At the risk of repeating my post from this time last year, Nakama, the troubled ‘recruitment business of two halves’ formed from the absorption of veteran UK IT staff agency, Highams, by ‘digital consultancy’ Nakama back in 2011 (see here), appears to be sinking deeper.

At half-time this year (to 30th Sept), almost everything went down again; revenues, net fee income (gross profit), operating profit (well, losses), which resulted in deeper net losses of £0.44m. However, after what appeared to have been a herculean effort on the receivables collection front, Nakama generated an inflow of £0.5m of operating cash vs £0.2m outflow the prior year.

Meanwhile, in what rather looked like a well-timed rescue bid, privately held executive search rival, Sheffield Haworth, took a 24% stake in Nakama in June. Sheffield Haworth, similar in size to Nakama – but profitable – went on to acquire peer nbi Consulting in September, the same month that Nakama CEO (and Nakama founder), Rob Sheffield, resigned. Sheffield Haworth executive chairman Tim Sheffield (no relation) joined Nakama’s board as NED.

I think we can all see where this is heading.

Anything that helps youngsters get a first step onto the housing ladder has to be welcomed in principle, as long, of course, that they understand the T’s and C’s.

And the terms and conditions are very clearly spelled out by UK-based shared home ownership startup StrideUp on its website, and I commend them for their transparency. In essence, StrideUp buys your chosen property on your behalf and you pay a share – say 10% – and then pay StrideUp rent on the rest. You can buy more equity in the property over the 5-year life of the deal at then market values, including buying StrideUp out. But as I say, you need to read the T’s and C’s.

Founded in 2016, StrideUp has raised £1.6m in a seed funding round which, according to TechCrunch, is a mixture of equity and debt financing, led by Picus Capital, along with an unnamed group of angel investors.

StrideUp is not the only startup with this idea in mind; there’s also Unmortgage, also founded in 2016, but its website is nowhere near as informative as StrideUp’s.

I can see in principle how money can be made with StrideUp’s business model. But I can also see how home buyers can just as easily come unstuck as with any mortgage product, arguably more so given that as the value of the property increases, the cost of buying more equity also increases. At least with a conventional mortgage, the price is the price.

For the first time in over three years, trailing 12-month revenue growth for the Top 6 Indians pure-plays reversed its decline, though operating margins are still falling.

But there’s some cause for optimism, with anecdotal evidence that higher margin ‘digital’ projects are starting to extend beyond proofs of concept and pilots, driving up deal sizes into millions—and in some cases tens of millions—of dollars in value.

TechMarketView Foundation Service subscribers can see the numbers, as well as highlights of the top-tier and mid-tier players, in the latest edition of OffshoreViews downloadable from the link.

For more information, please contact our Client Services team at info@techmarketview.com

In other circumstances, a company reporting flat yoy revenue growth would prompt disappointment, but with the year Redcentric has endured its H117 numbers look like a positive outcome (see New chief exec tasked with Redcentric turnaround and work back).

The AIM-listed managed services provider saw turnover decline 1% yoy to £51m in the six month period ending 30^th September 2017, with adjusted EBITDA up 1% to £9m. Pre-tax losses improved from £2.5m in H116 (impacted by £2.9m of impairment charges) to a £28k deficit in H117.

Those figures are hardly spectacular, but they do indicate that despite its recent troubles Redcentric has avoided the worst. The signs are that the company is keeping hold of existing customers (recurring revenue remains at 87% of the total) whilst speeding up its invoicing and collection processes to improve operating cash flow (which exceeded adjusted EBITDA by £2.3m).

Net debt was cut by £6.2m to £33.3m during the period, and management expect additional effects of Redcentric’s ongoing cost consolidation programme – which include reducing its headcount by 20, and closing both a London office and third party data centre - to be felt in the second half.

As a “new broom”, chief executive Chris Jagusz can legitimately distance himself from the fallout of Redcentric’s prior accounting misstatements and focus on growing the business in the immediate future. Having recently been certified as a Health and Social Care Network (HSCN) provider and been awarded a multi-year contract to host the HSCN peering exchange, Redcentric is in a good position to win more business from the NHS in particular.

That could prove tricky in the current political and financial climate however, and we think Redcentric will have to work hard to both find new private sector customers and upsell more of its managed cloud services to existing connectivity clients if it is to achieve the growth it seeks.

“Why you should be worried about Just Eat’s valuation” was the headline of our post on 3rd April 2014, a few days before UK-headquartered online food delivery startup Just Eat floated on the London Stock Exchange. Its valuation was then c.£1.5b.

Here we are, 44 months later, and Just Eat is now worth nearly £5.5b and will enter the FTSE 100 next month. Not a bad result for a company with revenues last year of £376m, a net profit of £71m, and £1b in assets on the balance sheet, almost all ‘intangible’. And, yes, that’s a higher valuation than Marks & Spencer, which turned over £10.6b last FY, made a net profit of £491m, and had £8.3b in assets on the balance sheet, mostly tangible.

So, should we still be worried?

In 2014 we were concerned that others could copy Just Eat’s business model and eat their lunch. Indeed others did, but none as successfully – or profitably (see Just Eat vs Deliveroo – a tale of two models). But since then, both Uber and Amazon have entered the fray, and they play by different rules.

We were also concerned that Just Eat’s growth might slow as it gained share. Well, 44% revenue growth is still not too shabby (see Just Eat dining well). And Just Eat processed £2.5b of orders last year in a global fast-food market estimated (not by us) to be worth $540b. However, the same research house forecast market growth at only 4% cagr over the next few years.

Just Eat is on a roll. Its acquisition of competitor Hungry House was recently approved by the UK Competition & Markets Authority. And with £144m of operating cash in the bank, essentially no borrowings, and, one assumes, supportive investors, there’s surely more to come.

Some might say, ‘don’t worry; be happy’!

In our next post focussing on the latest trends around the internal deployment of technologies, we focus on a real example of how a fast growing tech company achieved some impressive business benefits by automating their Professional Services function.

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PayPoint plc, the payment services provider reported its half year results this morning. This is the first set of interims since the completion of its restructuring programme to focus the business on Retail Services.

The company announced over two years ago (PayPoint focuses on its retail business) that it would be selling its Mobile and Online businesses. Subsequently, it sold its online payments business to Capita (Capita acquires PayPoint’s online payments business) in early 2016 and then sold PayByPhone, its mobile payment business last December to Volkswagen Financial Services.

Due to the divestments, it’s quite hard to compare this year’s interim results year-on-year which saw revenues achieved for the last six months of £97.6m (£101.7m 2016) and operating profit of £24.4m (£24.2m 2016). A better comparison of performance is the ongoing Retail Networks business which saw revenues up 2.3% to £97.6m (£95.4m 2016) and operating profit down 2.7% to £24.4m (£25m 2016).

In Retail services, it continued rolling out its PayPoint One platform which reached 6,181 sites, an increase of 2,580 sites over the last six months. This also saw further growth in the average weekly PayPoint One fee per site. Management believes it remains on track to achieve a target of 8,000 PayPoint One installations by the end of the financial year. Investment in PayPoint One did however add to the companies cost base which grew by £3.3 million to £32.1 million (28.8m 2016).

PayPoint has done the hard work selling its Mobile and Online businesses but it’s now time to for the strategy to deliver. Clearly it will take some time to filter through and we should get a much better idea of where the business is in six months’ time at year end.

2018 will be the Tenth Anniversary of the founding of TechMarketView. Our ambition from the outset was to become the most influential analyst firm on the UK tech scene.

In those 10 years, we have assembled a superb team of high quality analysts, many of whom have been with us for much of TechMarketView’s life. We built a customer base that embraces practically all of the main tech players, along with many mid-tier and emerging tech innovators. We initiated programmes, like Little British Battlers and Great British Scaleups.

We grew HotViews so that now tens of thousands of readers treat it as their Number One source of informed news and views on the tech sector.

So you can imagine our pleasure and pride to read Duncan Chapple's article - see here - reviewing Kea Company’s latest Analyst Value Survey. The report makes the point that has been the very essence of Techmarketview's business model.

To quote:

"Many UK analyst firms produce most of their revenue abroad and, indeed, the UK might not even be their largest market. However, the size of the UK market and the growing concentration of the population south and east of Birmingham means that British [analyst] firms have a remarkable impact on their domestic market.

The results of Kea Company’s Analyst Value Survey illustrate that perfectly.

TechMarketView punches even further above its weight in terms of paying subscribers. Its deal value might be lower than Ovum’s, but a higher percentage of its UK readers are paying for subscriptions. Participants in the Analyst Value Survey said that TechMarketView’s impressive impact on the UK market reflects higher influence on journalists, investors and their customers…….."

So, after 10 years, TechMarketView can now claim with some justification - and a great deal of pride - to have come very close to achieving our objective of being the most influential analyst firm on the UK tech scene.

Regular readers will know that I do not embrace used car resale startups with great enthusiasm, witness Cazana (see Cazana takes on Autotrader with £1.75m funding round) and the late not-so-great Hellocar (see Hellocar says Goodbye).

Well, I think I may have found a startup that might have legs (or should I say, wheels). It’s Brazil’s Instacarro (‘carro’ is ‘car’ in Portuguese – and you can work out the rest!), which has just raised a further $22m in a Series A funding round co-led by prior investors FJ Labs and Lumia Capital. These backers had led a $10m funding round back in February, following a $3.6m seed round in 2016.

Instacarro can best be through of as a cross between ‘webuyanycar.com’ and eBay. You register your car on Instacarro’s website and then take it to one of their valuation centres (currently only in Sao Paulo and Rio de Janeiro) or they will send a valuer round to you. Instacarro then touts your car to over 1,500 car dealers in an online auction and comes back to you within 90 minutes with the best price which you can accept or not.

According to TechCrunch, Instacarro co-founder Luca Cafici based the business model on that of the highly successful Russian online used car broker and auctioneer, CarPrice.ru. Why re-invent the wheel (so to speak)?

The new funding will be used for product development and international expansion. But I can’t see any reason why entrepreneurs and backers in other countries wouldn't be tempted to pick up on this idea and give it a spin round their own block.

During the summer, we gave subscribers to TechMarketView’s PublicSectorViews service sight of our UK public sector SITS market forecasts through to 2020. As always, we included a full breakdown of the numbers by vertical subsector (central government, local government, education, health, police and defence) and by SITS activity (infrastructure services, application services, business process services and software).

Yesterday, we published our up-to-date, in-depth, analysis of the drivers and trends in each of those sectors. Importantly, we also give our view on how those trends are impacting the market. And how suppliers can best position themselves to take advantage of related opportunities.

So, from approaches to encouraging accelerated take up of emerging technologies, to trends in contract disaggregation, to the race for digital skills, you’ll find it all in UK public sector SITS Market Trends & Forecasts 2017… that’s if you are a PublicSectorViews subscriber, of course! You can also download a spreadsheet with all the market forecasts included.

If you would like to find out if your organisation has a subscription or talk about getting access, please contact Deb Seth to find out more. Deb would also be happy to discuss TechMarketView ‘Engagements’ – hearing from the analysts in person, gives you the opportunity to pick their brains and talk about how the trends in the market will affect your organisation in the year(s) ahead.

Amazon re:Invent this week was a product fest where AI services loomed large as the AWS part of the business set its sights on catching up with Google.

Translation and transcription services were part of the catch up package, as was an AI enabled high definition camera but where the camera was concerned AWS took a different approach to Google. While AWS DeepLens and Google Clip both use machine vision, Google targets the consumer market but AWS is after the developer and the commercial market.

We can envisage clutches of DeepLens cameras being used to identify warehouse inventory down to the individual item, or spotting defects on production lines, as well as for facial and object recognition in the wider environment. As the camera is integrated with other AWS services (one of the other new services was Rekognition Video – which uses image recognition to identify individuals in real time video), the company is pushing an integrated AI service agenda, providing a range of services businesses can select from, to build intelligent solutions.

The integrated agenda was also evident in the announcement of SageMaker, an all-in-one machine learning system where developers can find data, build, train, host and ship services from within a single environment (that supports key frameworks like Google TensorFlow, FaceBook Caffe2, Apache MXNet). The overall aim is to make it easier to build and deploy algorithms – but it’s still up to businesses (and tech suppliers ) to discover value-generating use cases for them.

The developments highlight the need for IT services suppliers to bring specialist hardware into their intelligent solution propositions, be it intelligent cameras, machine learning chips or rapid ways to reprogramme FPGA chips. As for AWS, it needs to catch up with Google and Microsoft but adoption of machine learning services will also drive more use of its core storage and compute facilities, furthering its cloud dominance.

I think the smart thing that the R&D team at Reading-based media analytics developer Artesian Solutions did was to design the product so that it could be used as an add-in to Salesforce.com’s and Microsoft Dynamics’ CRM systems, though its product can be used stand-alone. Essentially, the Artesian engine scans the web for company and market intelligence that can be formulated for use in prospecting.

Founded in 2006, Aretsian has just raised a further £3.5m from Columbia Lake Partners to refinance debt and provide additional working capital. Artesian previously raised £5m in June 2015 in a Series B funding round led by existing investor Octopus Investments (see Artesian dips into well for further funding).

There’s a slew of media analytics tools in the market, but Artesian have hooked theirs into two mainstream CRM products with quite some success, given marquee client names across multiple industry sectors. Perhaps they should build connectors for other major CRM products too and widen the appeal of their product.

If you are a tech entrepreneur wondering ‘where next’ for your business, then you really should come along to the next Selling Out or Scaling Up breakfast seminar on Wednesday 31st January 2018.

Organised by ScaleUp Group, advisory sponsor of the TechMarketView Great British Scaleupprogramme, the seminar panellists will feature:

• Adam Hale– who as CEO of HR SaaS success Fairsail grew the business from £1m to £10m raising growth capital along the way, and sold it to Sage in March for £110m.
• Michael Tobin OBE– charismatic serial tech entrepreneur, who led FTSE-listed data centre operator, Telecity, from £6m to £3b before selling it to Equinix in 2015 for $3.8b.
• Paddy MccGwire - co-founder and MD of tech-sector focused investment bank Silverpeak, and with over 30 years of successful deal-making.
• Tola Sargeant – MD of TechMarketView, ranked the most influential tech research firm in the UK, and a highly respected analyst in her own right.

The session will be chaired by ScaleUp Group founder – and prolific tech investor –  John O’Connell, who founded, floated and sold Staffware, one of the UK’s most successful software companies, for $200m.

Selling Out or Scaling Up will be hosted by Silicon Valley Bank at their offices at 14-18 Finsbury Square, London, EC2A 1BR, on Wednesday 31st January 2018 from 08:15 – 10:15. There is no charge to attend.

To register, please contact Tina Gallagher (tina.gallagher@tx2events.com) at tx2events on T: +44 (0) 20 3137 2541 or click on this link to book online.

Capita has secured a new contract with Runnymede Borough Council to deliver its customer relationship management system and online customer portal.

The council has selected Capita One’s Digital Enterprise platform to help eliminate duplication, give staff a single view of the customer and improve its ability to deal with customers at the first point of contact. As we discuss in our UK Public Sector SITS Market Trends & Forecasts report, most local authorities are looking at improving citizen self-serve to deliver savings and efficiencies, and Runnymede is no different. The new platform will increase self-service opportunities for citizens, including signing-up to e-billing, managing change of addresses and receiving information on refuse collections and council tax, with the service available via a browser or mobile app. Over a three-year period, efficiency savings of approximately £264k are expected to be generated through the platform.

Separately, Capita has announced that Regional Enterprise Ltd (Re), its joint venture with the London Borough of Barnet, is on track to deliver c.£39m of financial benefits over its 10-year term through a combination of savings and income generation. The commercial arrangement was set up in 2013 to deliver a range of services including: planning and regeneration, highways, regulatory services, and housing improvement services.

The year four review of the contract, which was conducted by a cross-party working group of councillors, concluded services are “generally of reasonable to good quality” and when compared to other London Boroughs represents good value for money. However, the review states there have been some significant service issues, particularly in highways and planning enforcement—these have impacted some residents, but have now been addressed.

Today represents the first day on the job for new CEO, Jonathan Lewis. There are positives, but also many challenges for the new boss, and services delivery problems will be one of the issues he will need to address.

Probably the first thing Manchester-based AI startup MindTrace needs to do with its new funding is change its name so that it doesn’t get confused with Netherlands-based ‘neuromarketing’ startup Mind Trace! That, and recruit an R&D team, find a CEO and build a website (hence no logo!).

So it’s still very early days for MindTrace, which brought together three academics (including Professor Steve Furber, who designed the BBC Microcomputer and processors for ARM), and is chaired by former Imagination Technologies CEO Sir Hossein Yassaie. The startup is developing ‘unsupervised learning’ algorithms for autonomous vehicles, but the technology is said to have application in cybersecurity, IoT, and data management.

Mindtrace has raised £1.3m in a seed funding round backed by Accelerated Digital Ventures (ADV) and the Northern Powerhouse Investment Fund, through NPIF – Mercia Equity Finance, which is managed by Mercia Fund Managers, the fund management arm of AIM-listed Mercia Technologies. MindTrace is to build a prototype collision avoidance system for cars that expects to require less power and perform better in poor lighting conditions.

Clearly ADV is enthusiastic about MindTrace’s prospects, with its head of investment commenting that: “Truly unsupervised machine learning has never been achieved and its potential to change society, business and the world is infinite.” Well, no pressure there, then.

As readers probably realise by now, I am a bit of an Elon Musk groupie. So really interested to see Musk all over the news media today as the world’s biggest battery (Why isn’t it called BFB?) was powered up in South Australia. The 100MW battery will provide electricity to 30,000 homes in an area regularly hit by power outages. In its first day it delivered 70MW of stored wind power to homes just as the summer started.

In usual Musk fashion, he bet that he could deliver the energy storage system in 100 days otherwise he would foot the bill. He delivered it a day early!

But, according to Bloomberg,  Musk’s claims might be short-lived as  South Korea is building a 150MW battery plant that is scheduled to go live in Feb 18. Bloomberg also carries a chart of how battery prices have plummeted - down 75% since 2010 - and forecast to continue to plunge into the future. That all makes renewable energy so much more viable as volatile solar and wind generated power can now be saved. I personally think that the homes of the future will all have their own battery systems linked to solar panels. Your electric car will be charged from that source too - indeed will double as home battery when in the garage.

So the end of fossil fuels really is now nigh. I wonder what the people who decided to build Hinckley Point C really think now?   

I’ve just come back from a few days in San Francisco visiting tech firms in the Valley. The companies I visited had seen their shares rise by between 50% and 300% in the last year. In normal circumstances the word BUBBLE would come to mind. But every analysis shows that the big tech firms driving the indices ever higher, have quite reasonable valuations. It is just that ‘Tech is the place to be’ and global consumers and enterprises will continue to buy tech products and services - even if there was a more general economic downturn. Many consumers would give up almost everything else before their smartphone. Enterprises would turn to more automation and AI. Anyway, outside of the UK, the economic outlook in the US and Europe looks set fair.

As you can see from the table, 2017 has been a great year for tech with the NASDAQ up 27% YTD and our own FTSE SCS Index up 24%. November was rather more subdued. Indeed there was a mild ‘rotation’ away from tech and into banks at the end of the month. Put that in context to the meagre 2.6% growth in the FTSE100 and you will see why I constantly say ‘Tech is the place to be’!

As ever, there was great divergence in individual share performance. Great to see Computacenter up 13% in Nov - up a very respectable 41% YTD. Their trading update this month indicated they would finish FY17 ‘comfortably in excess of previous expectations’. See Computacenter to finish the full-year with a flourish. Kainos also put on 11% (54% YTD). Again supported by strong interim results. See Kainos H1 points to strong future growth. Blur was up 11% but is still down 53.7% YTD. But you need to read blur enters twilight zone to get a fuller understanding of the volatile stock.

At the other end of the scale, WANDisco eased 34% in Nov but is still up 166% YTD. See WANDisco H1 17: Plenty of positive ‘firsts’  Poor old Serco fell another 18.5% (33.7% YTD) despite some encouraging contract news. .

Almost all the 200+ stocks we track both in the UK and around the world tracked within +or-10%.

So one month to go in 2017. December can be a tricky month as managers and investors, who have made good gains, try to lock those gains in before 31^st Dec when their performance will be forever measured. That’s why Decembers in bull years are often negative. 

The market sniffed at some of the items in Workday’s Q3 results, such as a slowdown in uncommitted revenue and a reduction in contract durations, but with plenty of momentum across the business the quarter (to October 31) represented another set of strong results for the HR and Financial solutions cloud pure play.

Management reported good growth in all areas and all geographies. Certainly, international business (an area where it is underweight and working to do something about it)  improved with revenue up 48% to $116m, taking it to 21% of total revenue. Total revenue was up 34% to $555m, including $464m subscription revenue, up 37%. This is lower than the 40% growth Workday has been used to of late (see Workday hits fourth quarter of 40%+ subs growth) but management has previously highlighted that progress will not be neatly linear. Net loss reduced yoy: from $110m to $85.5m.

What it is seeing is larger companies committing to its services, extensions from existing customers and new customers fueling growth – 37 new customers added in Q3, a 60% yoy increase. The more established HCM cloud leads the way but the Financial cloud is moving forward. Mid sized companies were the first to commit to cloud financials but now Workday is seeing larger enterprises (e.g. 10k to 20K employees) preparing to make the move, which puts it in a good place for further growth against SAP and Oracle.

There are other growth drivers too. The company released Prism Analytics and its first Data-as-a-Service offering (an opt-in benchmarking service) during the quarter. Judging by our conversations with suppliers, benchmarking services may be de rigueur for cloud providers before too long – and could become part of the cloud migration business case. A comment by CEO Aneel Bhusri about how the multi-tenant cloud architecture, single code version and harmonsied data model across all customers makes it easier to take advantage of machine learning gave pause for thought: another component in the cloud business case.  

VMware's Q3 results exceeded analyst expectations, with revenue up 11% yoy to US$2bn and GAAP net income growing 39% to US$443m.

Those numbers are not strictly like for like, after a change in VMware's reporting structure compared the three month period ending November 3rd 2017 to the three month period ending September 30th 2016.

They are nevertheless impressive, with licenses accounting for US$785m (up 14%) and services turnover growing at a slightly slower rate of 10% to US$1.2bn.

As in Q2, the organisational shake-up following parent EMC being merged into Dell Technologies in September 2016 does not appear to be have had any adverse affect - in fact quite the reverse.

The company also pointed to a strong VMworld customer/partner event packed with new product and service launches as a major driver of its success, particularly its on- and off-premise private, public and hybrid cloud infrastructure platforms.

VMware's virtualisation technology is a key pillar of any cloud service environment, and it has also moved to deliver enhanced security for virtualised data centre environments. TechMarketView anticipates continued growth in both areas of those enterprise and service provider markets, and VMware looks well placed to flourish.

Vodafone's telematics deal with Admiral Insurance is a feather in the cap for the mobile operator's M2M business, and a potential gateway to bigger things in the Internet of Things (IoT) enabled connected car industry.

Admiral's LittleBox is one of the UK's biggest selling usage based insurance products in a small but growing market (see Zego on the right track to insure the gig economy) alongside rivals Insure the Box, Direct Line and Hastings.

Vodafone has been working with Admiral for the last six months after winning a tender process initiated in 2016. Financial terms of the deal were not disclosed but Vodafone is supplying a mix of hardware, software and services.

Crucially, that involves not just M2M connectivity but also devices, data management, crash analysis and safety-related services. As such it moves Vodafone beyond its traditional role of network provider to stake a bigger claim in the end to end IoT service chain. Subscribers to SecureConnectViews can read our report IoT: Network Providers Push to Supplant IT Services Players here.

Admiral praised the consistency and quality of Vodafone's vehicle tracking data but also its customised pricing approach (though it hinted it was not the cheapest option on the table). Usage based car insurers have previously been restricted in what they can offer to the market by hardware and installation costs, but Admiral expects Vodafone to help it move to a more service orientated product that dilutes those costs and opens up a broader market opportunity in the future.

The flexibility of Vodafone's proposition also allows Admiral to pick only the components it wants, leaving the insurer to utilise its own proprietary risk algorithms and machine learning techniques. Vodafone clearly worked hard to win a contract with an exacting customer. If the MNO can show similar flexibility in pursuing other M2M/IoT connected vehicle deals we expect more new logos and deeper relationships with existing telematics customers to follow.