I am trying to load a finance story from the Independent.
It's been trying to open in the browser for about twenty minutes now.
Twenty minutes is a long time. Famously, Jakob Nielsen reckons most web users click away in eight seconds. It would take me two minutes to go to the newsagent, one minute to buy the paper, another two to walk back - I'd have the story in less than half the time it takes on the web!
Ah, it's just opened :-)
I've done a number of stories about online strategies for InCirculation, focused on issues such as the symbiotic (or competitive?) relationship between newspapers and search engines; syndication; magazine subscriptions online; and digital editions. But I've never talked about getting your bandwidth right, getting decent server software, achieving reasonable page download speeds. Because I didn't think I had to.
Maybe I do.
In fact the Independent was one of the early greats among internet newspapers. It's still got editorial content that makes me want to visit it first or second every morning. But if it's not going to get the basics right, all that effort goes for nothing. And even though I know I want the content, I note a marked disinclination in my mouse finger to click on the bookmark...
Wednesday 26 September 2007
Tuesday 25 September 2007
End of the bid premium?
I really couldn't believe it earlier this year when two of my stocks, Xansa and IXE, got taken out at massive premia to my buy-in price, making me a fat profit.
Groupe Steria bought Xansa at a premium of 70% to the previous day's closing price; Equinix, originally offering a 50% premium to the share price, increased its offer further (to 67% more than the average share price in the three months prior to the offer).
It looks as if the level of enthusiasm displayed in the middle of the year has disappeared judging from recent bids. Both Red Squared and Telent look to have fallen to bids that offer less than a 20% premium.
So once again it does look as if the cold water thrown on the markets by the credit crunch has affected equity valuations. Anyone still believing that bids will rid them of their poorer performers... get out now!
Groupe Steria bought Xansa at a premium of 70% to the previous day's closing price; Equinix, originally offering a 50% premium to the share price, increased its offer further (to 67% more than the average share price in the three months prior to the offer).
It looks as if the level of enthusiasm displayed in the middle of the year has disappeared judging from recent bids. Both Red Squared and Telent look to have fallen to bids that offer less than a 20% premium.
So once again it does look as if the cold water thrown on the markets by the credit crunch has affected equity valuations. Anyone still believing that bids will rid them of their poorer performers... get out now!
SaaS - best business model!
I had an interesting chat today with Servicepower (SVR), whose software is used to manage field engineers and other mobile workers.
Servicepower has moved from an initial licence fee model to Software as a Service (Saas). Although obviously that introduces the frightening prospect of cannibalisation of revenues in the short term (because you're taking say £35k a year for three years instead of £100k all at once on an ILF basis), it's working out nicely for them. The recurring revenue run rate already covers 85 percent of forecasts for the year. That's good quality - most of the contracts are for three years, a couple for longer terms.
But there's another big benefit they're seeing from SaaS. The sales cycle has accelerated. (A historical perspective; sales cycled lengthened dramatically during the tech crash from 2001 to 2003 - and although the sector has seen good growth since then, the sales cycle itself hasn't got any shorter at most software firms still dependent on initial licences.)
One client apparently wanted to run a six month pilot of Servicepower software followed by several months of evaluation and several more of contract negotiation. Instead, SVR suggested a quick SaaS rollout. Result: sales cycle reduced from twelve months to three.
SaaS also forces software vendors to create software that can be deployed rapidly, since it is web native and uses open standards. Atlantic Global (project management software) recently managed a nine day go-live - remarkable for any ERP software. Not all implementations will be as fast, since customisation may still be required - but the onus is on anyone who still needs six months to roll out a piece of software to show why it is worthwhile.
Servicepower has moved from an initial licence fee model to Software as a Service (Saas). Although obviously that introduces the frightening prospect of cannibalisation of revenues in the short term (because you're taking say £35k a year for three years instead of £100k all at once on an ILF basis), it's working out nicely for them. The recurring revenue run rate already covers 85 percent of forecasts for the year. That's good quality - most of the contracts are for three years, a couple for longer terms.
But there's another big benefit they're seeing from SaaS. The sales cycle has accelerated. (A historical perspective; sales cycled lengthened dramatically during the tech crash from 2001 to 2003 - and although the sector has seen good growth since then, the sales cycle itself hasn't got any shorter at most software firms still dependent on initial licences.)
One client apparently wanted to run a six month pilot of Servicepower software followed by several months of evaluation and several more of contract negotiation. Instead, SVR suggested a quick SaaS rollout. Result: sales cycle reduced from twelve months to three.
SaaS also forces software vendors to create software that can be deployed rapidly, since it is web native and uses open standards. Atlantic Global (project management software) recently managed a nine day go-live - remarkable for any ERP software. Not all implementations will be as fast, since customisation may still be required - but the onus is on anyone who still needs six months to roll out a piece of software to show why it is worthwhile.
Sunday 16 September 2007
Perceptions of danger
The Northern Rock disaster is fascinating. Here's a business that managed to borrow from the Bank of England - admittedly at poor rates - and that, it turns out, had two potential acquirors talking to it. Here, too, is a regulatory system that repays almost all a saver's first £35k of deposits in any bank. And people are queuing to take their money out.
What is intriguing is that brokers might actually be safer for larger savers than banks - simply because funds are held in segregated client accounts. That won't help against fraud, but should enable investors to reclaim funds in the case of collapse. Besides, the compensation limit is higher (£48,000 instead of £35,000).
Pensions, widely distrusted by retail customers, are safer still, with no unlimit on the amount of compensation (90% of total invested).
So the 'safe as houses' bank or building society could, in fact, be riskier than equity investment. Interesting.
Where Northern Rock will have a major impact is in the availability of funds to the property market. The Rock had invested heavily in growing its mortgage book - one reason it needed to borrow on the financial markets rather than using savers' deposits to fund its lending. By mid 2007 it was writing a fifth of new mortgage business in the UK.
Now, it looks as if Northern Rock will practically be closed to new business. That's a 2o percent fall in mortage availability. Never mind what rates these mortgages may or may not be available at - credit quality will have to be increased to ration funds.
And with the markets as they are now, it will be a brave bank that aims to grab the Rock's 20% market share.
What is intriguing is that brokers might actually be safer for larger savers than banks - simply because funds are held in segregated client accounts. That won't help against fraud, but should enable investors to reclaim funds in the case of collapse. Besides, the compensation limit is higher (£48,000 instead of £35,000).
Pensions, widely distrusted by retail customers, are safer still, with no unlimit on the amount of compensation (90% of total invested).
So the 'safe as houses' bank or building society could, in fact, be riskier than equity investment. Interesting.
Where Northern Rock will have a major impact is in the availability of funds to the property market. The Rock had invested heavily in growing its mortgage book - one reason it needed to borrow on the financial markets rather than using savers' deposits to fund its lending. By mid 2007 it was writing a fifth of new mortgage business in the UK.
Now, it looks as if Northern Rock will practically be closed to new business. That's a 2o percent fall in mortage availability. Never mind what rates these mortgages may or may not be available at - credit quality will have to be increased to ration funds.
And with the markets as they are now, it will be a brave bank that aims to grab the Rock's 20% market share.
Friday 7 September 2007
Economic literacy
ITV is struggling against the CRR - the mechanism which regulates its advertising prices. True, it's facing the situation which BT watchers will recognise - being regulated as a dominant player while having lost the market share which made it dominant.
But one line in the Guardian report made me sit up. It said that ITV wants to increase its prices to make up for shrinking audiences.
Er... hang on. The value of TV advertising is entirely based on how many people get to see it. So what ITV seems to be saying is; our product is now worth less than it used to be, so we think you should be paying us more.
That's so economically illiterate it really took my breath away for a moment.
But one line in the Guardian report made me sit up. It said that ITV wants to increase its prices to make up for shrinking audiences.
Er... hang on. The value of TV advertising is entirely based on how many people get to see it. So what ITV seems to be saying is; our product is now worth less than it used to be, so we think you should be paying us more.
That's so economically illiterate it really took my breath away for a moment.
Thursday 6 September 2007
Little fleas
When I'm short of inspiration I look in my old copy of 'Verse and Worse' or one of my selections of Ogden Nash. Here goes:
little fleas have littler fleas
upon their backs to bite ‘em
and littler fleas have littler fleas
and so ad infinitum.
What's the relevance of this to IT investing?
Well, I was speaking to nCipher today, and it looks like they're becoming one of the littler fleas. They specialise in data security and encryption, and they are now finding that they can work very nicely together with the big consultancy firms. The big firms know they need to address their clients' security needs - but have no expertise in encryption. So nCipher is jumping in there, as a 'flea' on their host so to speak.
However, that's only part of their business. (They're doing well, incidentally - back in profit after a rocky passsage through the past couple of years, seeing revenues growing at 15.5% and getting some superb cash flow.)
I automatically thought of another 'flea' I've seen in the past - Ixos, a document management firm that had piggybacked its way to profitability on the back of SAP. And SAP, like a good big hedgehog, didn't mind IXOS hanging on its prickles - in fact it helped the smaller company with its marketing and expanded the cooperation into CRM as well as DM. Ixos was on Neuer Markt when I got to know it, but it was acquired by OpenText back in 2003.
So I'm going to go around and have a look for some more 'fleas'. I think it's a strategy more and more firms will be using in future. And it obviously can work pretty well.
little fleas have littler fleas
upon their backs to bite ‘em
and littler fleas have littler fleas
and so ad infinitum.
What's the relevance of this to IT investing?
Well, I was speaking to nCipher today, and it looks like they're becoming one of the littler fleas. They specialise in data security and encryption, and they are now finding that they can work very nicely together with the big consultancy firms. The big firms know they need to address their clients' security needs - but have no expertise in encryption. So nCipher is jumping in there, as a 'flea' on their host so to speak.
However, that's only part of their business. (They're doing well, incidentally - back in profit after a rocky passsage through the past couple of years, seeing revenues growing at 15.5% and getting some superb cash flow.)
I automatically thought of another 'flea' I've seen in the past - Ixos, a document management firm that had piggybacked its way to profitability on the back of SAP. And SAP, like a good big hedgehog, didn't mind IXOS hanging on its prickles - in fact it helped the smaller company with its marketing and expanded the cooperation into CRM as well as DM. Ixos was on Neuer Markt when I got to know it, but it was acquired by OpenText back in 2003.
So I'm going to go around and have a look for some more 'fleas'. I think it's a strategy more and more firms will be using in future. And it obviously can work pretty well.
SQS
I identified SQS as a stock to watch about a year ago. Today they came out with bumper interim results, a statement that they would comfortably beat full year market estimates, and an improved balance sheet too.
They're the leading specialist providing software testing. This market's growing ahead of software in general, with several drivers; M&A (where systems need to be integrated), new software spending, web functionality needing to be built into business systems, and compliance. 25% organic revenue growth isn't too dusty - five times the industry average. And with a 20% rise in the number of new clients being acquired, the company is establishing a great pipeline to keep growth motoring over the next 18 months.
Gross margin was up despite expansion - unusual in the computer services sector. They've had the benefit of a price rise (5% in the UK) but even so, they must be managing their new hires pretty tightly to get such a good result.
What I really like, though, is that the quality of deals is also improving, with more long term contracts. Not only that, but the company is being hired earlier in projects - testing all the way through, and becoming an integral part of the project, rather than just being brought in at the end. It's like the difference between internal audit and year end financial audit. (Although if external auditors think they're unpopular, they should just try doing an internal audit job - nobody loves internal auditors, not even their finance directors.)
SQS also shone light on the way offshoring is working for them. It's not an either/or decision for SQS's customers. They start off with the majority of the work being done on site; but as the relationship becomes deeper, and as the project matures, more work can be offshored - moving up to 50 percent within a year or two, and probably 70 percent of the work after three years. That's very different from the way most people think about offshoring - "sack all your staff and set the call centre up in Delhi instead." (Offshore firms like Wipro have some big PR they need to do in the UK.)
I have looked hard at the SQS account because something has got to be wrong, hasn't it? These results are too good to be true... except they are true. And I can't see anything wrong with them!
They're the leading specialist providing software testing. This market's growing ahead of software in general, with several drivers; M&A (where systems need to be integrated), new software spending, web functionality needing to be built into business systems, and compliance. 25% organic revenue growth isn't too dusty - five times the industry average. And with a 20% rise in the number of new clients being acquired, the company is establishing a great pipeline to keep growth motoring over the next 18 months.
Gross margin was up despite expansion - unusual in the computer services sector. They've had the benefit of a price rise (5% in the UK) but even so, they must be managing their new hires pretty tightly to get such a good result.
What I really like, though, is that the quality of deals is also improving, with more long term contracts. Not only that, but the company is being hired earlier in projects - testing all the way through, and becoming an integral part of the project, rather than just being brought in at the end. It's like the difference between internal audit and year end financial audit. (Although if external auditors think they're unpopular, they should just try doing an internal audit job - nobody loves internal auditors, not even their finance directors.)
SQS also shone light on the way offshoring is working for them. It's not an either/or decision for SQS's customers. They start off with the majority of the work being done on site; but as the relationship becomes deeper, and as the project matures, more work can be offshored - moving up to 50 percent within a year or two, and probably 70 percent of the work after three years. That's very different from the way most people think about offshoring - "sack all your staff and set the call centre up in Delhi instead." (Offshore firms like Wipro have some big PR they need to do in the UK.)
I have looked hard at the SQS account because something has got to be wrong, hasn't it? These results are too good to be true... except they are true. And I can't see anything wrong with them!
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