To help it better meet the needs of its local government customers, and the citizens they serve, Capita has unified more of its software businesses under the Capita One umbrella.

Although Capita One has existed for several years, it primarily covered the education and social care areas of Capita’s local government software offering. The new structure sees most of Capita’s local government software move under one roof, including housing, revenue and benefits, digital and document solutions.

Anthony Singleton, managing director of Capita’s suite of One software products, spoke to TechMarketView about the rationale behind the move. He admits that Capita’s software teams have been too siloed in the past, but that it will now take a more holistic approach.

Singleton explained, whilst its local government customers are still concerned about back-office efficiencies, they are increasingly focusing on improving interactions with their citizens. He expects to see a continued shift to the cloud and a growth in automation and AI in local government, although he admits most of the “low hanging fruit” in terms of digital transformation business has been taken. Austerity has been a catalyst to digital transformation, but the level of transformation achieved varies significantly across the UK.

Capita have recently introduced automation to its revenue and benefits software (see Capita: bringing automation to Revs and Benefits). We can expect to see more activity from Capita in this area, as well as in mobile applications such as chatbots.

We may see some of Capita’s platforms merge and become more open over time, but moving to a single platform is not on the agenda any time soon. For its local government customers, closer integration of Capita’s software should help improve data sharing, facilitate better decision making and drive more timely interventions.

As with all local government suppliers, Capita’s challenge is to help its customers do more with less. Bringing together its software businesses should better position Capita to look for efficiencies across local government regions and help its customers provide a better service to its citizens.

There is a magnificent irony that, free from the shackles of erstwhile owner HP (in its various guises), private equity-controlled offshore services firm, Mphasis, is growing revenues faster in what is now DXC than it is in its ‘direct’ customers. As a result, revenues from direct clients comprised 70% of Mphasis’ revenues in Q1 FY18 (to 30th June), down from 72% the prior quarter.

Just for the record, Mphasis’ headline revenues grew by just over 1% yoy to Rs15.4b, about 2% growth qoq. Operating profit declined, knocking margins down 140bps yoy to 13.8%, 80bps lower than the prior quarter.

This must all be very confusing for DXC, what with Mphasis vying for business in its accounts on the one hand, and now HPE teaming up with Bangalore-based offshore services major, Wipro, to offer on-demand infrastructure services (see here), undoubtedly eyeing up DXC’s accounts on the other.

Such is the rich tapestry that is the global IT services industry.

We look forward to welcoming well over two hundred CXOs from the world of UK tech and beyond to our flagship event, AnEvening with TechMarketView, in October. The 2017 event is held in association with Sage and will take place at the Royal Institute of British Architects (RIBA) in Portland Place, London on Thursday 5th October, commencing at 6:30 pm with welcome drinks.

This will be followed by an hour of valuable foresight from the TechMarketView analyst team on the prospects for tech suppliers in the UK market in 2018 and beyond, especially in the context of ‘Unlocking the Intelligence’, our theme which embraces the transformational potential afforded by digital technologies such as artificial intelligence, machine learning and cognitive computing.

We would then like to welcome you to a drinks reception ahead of a sumptuous three-course dinner. During the evening, there will be plenty of opportunity for networking with other ‘movers and shakers’ in UK tech.

The Evening with TechMarketView has been a sell-out for the last four years so book early to secure your place. 

We hope you can join the TechMarketView team, and of course our esteemed chairman Richard Holway MBE and managing partner, Anthony Miller, at what so many executives tell us is the one industry event they simply can’t afford to miss!

For full details and to book your place visit tx2Events here or contact event coordinator Tina Compton at tx2Events (tina.compton@tx2events.com).

There’s quite a few parallels between Atos’ H1 results yesterday (see Atos: “Technology leap” drives H1 success) and Capgemini’s H1 results announced today.

Organic revenue growth (constant scope and currency) for Capgemini stood at 2.7% with revenues reaching €6,412m (compared to 2.2% for Atos). Moreover, both experienced an improvement in performance in Q2, highlighting continuing momentum; for Capgemini Q2 organic revenue growth was 2.9%. For both, continental Europe contributed strongly to H1 success; for Capgemini, that was put down to strength in application services and consulting, resulting in double digit percentage growth in both Germany and Italy. In addition, both highlight the benefits they are seeing from investment in digital technologies; for Capgemini, investment in digital customer experience and digital manufacturing, combined with sectoral expertise, has translated to strength across the manufacturing, financial services and CPRDT (consumer products, retail, distribution & transport) sectors. Digital and cloud revenues were up 23% (now representing 35% of total revenues). Lastly both reported operating margin improvement at the 'adjusted' level; for Capgemini, it was an increase of 30bps to 10.5% (the 'real' OM was up 6% to 8.4%; compared to 5.2% for Atos (a small decline)).

But, of course, each faces its own legacy situations. For Capgemini, in the UK, that legacy issue remains the transition of its flagship HMRC Aspire contract. The expected decline in revenues for the UK came to pass, as insourcing of some elements of the contract continued. The result was a 5.9% ccy revenue decline to €894m (14.7% decline on a reported basis). Public sector, which once (not too long ago) dominated Capgemini’s UK business, now accounts for just 38% of revenues. Meanwhile, the UK private sector has a “healthy” performance, driven by financial services and energy & utilities (in Q1 – see Capgemini Q1: the Aspire impact (again) and Making Tax Digital (or not)– private sector growth was mid-single-digit percentage). House of Fraser was a key win in March, showcasing some of Capgemini’s newest IP (see House of Fraser shops for fresh ideas with Capgemini). As well as the private sector strength, there are some other positives for the UK. Firstly, the insourcing journey at HMRC is now complete. Probably related to that, sequential growth in the last quarter (Q217 vs. Q117) was positive (+5.4%) and the y-o-y decline in Q2 was not as steep as in Q1 (-4.2%). Moreover, the region remains very profitable with a 15.1% profit margin (up 60bps). And there was also positive news for the public-sector business, which extended its relationship at the Environment Agency, benefiting the global bookings picture.

One difference that really stands out between Atos and Capgemini is the headcount direction of travel. Atos’ headcount has declined at both the global and UK level – the decline, which reflects increasing industrialisation and automation - is mainly being handled through natural attrition with some being replaced by different – namely digital – skills. Meanwhile, at Capgemini, the worldwide headcount increased y-on-y: +6% to 196K. However, all the increase was attributable to growth in offshore locations, which represent 57% of Capgemini’s total headcount. The increasing offshore weight at Capgemini has been a consistent trend over the last few years. But we wonder, how long for given that it, too, is investing heavily in automation, and given that 62% of revenues come from application services, where the trend is increasingly for agile development requiring client site presence. There is still a long way to go before automation will make a serious dent in offshore application services but, slowly, the differentiation in offshore headcount between the leading UK players is becoming less of an issue.

When I want to know how much I’m spending and what I’m spending it on, I ask Quicken. Well, not ask, actually – I have to launch the programme on my laptop and run a report. But I’m just an old-fashioned boy and I just haven’t quite got my mind around talking to my technology.

If – or perhaps, when – I do, I could always ask that question of London-based banking ‘chatbot’ startup, Cleo, which has just raised a further £2m in a seed funding round led by LocalGlobe along with various existing investors. Founded in 2016, Cleo raised $700m in angel funding in January this year (see Angels chat with Cleo about managing money).

From what I understand, Cleo is ‘read only’ – in other words, it can analyse transactions from your bank account(s) but not manipulate money. So once Cleo has told you the answer to your question, you’ll have to go to a ‘real’ banking app to do something about it.

But banks are already getting into the chatbot act themselves, including CapitalOne and Amex, both using Amazon’s Alexa as the voice interface. Others are following, and there are other startups besides.

So unless, investors are going to be prepared to dish out considerably more dosh to turn Cleo from a princess into a queen (of banking, that is), then maybe it will do better to sell its ‘smarts’ to someone else.

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If you need any further proof that you can turn a UK startup into a global unicorn while making handsome profits and generating cash – if you have the right business model – then look no further than food delivery service Just Eat (start here and work back).

Half-time results (to 30th June) reveal net revenues up 44% to £247m, with operating profit running in lock-step, holding operating margins rock solid at 20%. The business generated nearly £46m in net cash in the period.

The ‘right’ business model basically means asset-light, where ‘assets’ include people as well as facilities. This is what differentiates Just Eat’s business model from that of archrival Deliveroo, which engages (I guess I shouldn’t say ‘employs’!) a fleet of delivery riders and is now building a network of kitchens too.

Of course, competition looms in the shape of interlopers Amazon Restaurants and UberEats, as well as ‘traditional’ competitors, such as GrubHub, Delivery Hero and Takeaway.com. Meanwhile, the industry will continue to consolidate the smaller players out of the market. But I can see no compelling reason why the industry will consolidate down to a market of one any time soon – or indeed any time at all. I think different country markets will favour different players, as is often the case for services businesses. This applies to taxi services too, by the way.

For the record, Just Eat IPO’d in April 2014 at 260p per share. Its shares are now worth over £7, valuing the business at nearly £5b. Tuck in!

Judging by today’s trading update from once-Unicorn Monitise, you have to wonder what’s going to be left for Fiserv to acquire (see Fiserv swoop for Monitise).

Revenues remain in decline, with not a single contract signed for its flagship FINkit product. Meanwhile, they continue to burn cash.

With masterful understatement, Monitise CEO Lee Cameron reported that “Current trading remains challenging”.

So sad.

Official FY17 numbers out today from SCC show it’s seen a handsome return on its three-year strategic plan. The privately-owned firm saw turnover increase almost 9% to £1.7bn, with EBITDA up 26% to £41m.

The company’s heritage is in resale, but SCC has undertaken a bold and effective strategy to build its services capabilities, with particular focus on the mid-market. Indeed, services in the UK are now 31% of revenue – and grew 10% to £194m in FY17. Data Centre Services specifically (where SCC has put a lot of investment) were up almost 30% to £56m.

We think the company's focus in the mid-market coupled with careful management of exisiting major accounts (e.g. Department for Work and Pensions, DXC Technology,Northern Gas and Ladbrokes) contributed significantly to its progress.

SCC also announced new contracts in the year, including Grafton Group, Interserve, Liverpool Victoria Insurance, Secure Trust Bank and Skipton Building Society.

SCC CEO, James Rigby, is clear that the company’s future is firmly in the areas it has worked hard build upon, namely cloud, data centre services, managed services and managed print. But something tells us SCC will continue to be a company that moves forward with the times, working hard to shift into growth areas. Indeed, Rigby highlights future growth in areas such as data and cognitive.

See where SCC places in our leading players ranking here: UK SITS Supplier Rankings 2017.

A Q1 trading update (to end June) from Sophos has seen the company reaffirm its outlook for FY18. The Abingdon-headquartered security firm said FY18 would see mid-to-high billings growth and a 50-100 bps improvement in cash EBITDA margin.

As for the first quarter itself, billings increased 19% (constant currency) – in spite of Q1 FY17 being a strong comparison – while revenue grew 14% (constant currency) to $141.8m. The Americas out-performed other regions (including EMEA which saw mid-teens billings growth) with billings up 25%. Operating losses deepened in Q1 to $15.6m from $4.9m, which reflects the company’s increased investment in R&D alongside a shift of billings to recurring subscription contracts.

The end user business has continued to see strong demand, with billings growth of more than 30%. Sophos is taking advantage of the “surge” in customer demand for anti-ransomware solutions, with a “temporary shift” in its go-to-market. As a result it’s been rewarded with high single-digit growth in network security.

Sophos has also been enjoying a very positive performance in its share price. When it announced its FY17 results in May, shares were up 8% to 398p. Although this morning’s upward movement is only slight, shares have continued to track upwards since May and are currently at 485p (up from 225p when the company floated in June 2015).

For the first time since Q3 2014, the number of UK software and IT services (SITS) buyers exceeded the number of sellers in the quarter. There were 83 UK buyers and 77 UK sellers including 45 domestic deals in Q2, according to data from corporate finance firm, Regent Partners.

Acquisitions of IT services companies accounted for 56% of all UK SITS deals, down from 58% in Q1, with consultancies and SIs representing the largest sector at 21%, followed by vertical solutions providers with a 14% share. Acquisitions of managed services businesses accounted for 9% of deals in Q2, down from 15% in Q1. Demand for industry specific expertise continued to be strong in the software sector, with vertically focused companies being the most sought after, accounting for 14% of the deals.

Subscribers to the TechMarketView Foundation Service can download our latest quarterly review of UK software and IT services M&A in the just released report, IndustryViews Corporate Activity Q2 2017.

For further information, please contact our Client Services team (info@techmarketview.com).

Amazon’s Q2 results caused a slight share price wobble (-3% in afterhours trading) after earnings per share failed to reach Wall Street’s expectations. EPS came in at 40 cents a share, way off expectations of $1.42 per share. This happened in spite of quarterly revenue coming in ahead of expectations ($38bn) – and was in part due to the continued and significant investment the company is making in a wide range of products.

A key revenue growth driver was Amazon Web Services (AWS), which saw sales climb 42%. It’s a fabulous number for which most tech companies would give their right arm. However, it is down (very slightly, admittedly) from 43% in Q1, and continues the trend for slowing growth in the cloud business (since Q1 2016, growth has slowed quarter by quarter from 64%). By our calculations the AWS operating margin is also down a bit on Q1, to 22% from 24%.

Is this a very bad sign? Not really. It’s an indicator of continued investment, price decreases and no doubt increasing competition from Azure (which was a strong growth driver for Microsoft in Q4, with revenue up 97%). AWS is a maturing business in a market that is growing up. Furthermore, it's not going to hold back on product investment for the sake of profits. 

AWS continues to move forward on new products and win more and more significant enterprise business. That said, it - and public cloud more generally - is not the right answer for every organisation at the moment. While many have spent at least the last 18 months implementing either AWS or Azure (or both, and/or others), most mainstream organisations remain open to developing a hybrid approach to cloud. There are, of course, some that are much more committed to the public cloud route than others – including FrieslandCampina, which is migrating its SAP estate to AWS with the help of Little British Battler,Lemongrass.

Q1 results from BT this morning show that Global Services held revenue steady at £1.2bn over the comparable period last year. That said, its adjusted EBITDA dipped from £119m to £73m.

More broadly, BT Group saw revenue edge up 1% to £5.8bn with adjusted EBITDA down 2% to £1.7bn. Profits were hit as BT had to pay £225m to Deutsche Telekom and Orange, who became shareholders in BT following its deal to buy EE. Tied up in that deal was a warranty to protect them should BT’s share price take a hit – which duly happened following its accounting scandal in Italy. BT shares were down c2.5% at time of writing.

Ironically, EE (revenue +4%, adjusted EBITDA +19%) turned in a positive performance for the quarter. In due course it will be brought together with the existing Consumer business (revenue +7%, adjusted EBITDA -3%) to create a new Consumer business operating as three distinct brands: BT, EE and Plusnet.

The Group has said it will restructure its Global Services division under a new chief executive, prioritising cloud hosting and service delivery over network connectivity to better support the digital transformation ambitions of its multinational corporation customers. Read more on the full year results for 2017, here: Further BT restructuring to reverse business revenue declines.

See where BT places in our latest UK Software and IT Services ranking, here.

Equiniti Group’s H1 FY17 results (six months to 30 June 2017) were ahead of expectations, with revenue up 1.5% to £194.8m (H1 FY16: £191.9m). This is despite the BPS and specialist IT solutions provider seeing an decline in organic growth of 0.6%.

Despite interest rate headwinds and the second half bias in Equiniti’s business, EBITDA was also up 1.9% to £42.0m (H1 FY16: £41.2m), largely reflecting the impact of acquisitions.

Revenue for the Investment Solutions division, which provides share registration services for approximately half the FTSE 100, was up 2.7% to £64.2m (H1 FY16: £62.5m). The increase in higher margin project work saw EBITDA improve 13.5% to £20.2m (H1 FY16: £17.8m).

The recent acquisitions of Marketing Source and Gateway2Finance (see Equiniti makes two small financial sector acquisitions) have been fully integrated into the Intelligent Solutions division. Revenue in this division was up 1.3% to £55.4m (H1 FY16: £54.7m), but organic revenue declined by 5.8%, partly due to delays in a major remediation contract with a retail bank—this has now commenced.

In the Pension Solutions division, which provides the technology behind some of the largest pension schemes in the UK, revenue was up 2.3% to £70.5m (H1 FY16: £68.9m). However, due to ongoing cost pressures and the increase in lower margin contracts, EBITDA for the division fell 16% to £10.5m (H1 FY16: £12.5m). During Q2 action was taken to adjust the cost base of the division and the business should see the benefits in H2.

It’s been a solid start to the year and we expect to see organic growth in H2. The company will start to see the benefit of the Nostrum acquisition (see Equiniti acquires loans BPaaS player Nostrum) and the proposed acquisition of Wells Fargo’s Shareowner Services (see Equiniti to acquire Wells Fargo Share Registration and Services business) will extend the reach of the business into the US.

We will be speaking with management and adding more commentary for TechMarketView subscription service clients soon.

Once again Noida-based offshore services firm, HCL Technologies, has shown its top-tier peers TCS, Infosys and Wipro how the job should be done, with headline growth in Q1 FY18 up by more than 11% to $1.88b, nearly 4% higher than the prior quarter. HCL’s operating margin remained pretty much rock steady at a tad over 20%, widening the gap with Wipro (17%) though still behind TCS (23%) and Infosys (24%). Management is sticking to its FY18 guidance of 11.5% growth and 20% operating margin (midpoints).

Subscribers to the TechMarketView Foundation Servicewill be able to compare and contrast the performance of the leading Indian pure-plays in much more detail in the next edition of OffshoreViews. For further information, please contact our Client Services team (info@techmarketview.com).

Recently rebranded, Mumbai-based LTI (aka Larsen & Toubro Infotech) is like the new kid on the block’ here in the UK, though in truth more of ‘renewed kid’, having had a first bash at our market a few years back (see LTI making a mark in UK BFSI).

Since all but exiting the UK market, LTI is now taking another tilt, recruiting new management pretty much from top to bottom in what is starting to look like an Infosys alumni reunion! A couple of years ago, LTI brought on board Infosys Executive Vice President and Global Head of High-Tech Manufacturing & Engineering Services, Sanjay Jalona, as its new CEO (see Infosys exec jumps ship to lead L&T Infotech). Then about a year ago, Jalona snatched Sudhir Chaturvedi from NIIT Technologies to head up LTI’s global sales (see LTI scoops NIIT Tech COO). Charurvedi was a prior UK head at Infosys.

And now I can reveal that Satya Samal, previously NIIT Tech’s European head, and also ex-Infosys, has just been appointed head of Europe at LTI, bringing with him, Sonali Kanungoe, also ex-Infosys, to lead BFSI business development in the region. I met Samal again very recently and I can tell you that LTI has some very interesting plans for the UK market which take a rather different approach than its offshore services peers.

This is all prelude to a very competent set of results for Q1 2018 (to 30th June), which show headline revenue growth of 12% to $259m, 2% higher than the prior quarter. Operating margins expanded both yoy and qoq, to 19.4%, way above mid-tier peers NIIT Technologies and Mindtree, and in fact higher than top-tier Wipro!

One to watch.

After the fantastic success of our first Selling Out vs Scaling Up breakfast seminar in June, ScaleUp Group is delighted to advise that the next event will be held on Tuesday 19th September 2017 from 8:15 am till 10:15 am, and will be hosted by Goldman Sachs at 120 Fleet Street, London EC4A 2BE.

This session has five experienced speakers who will debate the pros and cons of selling out vs scaling up:

• Vin Murria, renowned multi-award-winning entrepreneur, CEO and investor who in the past 17 years has exited three business, for a combined value of £2.5b.
• Duane Jackson, the tech entrepreneur who founded KashFlow which he sold for £20m.
• Sameer Anand, a leading member of the Private Wealth business of Goldman Sachs
• Paddy MccGwire, Managing Director of Silverpeak, Financial Advisers and specialists in sell-side mandates
• Richard Holway MBE, Chairman, TechMarketView, one of the UK’s leading ICT analysts

Selling Out vs Scaling Up challenges the accepted norm for tech entrepreneurs to sell out at somewhere between £10m and £20m annual revenue, and addresses the question, is this a wise move?

The session will be chaired by tech entrepreneur John O'Connell, Chairman of ScaleUp Group, the elite band of successful tech entrepreneurs and executives who help founders grow their businesses.

Selling Out vs Scaling Upshould be of interest to all tech entrepreneurs and their advisers/financiers. The event is free and includes a light networking breakfast.

To register, please contact Tina Gallagher (tina.gallagher@tx2events.com) or call 020 3137 2541 or book online at www.tx2events.com.

The impact of its SSCL joint venture with the Cabinet Office continues to weigh heavily on Paris-based Sopra Steria, with UK revenues declining by nearly 6% on an organic basis (-15% headline) in first half. The decline must have steepened in Q2, given the 4% reversal in Q1 (see Sopra Steria UK: SSCL 'transition' impacts Q1). UK operating margins also declined, by 130bps to 6.0%. Management confirmed its earlier guidance that UK revenues would be lower in 2017 than last year.  

Sopra Steria is the second of the two French ‘majors’ to report declining UK revenues, along with Capgemini (see Capgemini H1: HMRC insourcing complete). In contrast, Atos continues to set the pace with 3% UK revenue growth (see Atos: "Technology leap" drives H1 success).

We’ll have further analysis and commentary on Sopra Steria’s results next week.

It’s great to see another TechMarketView Little British Battler having its potential recognised by investors. This time it’s Reading-based product information and order management platform developer, Virtualstock, in which Notion Capital has invested £4.5m, valuing the company at £66m. Private equity firm Legendary Investment held a 7% stake in Virtualstock, now slightly diluted.

Founded in 2004, Virtualstock was one of the ‘Fourth Generation’ of Little British Battlers back in May 2014 (see LBB Virtualstock offers Retail sector ‘a new way’) and had already built up an impressive client list including Tesco, Viking and Kiddicare. More recently, Virtualstock partnered with NHS Shared Business Services, the joint venture between Sopra Steria (through its acquisition of Xansa way back when) and the UK Dept. of Health to help manage NHS procurement, initially in training hospitals.

The funding will be used to support further expansion into new geographic markets and sectors, and is expected to see Virtualstock’s headcount double to 100.

Over the past few weeks the payments sector has been a hive of activity as industry giants consolidate and as private equity players place large bets in this growing and transforming industry. Two such deals are Worldpay’s acquisition by Vantiv, a US rival, for £9.1bn and CVC and Blackstone’s £3bn bid for Paysafe.

As the payments business moves from cash to digital, companies are looking for scale, often on a global basis, and new technology as the business shifts towards software and services and as Fintech brings in new competitors, higher customer expectations and new business opportunities.

This latest report looks at the underlying rationale for these recent moves, comments on the issues facing the acquiring companies and highlights the key implication for Software and IT Services suppliers into this sector.

Subscribers to FinancialServicesViews can access “FintechViews – Why all the M&A in Payments”, here.

TechMarketView will be publishing a detailed analysis of the payments market in the Autumn.