ExactTrak, one of the April 2016 cohort of Little British Battlers, tackles the problem of mobile data loss head on with its USB-based Security Guardian. While USB sticks can be a byword for compromised and lost data, ExactTrak uses the USB format to its advantage, embedding security into the hardware. 

Hardware based security has several advantages, including eliminating the operating system weak link, and is something Intel/McAfee for example, is invested in. ExactTrak is on the leading edge with an available product, and UK designed and manufactured to boot.

It is not just hardware – management software provides a range of sophisticated capabilities including location tracking, turning data access on or off according to tightly defined geographical zones (an individual building for example) using GPS and GSM, as well as specified networks, devices, and encryption. There is even an element of “Mission Impossible” because if the USB is lost, an electric pulse can be remotely triggered to physically destroy the memory card (without harming the human carrier).

There is obvious appeal for this type of secure mobile solution where it is necessary to move highly sensitive data (e.g. healthcare, legal, defence) and with the EU General Data Protection Regulation due to come into force in two years, the appeal will become more widespread.

CEO and founder Norman Shaw has ambitious plans in action, including agreements to embed the core technology into AMD processors to be seen in products from Dell, HP and Lenovo. This has the potential to turn it into a high volume product with recurring subscription revenue – with potentially impressive impact on ExactTrak’s currently modest revenue. Major players committing to emerging ExactTrak, rather than more established suppliers, is a tangible sign that it is punching above it weight, which is the epitome of an LBB.

Subscribers to the TechMarketView Foundation Service can download the latest edition of IndustryViews QuotedSector to see our latest analysis of how the stock performance of UK software and IT services companies listed on the London Stock Exchange compares with their international peers.

For further information please contact our Client Services team.

Digital Retail continues to perform at Sanderson Group and is on form to deliver strong full year performance, according to the latest trading update, which comes prior to the release of its interim results. There is follow through from the good start to the year in Q1 (see here), with the business as a whole also looking strong in H2 (to March 31 2016).

As a result of both sales order intake and the order book looking good, the company is expecting to report revenue just shy of £10m (vs. £9m) and operating profit just under £1.5m (vs. £1.37m).

What really stands out is that of the £6+m sales order intake (up from £4.94m), over £2m was from new customers. This figure also exceeded the total value of business from new customers during the whole of FY15, which shows Sanderson has its finger on the pulse of its targeted segments. We are used to seeing Digital Retail do well, but £1m of the new business was from the Enterprise business, which houses the slower moving manufacturing segment.

The other point of note is that while Digital Retail is doing well in its frantically changing market segment and is set to increase revenue, short term profitability was impacted in H2 due to investment in management, and sales and delivery capacity. This underlines the need for continual adaptation in the digital retail market, something BHS has not managed. While the markets are nervous about the retail sector, as a provider of solutions to help deliver digital retail Sanderson is in a good position, but it will need to keep its own work rate high, and continue to invest organically and in acquisitions. 

The fourth annual ‘Evening with TechMarketView’ will take place on Thursday 8 September 2016 and tickets are selling fast! Following the success of the sell-out 2015 TechMarketView Presentation & Dinner, this year’s event will once again be held in the magnificent premises of the Royal Institute of British Architects (RIBA) in Portland Place, London, from 6.30pm.

The evening, which will be centred around our 2016 research theme ‘Surfing the Waves of Disruption’, will commence with short, insightful presentations from the TechMarketView analyst team highlighting key trends in the UK software and IT services market. This will be followed by plenty of time for networking over drinks and a sumptuous three course dinner with your peers.

We’re expecting a similar audience to the previous three years with around 250 ‘movers and shakers’ from the UK tech scene, for what has been described by previous C-level attendees as “the best networking event in the industry”.

Tickets do sell quickly, so we’d advise you to book early to avoid disappointment! We’ve held the prices at the same level as last year - £395+VAT per person for TechMarketView research subscription clients and £495+VAT per person for everyone else. There are also a limited number of tables of ten available at £3,950+VAT.

To secure your place, please click here to book or email tx2 events who are organising the event for us on eventenquiries@tx2events.com.

We also have a couple of sponsorship packages available for the event - to express interest or request further details, please email Tola Sargeant in our Client Services team. 

Concentra caught our eye due to its focus on business analytics. The firm was established eight years ago, following a merger between a group of consultants and technology business. Concentra now has 100 people based in central London (with satellite offices in the Netherlands and Toronto).

It is an interesting story. As a group of operations consultants, do you continue slaving away over spreadsheets, and other frustrating tools, into the early hours of the morning. Or do you find a better way of doing things? CEO Rupert Morrison and his cohorts chose the latter and decided to merge their operations knowledge with the technology of Concentra.”

The calibre of the management team is notable. Morrison has 20 years’ experience in operations consulting, supply chain optimisation and organisation design, at A.T. Kearney before Concentra. CFO, Patrick Gracey has twenty years’ experience in the computer service sector, growing companies to their full potential.

Concentra offers a mix of products and services, but the big success story of late has been the company’s product portfolio. The company continues to invest heavily in R&D. The result has been strong licence growth over the last three years. Focusing on niche markets such as healthcare, pharmaceuticals and financial services, the main product is OrgVue.  OrgVue transforms how organisations manage and use data for HR analytics, organisation design, workforce planning and transition management. Concentra includes some of the large strategy consulting firms as clients (as well as numerous other big name corporates); those firms claim they can complete assignments 3x faster with the use of OrgVue’s functionality.

Concentra’s aim is to get to a point where anyone charged with organisational design insists they need OrgVue to get the job done. Giving confidence they can achieve that goal, the churn rate with existing clients is very low. In addition, Concentra has bold ambitions to significantly expand its customer base, notably in the North American market. And OrgVue is not the end of the story. Concentra has just launched a new product too: SupplyVue for supply chain analytics. This is only the beginning of the story for Concentra. We can expect to see much more from this Little British Battler.

There are few companies – let alone tech companies – whose results make it from the business pages to the front pages of the media. Apple is one of the few. In the past, the reports have been up there at the ecstatic end of the scale. Today, you might be led to believe it was the end of Apple. One report was headlined ‘Rotten Apple’.

It is an undeniable fact that last night Apple reported its first sales decline in 13 years as Q1 sales dropped 13% to $50.56b yoy. The Times reported ‘Profits plunged 22%’. But they still managed $10.5b profits in just one quarter. It seems strange to ascribe such doom to a company that increased its cash mountain to $233b! In after-hours trading, Apple shares were down some 8%.

All this was pretty much as expected so surely could have taken nobody by surprise. The ‘problem’ with Apple was that the Apple 6, with its larger screen, was such a runaway success that repeating it has proven very difficult. Although the 51.2m iPhones sold (down 16%/10m from this quarter last year) was ahead of expectations, they were at a lower unit price. It was China ‘wot done it’ as sales there were down 26%. Conversely iPhone sales to the enormous Indian market were up 56%. Sales to Europe ‘only’ fell 5%. iPad sales were down 19% at $10.25b and Mac sales by 12% at $4b. But revenues from stuff like Apple Pay and Apple Music rose 20% to $6b – welcome good news. The strong dollar also hit results. The fall in revenues would have been 4% better (only down 9%) in constant currency.

What Apple needs is a ‘Next Big Thing’. The Apple Watch has so far proved not to be it. The long promised revolution with Apple TV seems elusive. The iPhone, iPad and Mac markets are all in maturity and it really is difficult to forecast a reversal in the current trend. Even increased volume would probably be countered by lower selling prices from, say, the new smaller/cheaper iPhone SE. Apple itself is predicting continued falls in the current quarter.

Maybe the Apple iCar (Apple’s worst kept secret) is the long-awaited answer?

Now that the campaigning for the EU referendum at the end of June has started in earnest, we are more able to assess the quality, breadth and depth of the arguments for both sides of the debate. It is clear however that the decision will be made based on a multitude of different factors and that this important vote will be a close run thing.

The uncertainty surrounding the decision is already having an impact on the economy and a vote to Leave would result in the renegotiation of Britain’s trading agreements and its position in the world. Opinions vary markedly as to the impact of a “Brexit” on the economy and other issues such as migration in the longer term. 

In The EU Referendum – In the balance, we examine the facts and test the hyperbole of this crucial debate and present our expectations of the impact of the referendum and a decision to “Leave” on the UK market for Software and IT Services. The impact will probably be most severely felt in the Financial Services sector where investment decisions could be postponed and in the public sector where Central Government departments will be distracted by the repercussions of a Brexit decision. This would result in additional pressure on market growth, in many cases being likely to slow initiatives to modernise and embrace digital transformation.

This report is available to TechMarketView subscribers, here.

Finally, they’ve ‘got it’! But is it too late? Pretty much ever since (now) Exeter-headquartered, services marketplace, blur Group launched on AIM back in October 2012 I have been hammering on about its flawed business model (start with Blur loses focus on revenues and work way, way back). The flaw was that blur’s commission fee (i.e. revenue) was contingent on clients achieving certain project milestones, which of course were frequently extended or missed altogether. In effect, blur was taking the risk on the client’s project but had no influence on the outcome – all for a 20% gross margin. They lost tons of money.

blur’s charismatic CEO and founder, Philip Letts, finally saw the light (‘helped’ with an FRC inquiry on revenue recognition, now satisfactorily resolved) and spent last year fundamentally changing blur’s business model, eschewing contingent, low-value projects with SMEs in favour of focusing on indirect services spend in large enterprises.

But all of this has come at a price. Revenues in 2015 (to 31^st Dec.) almost halved to $2.7m (blur, bless, reports in USD) but, even so, they managed to trim net losses ever so slightly to $10.1m (2014: $10.5m). There’s still $7.1m cash left in the bank (2014: $17.4m) and operating cash burn declined by 15% to $8.2m.

But here’s the real crunch. Lett’s made the obvious point that sales cycles in enterprise prospects are much longer than for low-value, SME projects: “(W)e expect the cycle between initial meetings and the placement of higher volumes of project spend … to extend over several quarters”.

Let me say again; there’s nothing wrong with a services marketplace if it has the right business model. Letts should have realised this sooner!

Capgemini’s Q1 results announcement is strong with management remaining confident of the outlook.  At the headline level, the Group achieved revenues of €3,092m, an increase of 11.8% year on year and 13.9% at constant exchange rates. Organically (predominantly taking out the impact of the iGate acquisition effective from 1^st July 2015), revenue growth was a still solid 2.9%.

As we stated at the time of the full year results – see Capgemini bets on cloud and digital for growth– the management team’s confidence is founded on its belief that it has positioned effectively to attract significant cloud and digital business. Indeed, following 23% growth in ‘cloud’ and ‘digital’ in FY15, growth in Q1 was 27%. It can be easy to just take these figures with a pinch of salt, as much depends on the definition of digital used. However, having spoken to Capgemini recently, my understanding is that the company’s definition of digital is pretty tight and essentially focused around the implementation of Systems of Engagement (SoE) and the associated integration services. We have seen far broader definitions than that being used! And looking at the Q1 results presentation, example wins in the period span a diverse range of industries. The consulting and application services businesses, in particular, are benefitting from Capgemini’s success in this area.

The UK is highlighted as one of the regions that has driven a strong start to the year for consulting. Overall, the UK&I, which makes up 17% of global revenues, had a good start to the year: the region reported an 8.1% increase in revenues (constant currency), driven by double digit organic growth in the private sector. The UK organic percentage increase is not given in the Q1 results announcement, but, by our calculations, organic (constant currency) growth was likely in the low to mid-single digit percentage area. Of course, the HMRC Aspire contract remains an important factor in the UK. Recently, the good news was that the company has signed a new three-year contract with HMRC through to 2020 (see HMRC begins Aspire megadeal breakup). In FY15, the UK business declined by 14% organically due to the novation of Aspire subcontractor revenues. Under the new arrangement, we will see some elements of the contract re-let over the next couple of years (tender documents have been published for some), so there is likely to be a negative impact on the FY16 and FY17 results. However, like in the global business, we sense a significant amount of confidence in the UK when it comes to winning new digital and cloud business, in both the public and private sectors, to soften (or indeed balance out) the Aspire effect.

As readers have pointed out, the 140 character limit to Twitter DMs, that I referred to in my Twitter disappoints post earlier today, was removed a few months ago. Just shows how rarely I use that feature. I'm still unsure why I would use DMs rather than other messaging services.

Perhaps I should send a tweet to apologise.

In the current reporting season, I have had to use the word ‘disappointing’ or worse to describe many a one time stars – Apple, Google, Twitter and others. But tonight the star mantle has been handed to Facebook. Their Q1 results busted all expectations and their shares soared nearly 10% to $118 in after-hours trading.

Q1 revenues rose 54% to $5.4b and profits tripled from $509m to $1.5b yoy. User growth in Q1 was 15% to 1.65b from last year. 989m now access via mobiles – up 24%. Unlike Google (and the rest) Facebook has been able to sell more mobile ads at higher prices. Facebook is now the giant in display ads. eMarketer estimates Facebook will garner 31% of ALL display ad revenue in the US in 2016. It all seems just the beginning too with Facebook rolling out its video ads and other new formats. In Jan Facebook said users viewed 100m hours of video every day!

As I have said many, many times the magic of Facebook is that it has social media for every age group. Sure Facebook itself is now for oldies like me where the youngsters put sanitised versions of their lives for consumption by parents and grandparents. But Facebook also owns Instagram which is a great hit with millennials. Instagram now has 400m active user and is expected to carry $1.53b of ads in 2016. Then there is WhatsApp which also now has in excess of 1b active users. Recently Facebook split out Messenger which now has 900m active users. WhatsApp and Messenger carry 60b messages a day. Users create 1b Facebook posts a day. These figures are pretty mind-blowing!

The only note of caution I can think of is to remind you of the other stars that have shot to fame and fortune only to come crashing down to earth. No suggestion or likelihood of that happening to Facebook anytime soon. But the ‘star cycle time’ is certainly getting shorter and shorter as so many are finding out to their cost.

CSC has received some welcome good news with approval from the Financial Conduct Authority (FCA) for its takeover of Xchanging.

The FCA was looking into the impact of the change in control of Xchanging Broking Services (XTB), the former joint venture enterprise partnership with Aon, which Xchanging took full control over in 2011 (see Xchanging buys out Aon from enterprise partnership). 

The only hold up now is getting written approval from the German regulator over the change in ownership of Fondsdepot Bank GmbH– the former banking JV with Allianz Global Investors, which Xchanging acquired in 2014 (see Xchanging takes full control over German banking JV).

The clock is ticking. CSC now needs to tie up these remaining loose ends prior to the 16 May deadline.

Founded by a charismatic duo, Hellen Bowey and Alexandra Eavis, Alcove is a Little British Battler (LBB) in the true sense of the term, a start-up punching well above its weight that promises to disrupt an established market in some style. Alcove provides an Internet-of-Things (IoT) powered ‘telecare’ system that supports independent living by combining real-time data from wireless sensors with that from other in-home and wearable consumer devices, such as a smart watch that acts as a panic alarm and a tablet that can be used for video calls.

The SME has a software-led approach, adapting, integrating and aggregating the best consumer hardware and developing its own bespoke software wrapper. Data is analysed and displayed simply in a web-based application and used to send real-time personalized alerts to help keep older and disabled adults living independently in their own homes and out of residential care. For the time being, Alcove is focused on telecare rather than telehealth – the team are passionate about replacing hard-wired pull cords and pendant alarms with a data-driven service that enables preventative care and saves care and support providers money.

Although Alcove was only founded in 2014 and its products didn’t hit the market until Q4 2015, it is already proving itself in the domiciliary care market with customers such as East Thames Group, a housing association with nearly 14,000 homes, and Sheffield City Council, as well as some heavy-hitting partners. Clearly it is early days for Alcove and like all our LBBs it will face challenges as it scales, but with a strong pipeline, compelling product and driven team we have high hopes for its future. 

Berkshire-based INOVEM popped up on our radar following its win at the Ministry of Defence earlier this year. Its successful application to become a TechMarketView Little British Battler came partly as a result of this win and others via G-Cloud.

The company’s product is a SaaS-based collaboration tool called Kahootz. It allows users to create online workspaces where they can collaborate with other employees and/or with external users, such as customers and partners. It could be for specific projects that last a finite period of time, for example to share bid information or for tender management. Or, it could be on an ongoing basis - for example,  the MoD is using it to communicate with companies in its supply chain.

Importantly, the tool can be customised by the end user organisation itself (i.e. by whomever is running the project), thus negating the need to pay for an external consultant as per some other collaboration tools. Furthermore, minimal training is required to get up and running with the tool, which helps Kahootz build adoption numbers. The Kahootz active user licence means customers only pay for active users (rather than paying for all potential users from the start) meaning start-up costs are relatively low.

Currently, most of the Kahootz business is coming via the G-cloud, demonstrating how well the system can work for very small providers. Other customers include the Health and Safety Executive and RICS (Royal Institute of Chartered Surveyors). The public sector is the key focus area for Kahootz, but we may well see it diversify into commercial sectors in time.

At first glance there seems little to get excited about in the interim figures from PROACTIS, the Wetherby-based provider of spend control and eProcurement solutions. However, a deeper look reveals an interesting strategy to exploit the potential in transaction and procurement networks.

The figures showed organic revenue from spend control solutions up just 4% (down from 18% in H1 last year), with EBITDA a smidgeon higher at £2.4m. Headline growth rates were depressed by the move to multi-year SaaS deals, echoing the story seen many times elsewhere. Nevertheless, there were some positive trends concerning cross-sell and upsell opportunities, boosted by the company’s recent acquisition spree which has brought in new capabilities and services in document scanning, marketplaces and e-auctions which can build share of wallet. Since the year end, Proactis has added Due North to its stable of companies, see here. There is also a solid increase in the rate of adding new customers, further supporting the management’s confidence about the software business.

We are intrigued about PROACTIS’s plans in building a Supplier Network, leveraging its unique position with its existing customer base of buying organisations across the public and private sector. The buyers can enlist their supplier communities onto the group’s nascent network, providing opportunities for e-invoicing, accelerated payments, dynamic discounting, etc. Both supplier and buyer would benefit from lower costs, faster transaction times and slicker reporting. This side of the business may well take time to develop, with nominal revenue currently included in analyst forecasts and lots of competition in a fragmented market, but it could be a significant driver of value.

Cash at year end had risen to £4.6m which will support the organic business, but the management are on the lookout for more acquisitions to accelerate the group’s development. Worth watching.

Earlier this month we reported that First Derivatives, the provider of Big, Fast Data solutions, was in bullish mood, see Pushing expectations higher, as it benefited from a strong consulting business, record software sales and a flurry of M&A activity.

The company’s confidence will be further boosted with today’s announcement that Thomson Reuters will use FD’s Kx database technology to drive its financial Data as a Service platform, Velocity Analytics. This is a major endorsement of First Derivatives’ solution and could provide significant scale for its cloud-delivered offering. Users will be able to deploy high-speed analytics to mine the extensive real-time and reference data generated and collected across Thomson Reuters to support trading strategies, risk management and regulatory compliance. First Derivatives had already with introduced a hosted/cloud offering thus extending its customer reach beyond the large investment houses where it has numerous strong and valuable relationships, but the TR deal should provide a new channel to a much broader range of customers and speed geographical expansion. The service will be delivered over the Thomson Reuters Elektron Network.

Thomson Reuters is probably not the easiest of partners to deal with and the cultures of the two organisations will be radically different, but the deal should provide another avenue for substantial growth.

I have not had a good word to say about Twitter for some time. Read #RIPTwitter and work back. I find Twitter hugely complicated. My Twitter feeds are a jumble of trash in the main. Last night Twitter shares ‘crashed’ by 12% after hours as they missed revenue targets as advertisers remain unconvinced of the effectiveness of the channel. But actually there were some small encouraging signs. Twitter has stopped losing users which rose 3% yoy to 310m.

Losses reduced from $162.4 to $79.7m yoy. Twitter has NEVER made a profit in its 12 year life and its shares have halved in value since their IPO.

Twitter now sees the future in live events/video. Indeed, it’s about the only time I now use Twitter. Ie following a football game or, sadly, a specific disaster/ terrorist attack.

In an interesting announcement, Twitter reported a 50% increase in DMs (Direct Messaging) Of course there are many competitors in the messaging arena eg Facebook and Apple.  But Personally I find the increase in the number of message sources I have to check – from Facebook, Linkedin, iPhone and now Twitter – highly annoying. If you want my attention, please send me an email.

Note - This post has been changed since original publication to remove reference to 140 character limit on DMs.

Further to my (much quoted) post on Monday (see Outsourcery short on cash – again), AIM-listed cloud services minnow Outsourcery has just announced that key partner (and principal secured lender) Vodafone is bailing them out again with a new funding facility. Voda first came to Outsourcery’s rescue last July with a 48 month, £4m loan at 7.5% p.a. in exchange for a warrant over 3m of Outsourcery’s shares at 30p a share (see Outsourcery rings up £4m loan with Vodafone).

Outsourcery’s shares slumped to 3.6p after Monday’s news but have rocketed up to a mighty 6p as I write. Its shares listed on AIM in May 2013 at 110p.

Outsourcery has never made a profit. IMHO it never will.

There were no great revelations as the management of Earthport held their investor day yesterday, just a straightforward exposition of how things are. The story remains much the same as before, as Earthport builds a simpler, more efficient and cheaper system for cross-border payments, opening up a huge market opportunity, albeit longer term.

The central issue and the reason for a disappointing set of interim results as well as a further long wait for profits is the time it is taking to gain real traction within the banks who have signed up as customers. Realising the full potential from any one of these customers would transform Earthport’s P&L, but the reality is that only minuscule proportions of their activity have thus far been shifted onto Earthport's platform. 

The blame can be fairly laid at the door of the banks, with their ultra-complex systems, conservative structures and competing priorities. A wholesale shift to use Earthport would require significant changes to the banks’ core systems which would be a significant undertaking and not without risk. Earthport is however not completely without fault, admitting to lessons learned re the time and effort taken to educate customers and finalise contracts. To provide a faster route to volume, Earthport is looking to other customers in remittances and ecommerce, but increasing penetration within the banks is central to the five-year vision it presented of a c.£100-150m business with a 30-35% EBITDA margin.

We would look to the extended management team to explore ways to accelerate the development of its key customer relationships, but it looks like persistence and patience will be key requirements going forward.

Atos reported on its Q116 results on a very busy day for the TechMarketView team – our Little British Battler (LBB) Day. As a result, we kept our initial write-up short and sweet (see Atos: Currencies take sheen off strong start), but there is much more to add, particularly from a UK perspective.

As we previously highlighted, it was currency effects that dragged down growth at the global level… from a 15% increase at constant currency to a 1.6% organic revenue increase. At the UK level, the organic decline was 7.7% (from €485m to €447m) but was a deeper 9.6% at constant exchange rates. But this decline did not come as a surprise. We had always expected this dip in Q1 due to a number of one offs in the comparable period. Indeed, if we take the growth between Q114 ad Q16, it stands at 6%.

In UKHotViewsExtra, Georgina O'Toole delves into the factors impacting the Q1 results and highlights why we should see an improvement in the UK results in future quarters. TechMarketView subscribers can read the note - Atos Q1: UK revenue dip as expected - now. If you are not yet a subscriber, please contact Deb Seth to find out how to access the research.