private cloud platform, using accelerators from Canopy– the Atos Cloud – along with multiple public cloud offerings to offer agility and flexibility as needed.

Behind the scenes, Atos will provide a range of application development and maintenance services across supply chain, data analytics, CRM and financial systems, and manage all end user compute and service desk support. SAP’s HANA platform will also be used to analyse and act-on real-time data from across all parts of the business. Apparently, Atos will also use ‘leading edge robotics and automation around the back-end IT systems’, although no further details were provided.

This is clearly an important strategic move by the client to become better digitally-enabled and improve their overall customer experience. We do think more needs to be made of joining up the end-to-end service stack however, particularly the underlying business processes, which will need to be transformed (see Business Process Platform opportunities in digital transformation). The challenge (and opportunity) for Atos will be to work with the parent company Electrocomponents to develop and implement an over-arching strategy across the various operating divisions to truly join-the-dots.

PS. Atos' FY15 results will be out in just over a week's time on 29th February.

In FY15, revenues at BAE Systems increased 7.6% to £17,904m, while underlying EBITDA was down from £1, 702m to £1,683m. As always, its major equipment programmes really swinging the needle - in the last 12 months they boosted the traditional UK platform business (things like the European Typhoon programme and a £1.3b order for the Astute-class submarine).

Within that business, there is some software and IT services (SITS) revenue (it’s just exceedingly difficult to extract). But the business that is most easily recognisable as SITS is the Cyber & Intelligence business, which only represents 10% of overall Group revenues. Performance here was pretty strong – up 11.4% to £1,848m, though underlying EBITDA declined 5% to £145m due to product investment (see below). The Cyber & Intelligence business is made up of US Intelligence and Security (70%) and Applied Intelligence (AI - 30%). But it was the latter – AI – that drove growth in FY15. AI sales growth was an impressive 31%, with 13% of the growth coming from the integration of SilverSky (see BAE Systems finds ‘Silver’ in the US cyber ‘Sky’) and 18% organic.

It is the AI business, which will continue to drive growth in Cyber & Intelligence in 2016. Low single digit sales growth is expected for the division as a whole, with stable sales for Intelligence & Security but “good double digit growth” in AI. The AI business has made substantial investments in 2015 – in recruitment, product development and the integration of SilverSky - to drive expansion of the commercial cyber security business. Now, the investment seems to be paying off, with BAE Systems citing significant wins for its NetReveal and CyberReveal products (see UK Public Sector SITS Supplier Landscape 2015-16). Margin improvement (to 7-9%), following this investment, is, also expected in 2016.

Where we sense BAE Systems AI is finding the market tougher is for its services business. The company cites “continued growth of security and digital services projects in government & CNI in the UK and internationally” and can point to some good wins (like digital identity and fraud analytics at DWP and cyber security and information assurance services at MoJ). However, it also highlights highly competitive markets and fast-changing customer requirements. Notably, it points to disappointment after losing the Metropolitan Police Service SIAM competition (see Atos extends SIAM footprint at Met Police). BAE AI wants to increase the scale of system and service integration contracts to UK and overseas Government customers but this may be easier said than done.

Given that Paris-based IT services major Capgemini managed to squeeze out just 1% like-for-like revenue growth in 2015, management’s expectation for 7.5%-9.5% growth this year appears at first blush somewhat supercharged. Indeed, at the high point, management’s outlook almost coincides with the low end of the usually steroidal growth forecasts for New Jersey headquartered, India-centric offshore services major, Cognizant (see Cognizant sets scene for slow year) – and you wouldn’t normally expect to see Capgemini nudging Cognizant’s rear bumper as they head towards the finishing line (Cognizant’s organic growth in 2015 was around 15%).

The answer must surely lie in Capgemini’s $4b acquisition of (also) New Jersey-headquartered – and (also) India-centric – IGATE (see Capgemini closes gate on IGATE brand and work back). The acquisition closed in June last year, so 2015 revenues only included a 6-month contribution. Capgemini’s headline revenue growth last year reached 12.7%, to €11.9b, in line with prior guidance (see Capgemini confident for full year).

Group operating margin (the ‘real’ one) expanded by 50bps to 8.6%, with adjusted margin 140bps higher, at 10.6%, also in line with prior guidance. Management expects to add another 50-80bps in 2016.

On the domestic front, Capgemini’s UK revenues declined by 14% as expected from the effect of the novation of Fujitsu’s subcontractor revenues on the HMRC Aspire contract. UK adjusted operating margins expanded over two points to 13.4%.

Oh, by the way, Capgemini also announced the acquisition of New York-headquartered design house, Fahrenheit 212 (it’s the boiling point of water, if your school days are too far behind you). Terms were not disclosed.

We’ll have more on all of this in a later post – hopefully with some insight into Capgemini’s organic revenue growth expectations.

Northgate Public Services (NPS) has signed a new five-year deal in local government, which appears to sit right in the company's comfort zone. Indeed, the arrangement with London Borough of Bexley looks very similar to the arrangement NPS agreed with Hartlepool Borough Council last year (see UK Local Government SITS Supplier Landscape 2015-16). NPS will replace incumbent ICT services provider, Sopra Steria. 

The council is looking for NPS to find £11m in savings as it delivers the common triumvirate of reduced IT spend, increased efficiencies and enhanced services. Starting on 1st April 2016, NPS will migrate data centre services, and provide network & infrastructure services, service desk management and business applications. Also, an additional commitment - and one which is increasingly common in local government outsourcing arrangements - is the establishment of a modern apprentice scheme, which will see recruitment of apprenticeships from within the local economy.

NPS is a local government stalwart and is adept at adapting to local government needs. It looks like, through the creation of an ICT Enabler Fund, the company will also be able to demonstrate its ability to be innovative; the council is looking to its new supplier to transform  ICT delivery in line with future requirements and its Digital Future programme. 

The door to a Vodafone deal with Liberty Global has partially re-opened after the mobile operator agreed to acquire Liberty’s loss making Dutch broadband operation Ziggo.

Vodafone will pay €1bn (£780m) in cash for an equal share in the joint venture once Ziggo's €7.3bn (£5.6bn) net debt is deducted.

US cable giant Liberty Global also owns Virgin Media following a £15bn acquisition in 2013, and the latter remains one of the UK’s largest fixed broadband service providers courtesy of its extensive fibre network.

Vodafone and Liberty Global ended talks of a possible merger and/or exchange of pan-European network assets in September 2015. But the mobile operator has clearly not given up hope of securing deals on a country by country basis and would ideally love to recreate the Ziggo joint venture in the UK if either Liberty Global or other network providers could be persuaded.

Fresh impetus is required if Vodafone is to match the combined fixed and mobile network might now on offer from newly merged rivals BT/EE and Three/02, in full anticipation of a scrap for triple and quad play broadband/mobile/TV/telephone service package customers ahead.

Elsewhere Vodafone is reported to be scrapping 250 jobs from its corporate division as it looks to trim costs and focus on is network, products and services. We think the company’s priorities now lie firmly in building out its infrastructure, keeping hold of existing customers and attracting new ones in preparation for the competitive storm it knows to be coming.

Enterprise revenue held up well in Vodafone’s H1 results, and the UK was something of a bright spot. But a slowdown in consumer mobile sales pushed overall European service revenue down 6.2% (1.3% organically) to £12.1bn.

It’s interesting to compare the fortunes of software players in other parts of the world, and as regular readers know, my favourite ‘other part’ is Brazil. The country is not in a very happy place, at least in regards to its economy, with recession biting hard (though you wouldn’t know it from the eye-popping, technicolour extravaganza that was the annual Carnaval, held earlier this month!)

But as in all downbeat markets, there are upbeat players and such seems to be the case for highly acquisitive retail software developer Linx (see Linx looks to tie up Brazilian retail ERP market).  Linx’s revenues grew over 25% last year, to Rs449m ($135m), though they only managed to squeeze 7% growth in operating profit, which meant operating margins lost over two points to 15.5%.  

Linx is about a fifth the size of Brazilian (and LatAm) SME ERP market leader Totvs, which has made a bid to dominate the retail software sector through its ill-considered (IMHO) acquisition of Sao Paulo-based Retail and Hospitality industry POS hardware and solutions firm, Bematech (see Totvs: the cost of buying market share). However, Totvs’ operating profit is in decline, down 3% for the 9 months to 30th Sept (Totvs will report FY results in March), though operating margins, at 19.4%, are still higher than Linx’s.

Despite the appalling market conditions – or perhaps because of them – there is much to play for in the Brazilian software market. Surely consolidation among the larger players must be on the cards.

Earlier this week Rackspace unveiled its 2015 numbers. On a constant currency basis, Q4 net revenue increased 12% year-on-year to $523m. For the full year, revenue passed the $2bn milestone - up from $1.8bn.

A key strategic move for the company during 2015 was becoming a managed services partner for Amazon Web Services (AWS) and (Microsoft) Azure. These big public cloud providers (and actually, smaller ones such as UK public sector specialist, Skyscape) want to retain a laser-like focus on their product, and thus are using partners to provide the wrap-around managed services. Indeed, Rackspace says it intends “to become the number one managed services provider for AWS”.

However, what is unclear right now is what this move means for Rackspace in terms of revenue and profit in the short term (it says the “sales pipeline is building nicely” and that it expects this offering “to drive our growth in 2017 and beyond”). And that is especially important because of the pressure on existing business (e.g. “we expect the growth rate for our OpenStack public cloud to slow in 2016”).

As for this year, Q1 is a seasonally slow quarter for Rackspace, but the company says it’s going to be even “slower than usual this year”. It all leaves us feeling a little uncertain about how the current year with shape up. Indeed, the company’s expectation for (“normalized”) growth of 6-10% in 2016 - while good versus traditional IT services players - is not especially stellar given its focus on hosting and cloud.

I sort of get the pun but maybe they’re trying too hard! London-based SaaS startup Triptease’s product is used by hotels to encourage punters to book direct rather than through OTAs (online travel agents – you gotta keep up with the vernacular!). They’ve just raised $7m in a Series A funding round which included prior backers Notion Capital and Episode 1, bringing total funding so far to some $9.5m, according to TechCrunch.

One of the clever bits for hotels is that Triptease displays live OTA pricing for the hotel on the hotel’s own website so that punters can compare prices. Needless to say, the hotel can then present a better offer to the punter to book direct.

There is a revenue model. Triptease charges small hotels £25 per month (+ £75 set-up fee) and lets them show pricing from 3 OTAs on their website. Large hotels pay £1.50 per room per month for the full service, which includes a ‘Disparity Dungeon’ (no, don’t ask). Co-founder and ‘Chief Tease’ (I kid you not) Charlie Osmond claims some 8,000 hotels use the platform, so, if they are indeed charging list prices (big ‘if’) then in theory Triptease should have a revenue run rate of at least £2.4m p.a. if they were all small hotels.

I would imagine in time OTAs will get a bit miffed if hotels use Triptease to consistently undercut their pricing, but sounds like great news for the punters – and perhaps investors too.

Looks like we are entering the last death throes of Marissa Mayer’s tenure as CEO of Yahoo. As you might have gathered from my many previous posts of Yahoo I am not one of Mayer’s greatest fans! But I do like Yahoo and use it many times everyday. To waste the huge opportunity that Yahoo’s news services (general, finance, sports, entertainment etc) provide is near criminal.

On Friday Yahoo’s board side-lined Mayer and appointed an independent committee to examine all options with Goldman Sachs, JP Morgan and PJT Partners appointed as advisers. I see the core Yahoo being separated from the Alibaba stake. Potential buyers could include Verizon and AT&T on the trade side and any number of PE houses on the other.

Look, I am not suggesting turning a company like Yahoo around is easy. But everyday I (and, let’s face it, I am exactly the kind of fairly well off kinda person that advertisers love) look at Yahoo Finance many times. I have a large number of personalised portfolios and watch lists that I can monitor on the tap of a finger. All of TMV's share analyses and monthly reviews are based on Yahoo Finance data. Indeed, this week they have just updated the mobile version which I like even more. But it has NO adverts or any monetisation of any kind! I’ve used this great service free of charge for 10+ years now and Yahoo just cannot have earned a cent from me. I’d even pay a subscription if they asked me.

It’s not even the end of February but it’s becoming apparent that this will be a year of machine learning consolidation as established providers scoop up innovative start-ups with expertise in this leading edge and specialist field. This weekend word came of Salesforce inking an agreement to buy PredictionIQ.

This Palo Alto start up (that media reports indicate originated in the UK in 2012 as Tapping Stone) provides an open source machine learning server, which would be used to build recommendation engines for example. With 8000 developers, a number that has doubled over the past year, it’s clear that market interest is increasing. Salesforce has not said much about its plans but is expected to wrap it into its SalesforceIQ offering to expand its burgeoning machine learning assets. SalesforceIQ itself is based on the 2014 RelateIQ acquisition to which Salesforce has been adding machine learning assets, including MinHash and Tempo AI so far in 2016 alone.

Elsewhere in the more generic analytics land SAP acquired the ‘key assets’ of mobile analytics provider Roambi. This clever little application is similar to QlikTech and Tableau in that it hooks into back end data sources (including Excel, SQL Server, Cognos, Box, Salesforce, SAP and HANA etc), but it specialises in presenting data in a graphical and easily shareable way in native iOS and Android apps where charts are updated dynamically. It has a lot of fans – customers include Nike, Puma, Eli Lilli, Novartis.

Although these acquisitions are in different parts of the analytics market they demonstrate the appetite for the capability among suppliers (see ESAS Predictions 2016).  It is rising among enterprises too but the major activity is on the supply side as they build their assets. What is apparent is that for machine learning start ups in particular, they are being acquired very early in their lifecycle so suppliers will have to be ever more fleet footed in this hyper competitive space – and it won’t be a case of a single acquisition providing all the required capability. 

Managed services player, Claranet, has acquired Warrington-based Bashton Limited for an undisclosed sum. The purpose of the purchase is to build-out Claranet’s DevOps capabilities and provide better support for “complex and diverse applications” on public cloud infrastructure. Bashton’s customers include ITV, University of Manchester, Liverpool FC, Virgin Holidays, and Superdry, and reports suggest it had revenues of a little over £1m.

In July of last year we wrote about Claranet’s acquisition of Techgate and LinuxIT– both of which followed our prediction that acquisitions would follow the company’s refinancing in March 2015. The Bashton acquisition builds on Claranet's ability to provide managed services for third party clouds. Without question we see a strong requirement in the market for these ‘wraparound’ services that serve to establish and then run public clouds (and hybrid environments) as this is not within the scope of what the pure-plays do. The Bashton acquisition gives Claranet better tooling and capabilities to dig deeper into the market opportunity. While we see a good flow of opportunities here, it is dfferent to the market for provision of standalone public cloud services. Contracts for complex managed services are more akin to traditional infrastructure services, and as such the pipeline takes time to build and the sales cycle is longer than transactional public cloud provision. On the upside, the margin is richer and the services ‘stickier’.

Meanwhile, this is all good news for AWS. The public cloud provider will benefit hugely from partners that can help it 'infiltrate' enterprises that do not buy (or extensively buy) from it directly.

Michael Pesch, until last year CEO of software, IT and business process services firm ArvatoSystems (a subsidiary of German media giant Bertelsmann), has joined Bangalore-based offshore services major, Infosys, as CEO of Infosys Consulting Holding AG, the unit born out of Infosys’ $350m acquisition of Swiss SAP consultancy Lodestone back in 2012 (see Infosys buys ‘Swiss Axon’). Pesch will report to Infosys EVP and Global Head of Infosys Consulting, Sanjay Purohit. Pesch will run Infosys’ international consulting operations outside of the US, which by implication remains under Purohit’s direct control.

Besides his new day job (or is it the other way round?) Pesch will also serve as Regional Head for the DACH countries which, at first blush, might appear a better fit than the Consulting role. According to LinkedIn, Pesch’s consulting credentials are listed as a couple of years at the erstwhile EDS in the GM Solutions Consulting DACH unit at the turn of the millennium, after which he left to become COO at Bertelsmann Mediasystems.

One of Pesch’s missions will be to ‘increas(e) Infosys’ expertise in large-scale SAP programs’, in which role he will surely be ably assisted by some 16 ex-SAP executives that have joined Infosys since ex-SAP CTO Dr Vishal Sikka was appointed Infosys CEO. Or perhaps that may be 15 given the reports that Infosys products head Michael Reh is mooted to be leaving Infosys at the end of March (see Infosys surprises – and confuses). Reh is still billed as Infosys EVP and CEO Designate (?) EdgeVerve, Infosys’ software products subsidiary. EdgeVerve is home for Infosys banking software package, Finacle, about which TechMarketView FinancialServicesViews subscribers can read more in our new report, Finacle and Infosys in Financial Services.

Powa Technologies, the group that set out to revolutionise the world mobile payments systems, has been bought by Thompson Investments shortly after going into administration. During the company’s 8-year history it had been reputedly valued at US$2.7bn and had got through an estimated US$225m of funds before being sold to its new owners for an undisclosed, presumably “nominal” amount.

The flare of Powa burned brightly in August 2013 as the company announced that it had raised US$76m from a single investor, see here, and management talked of rivalling the likes of Google and Alibaba. In June 2014 the company used its highly rated paper to buy Hong Kong-based MPayMe to broaden its reach and portfolio, see here. Since then there has been a string of agreements with retailers and software providers to use the Powa system as well as with Danske Bank and recently with China UnionPay. Despite this high level of activity, management have admitted recently that Powa was “basically pre-revenue” and stories mounted about missed payroll and supplier payments and investor concern, leading to the change of ownership. Management have said that the operating companies are continuing to trade as normal.

Powa’s current technology offering centres on its “PowaTag” system, which uses media such as QR codes to facilitate purchases. This part of the sector is notoriously fast-moving and competitive and the Powa top team were obviously looking to build scale and momentum in order to establish a winning position. This high-profile, high overhead and (in our opinion) low margin strategy looks to have failed spectacularly and the management team – and the new owners – will have to find a new approach to enable Powa to realise some of its earlier potential.

News today that the gunman responsible for shooting six dead in Michigan this weekend was an Uber taxi driver who, amazingly, picked up fares between his murderous crimes, is pretty alarming. There are also an increasing number of bad stories about Airbnb– both houses being trashed and guests finding that their accommodation is not available when arriving from afar.

The sharing economy is growing rapidly. My daughter earns quite a lot from Airbnb and I, myself, use JustPark frequently.

But clearly it comes at a price. London black cab drivers have to be of a high standard to get a licence. Hotels (and private b&bs) have to meet exacting H&S standards which are meant to safeguard guests.

Of course, many will argue that if those are things that concern you then stick to using black cabs and stay in a Premier Inn. But, as Amazon has shown, a disruptive new technology can destroy the existing model as those who liked browsing in a real book or record shop know to their cost.

Disruptive change is not always for the better.

As the Mobile World Congress gets underway again in Barcelona, we get many stories about the wondrous new features of 5G.

I live about 3 miles from Farnham in Surrey. It is hardly rural in any sense of the word – indeed it is densely populated as the roads and railways demonstrate. In my home it is impossible to get a 4G signal on my iPhone6. I can only get a 3G signal if I stand by a window. Conversely my aged Blackberry, which I keep as a backup, merrily goes on receiving emails on 2G wherever I am. I often have to resort to using it.

It’s a fair question “What would you prefer. Ubiquitous reception whatever the speed? Or very fast mobile communications but only in select places?” As WiFi becomes more widely available anyway, I suspect many might now opt for the former.

In our initial write-up of Capgemini’s FY15 results last week (see Capgemini looks to step on the accélérateur), we left a few questions hanging in the air. To summarise our initial post, Capgemini achieved headline revenue growth of 12.7% (to €11.9b, including a six month contribution from iGate), but just 1% like-for-like revenue growth. It was, though, predicting 7.5%-9.5% growth for FY16 (at constant currency). In the UK, as expected, revenues declined by 14% organically (to €2,150m) following the novation of HMRC Aspire subcontractor revenues.

So, a couple of things needed more investigation. Firstly, how much of the 7.5%-9.5% growth predicted for FY16 would be organic? And secondly, what is the underlying picture in the UK market and how will the region contribute in 2016?

In UKHotViewsExtra, Research Director, Georgina O'Toole, delves deeper into the detail of the results to provide answers to these questions. TechMarketView subscribers can access the research now in 'Update: Capgemini bets on digital and cloud for growth'. If you are not yet a subscriber, please contact Deb Seth to find our how you can access these and much, much, more.

London-based mobile advertising analytics start-up Adbrain has doubled up on last year’s funding (see Adbrain adds another $7.5m to the pot), raising a further $7.5m in a Series B round, which introduced Cisco Investments into the mix, alongside existing investors Notion Capital and Octopus Ventures.

Meanwhile, Adbrain co-founder and CTO, Rashid Mansoor, appears to have changed role to that of ‘Chief Scientist’ presumably on account of the fact he is now co-founder and CEO of ‘deep-stack cloud supercomputer enabling petascale computing’ startup, Hadean. Ex-Microsoft program manager – and since career CTO – Jason Atlas took over as Adbrain’s CTO at the beginning of this year. Sounds like he has good credentials, but if Adbrain’s co-founder can’t find the business exciting enough to stick to the day job, it rather makes you (well, me) wonder why.

They’re here – but I don’t think anyone has noticed. Colorado-based, NYSE-listed mid-tier IT services firm Ciber is frankly invisible here in the UK. Its only claim to fame in our market was when it acquired UK-listed, pan-European IT consultancy ECsoft back in 2002. Since then – nada. Subsequently it all went horribly wrong resulting in a new top team being appointed mid-2014 with the mission to turn the business around (see Ciber hopes for a profitable year).

And with notable success. Ciber is now back in profit, though headline revenues declined by 9% in 2015 to $787m, representing a 1% fall in constant currencies. The prior year’s $19.6m net loss is now a $3.3m net profit, though operating margins are very undernourished, at 1.5%, as restructuring charges took their toll.

Ciber generates about 45% of its revenues from outside of the US, of which perhaps 10-15% derives from the UK, its largest European market. This pitches Ciber’s UK revenues at some £20-25m and leaves it battling with a host of similar-sized mid-tier players for the droppings left behind by the top tier players.

It’s hard to see a USP for Ciber – but I guess that’s the challenge for new management, led here in the UK since January 2015 by ex-BT Global Services, ex-ECS executive Andy Nicholson.