Yesterday’s announcement at the Conservative Party Conference by shadow chancellor George Osborne, that the Conservatives would freeze Council Tax for the next two years, sets a potentially worrying financial scene for Local Authorities.
Although the scheme is based on “you limit your tax rise to 2.5%” and the Government “will give you enough cash to take it down to zero”, old stalwarts of local government can read between the lines to see even more financial pressure being placed on councils over the coming years.
Did this announcement have the backing of Conservative councils? A quick check around seems to suggest not, indeed I’m informed that there is some speculation on whether Margaret Eaton, the newly elected LGA Chairwoman, was even aware of it.
No matter how much Tory councils were aware of it, or indeed how long it may take for a general election to be held, given the way the current Government has been spooked by Conservative proposals (and found the need to adopt some of them), and given the current general financial environment, there can be little doubt that the pressure will be on councils to reduce their spending even more – making cost savings perhaps even more than currently advocated – in the next financial year and beyond.
Tuesday, 30 September 2008
Monday, 29 September 2008
Councils to take-over local Post Offices.
Essex County Council is to be applauded for its investigation into taking over local Post Offices that are at risk of closure – but are they making the right decisions for their local tax payers? They are running a conference on the topic (the “Essex Model”) on 23 October 2008 to present and debate the opportunity and challenges of such an approach.
Local Authorities face a difficult decision – politically, keeping local PO’s open for the benefit of their citizens (and potentially delivering some face-to-face council services) – or providing the most economic use of tax-payers’ funds.
Very firmly, my own opinion is that local authorities’ take-over of Post Offices will only delay the inevitable closure of such establishments – it may win votes from older voters in local elections – but in time, as more and more citizens rely on electronic communications with their councils, tax payers will look for local authorities to reduce their exposure to expensive delivery channels that remain unused by the majority of their electorate. (It must be remembered that the Post Office is closing local Post Offices that are currently under-utilised, and as such are not commercially viable).
There is an argument that local authorities should take every opportunity to move delivery channels for their own services, as much as possible, into efficient, electronic methods – and that widening the face-to-face delivery channel delays citizens moving from the inefficient to the efficient delivery channels. Also, will local tax-payers welcome their local taxes being used, effectively, to subsidise the Post Office?
Yes – local PO’s do have a social element to their existence – and they will be sorely missed, primarily by pensioners and the less well-off – but in time their closure is inevitable – and I believe that tax-payers’ money should not be poured into ventures that have already proved they are commercially unviable.
Local Authorities face a difficult decision – politically, keeping local PO’s open for the benefit of their citizens (and potentially delivering some face-to-face council services) – or providing the most economic use of tax-payers’ funds.
Very firmly, my own opinion is that local authorities’ take-over of Post Offices will only delay the inevitable closure of such establishments – it may win votes from older voters in local elections – but in time, as more and more citizens rely on electronic communications with their councils, tax payers will look for local authorities to reduce their exposure to expensive delivery channels that remain unused by the majority of their electorate. (It must be remembered that the Post Office is closing local Post Offices that are currently under-utilised, and as such are not commercially viable).
There is an argument that local authorities should take every opportunity to move delivery channels for their own services, as much as possible, into efficient, electronic methods – and that widening the face-to-face delivery channel delays citizens moving from the inefficient to the efficient delivery channels. Also, will local tax-payers welcome their local taxes being used, effectively, to subsidise the Post Office?
Yes – local PO’s do have a social element to their existence – and they will be sorely missed, primarily by pensioners and the less well-off – but in time their closure is inevitable – and I believe that tax-payers’ money should not be poured into ventures that have already proved they are commercially unviable.
Friday, 26 September 2008
Windows 7 gets to Alpha release
Microsoft is showing Windows 7 (also known in the trade as Vista mark two) at its Professional Developer Conference PDC at the end of October. Developers attending the PDC will be able to get their hands on a pre-release build of this new version of Windows that is widely expected to be made available on general release during 2009.
Expectations are that this version of Windows will be based on the same kernel as Vista, but will be a stripped down version with many of the applications missing (e.g. e-mail, photo processing and movie making) to be replaced by features that will be available as downloadable applications under the Windows Live brand.
Leaked screen shots of the new operating system look very much like the current Aero look – Vista’s semi-transparent graphic interface. Also, the Office 2007 Ribbon interface seems to have found its way into Wordpad and MS Paint. For more information, the techies amongst this readership can find Microsoft’s blog on Windows 7 at http://blogs.msdn.com/e7/default.aspx
For the non-techies - my reading of this software is that it won’t see the light of day on your desktop before 2010 at the earliest – it is likely to run most of the applications that currently run OK on Vista - and whilst I suspect it will be better than Vista (which I believe is a great improvement of Windows XP), as with all MS software, I would recommend not being an early adopter, but waiting a few months until someone else has ironed out all the launch problems.....
Expectations are that this version of Windows will be based on the same kernel as Vista, but will be a stripped down version with many of the applications missing (e.g. e-mail, photo processing and movie making) to be replaced by features that will be available as downloadable applications under the Windows Live brand.
Leaked screen shots of the new operating system look very much like the current Aero look – Vista’s semi-transparent graphic interface. Also, the Office 2007 Ribbon interface seems to have found its way into Wordpad and MS Paint. For more information, the techies amongst this readership can find Microsoft’s blog on Windows 7 at http://blogs.msdn.com/e7/default.aspx
For the non-techies - my reading of this software is that it won’t see the light of day on your desktop before 2010 at the earliest – it is likely to run most of the applications that currently run OK on Vista - and whilst I suspect it will be better than Vista (which I believe is a great improvement of Windows XP), as with all MS software, I would recommend not being an early adopter, but waiting a few months until someone else has ironed out all the launch problems.....
Thursday, 25 September 2008
OT – Aynuck and Ayli
The Telegraph today, quoting a survey by Coolbrands, reports that the Brummie accent is the one liked least, and if you want to be cool, you need to drop your Brummie accent....
As a Black Country lad myself, I will confess to having hidden my accent ever since my teenage years, but have been impressed by a small number of people who have detected the Brummie twang under my now more-refined southern accent. But I will occasionally (normally after an intake of M&B bitter) be persuaded to drop back into talking “Ow we spake”. I also still have a few Aynuck & Ayli stories, my favourite being....
One day a bloke from out of town was walking along the canal when he saw a small boy crying.
He bent down saying "Now little man what is the trouble". The boy looked up at him and howled "Me mates fallen in the cut". "Good Heavens", the man shouted as he stripped ready to dive in. "Why are you sitting here instead of going for help when your friend is drowning" The boy looked at him in amazement as he splashed around in the murky water.
"It's not that mate wats fallen in. It's the mate outa me mate sandwich”.
A number of my customers have offices based in/around the Midlands – and I’ve been pleased to see that several of them, like me, actively support “Talk Like a Brummie Day” – the next one is 17 July 2009 – any one like to arrange to meet me then?
As a Black Country lad myself, I will confess to having hidden my accent ever since my teenage years, but have been impressed by a small number of people who have detected the Brummie twang under my now more-refined southern accent. But I will occasionally (normally after an intake of M&B bitter) be persuaded to drop back into talking “Ow we spake”. I also still have a few Aynuck & Ayli stories, my favourite being....
One day a bloke from out of town was walking along the canal when he saw a small boy crying.
He bent down saying "Now little man what is the trouble". The boy looked up at him and howled "Me mates fallen in the cut". "Good Heavens", the man shouted as he stripped ready to dive in. "Why are you sitting here instead of going for help when your friend is drowning" The boy looked at him in amazement as he splashed around in the murky water.
"It's not that mate wats fallen in. It's the mate outa me mate sandwich”.
A number of my customers have offices based in/around the Midlands – and I’ve been pleased to see that several of them, like me, actively support “Talk Like a Brummie Day” – the next one is 17 July 2009 – any one like to arrange to meet me then?
Thursday, 18 September 2008
Capita/IBS referral – continued.....
Thanks for the many comments I received on yesterday’s post on the topic of Capita’s acquisition of IBS being referred to the Office of Fair Trading (OFT). Please keep sending me your comments, but if you want to make comments to the OFT then contact OFT’s case officer, Tim Geer on 020 7211 8339 or by e-mail at Tim.Geer@oft.gsi.gov.uk (the deadline for comment is 29 September 2008). The comments I received fall broadly into the following three areas:
IBS’s Housing systems. In this area, I agree that acquisition of IBS’s customer base would greatly increase Capita’s market share, but would not I believe, make Capita the dominant supplier. Even if IBS joined Capita there would be several suppliers of housing management systems, including Northgate (possibly with Anite), Civica/Comino, and Orchard, giving plenty of choice for potential customers. So, in my opinion – not a reason for a referral.
Is Pericles really uncompetitive? I remember being on the fringes of the birth of the Pericles product in ICL back in, I think it was 1997, with a stated ambition to have the product completed within a three years. At the time it was being built with bleeding edge technology, and was breaking new ground – including offering a browser-based user interface.
When the ICL unit was acquired by Anite back in 2001, it was thought to be near completion, but it would appear that Anite has been forced to put in a great deal of development effort to get it anywhere near stable this year, over 10 years since the development started, at a time when browser-based systems are now almost the norm. But I believe that for Anite this has been a damage-limitation exercise, and has been focussed on meeting contractual commitments, and retaining customers rather than winning new business over the past couple of years (if there have been any new name customers over the past few years, other than ICL VME conversions, please let me know).
Yes, a new owner could try to win new business with Pericles, but I believe that the Pericles name is irreversibly tarnished, and it would be very difficult to convince any new customer to commit. Also, with a current lack of central government funding for new Revenue & Benefits systems (such funding initiatives finished around 2006), there aren’t many local authorities that can afford to buy a new system unless they are being re-organised, or their current systems are not up to the job. Unfortunately, I believe that the only customers sufficiently dissatisfied with their current systems to want to look at replacements are the ******* customers - and possibly *******’s customers......
Aren’t all R&B suppliers providing poor quality? I once heard the procurement process for a new R&B system as being “selection of the best of a bad bunch”. But I have considerable sympathy with all R&B suppliers – having to cope with regular, complex legislative changes made most years, poorly specified by Central Government, and always too late to allow most suppliers to provide proper, quality-assured systems.
I’d argue that most suppliers have invested lots of money in speculative re-development of their R&B products, all at high risk, and mostly, in the end, successful (and with rich rewards). Those that get it wrong – like ICL/Anite with Pericles – can lose vast sums of money. Each R&B supplier has made mistakes on the way, but generally they’ve overcome them and delivered much improved systems to their customers, allowing them to manage their R&B organisations more efficiently and effectively – all done in a challenging environment.
I believe that their main failing, like many of the ERP suppliers, has been to be highly protective of their customers and not entering the era of interoperable systems willingly, unlike most suppliers of other application systems to Local Authorities......
IBS’s Housing systems. In this area, I agree that acquisition of IBS’s customer base would greatly increase Capita’s market share, but would not I believe, make Capita the dominant supplier. Even if IBS joined Capita there would be several suppliers of housing management systems, including Northgate (possibly with Anite), Civica/Comino, and Orchard, giving plenty of choice for potential customers. So, in my opinion – not a reason for a referral.
Is Pericles really uncompetitive? I remember being on the fringes of the birth of the Pericles product in ICL back in, I think it was 1997, with a stated ambition to have the product completed within a three years. At the time it was being built with bleeding edge technology, and was breaking new ground – including offering a browser-based user interface.
When the ICL unit was acquired by Anite back in 2001, it was thought to be near completion, but it would appear that Anite has been forced to put in a great deal of development effort to get it anywhere near stable this year, over 10 years since the development started, at a time when browser-based systems are now almost the norm. But I believe that for Anite this has been a damage-limitation exercise, and has been focussed on meeting contractual commitments, and retaining customers rather than winning new business over the past couple of years (if there have been any new name customers over the past few years, other than ICL VME conversions, please let me know).
Yes, a new owner could try to win new business with Pericles, but I believe that the Pericles name is irreversibly tarnished, and it would be very difficult to convince any new customer to commit. Also, with a current lack of central government funding for new Revenue & Benefits systems (such funding initiatives finished around 2006), there aren’t many local authorities that can afford to buy a new system unless they are being re-organised, or their current systems are not up to the job. Unfortunately, I believe that the only customers sufficiently dissatisfied with their current systems to want to look at replacements are the ******* customers - and possibly *******’s customers......
Aren’t all R&B suppliers providing poor quality? I once heard the procurement process for a new R&B system as being “selection of the best of a bad bunch”. But I have considerable sympathy with all R&B suppliers – having to cope with regular, complex legislative changes made most years, poorly specified by Central Government, and always too late to allow most suppliers to provide proper, quality-assured systems.
I’d argue that most suppliers have invested lots of money in speculative re-development of their R&B products, all at high risk, and mostly, in the end, successful (and with rich rewards). Those that get it wrong – like ICL/Anite with Pericles – can lose vast sums of money. Each R&B supplier has made mistakes on the way, but generally they’ve overcome them and delivered much improved systems to their customers, allowing them to manage their R&B organisations more efficiently and effectively – all done in a challenging environment.
I believe that their main failing, like many of the ERP suppliers, has been to be highly protective of their customers and not entering the era of interoperable systems willingly, unlike most suppliers of other application systems to Local Authorities......
Wednesday, 17 September 2008
Capita's acquistion of IBS is referred
Capita’s acquisition of IBS has been referred to the Office of Fair Trading (OFT). Capita issued the following RNS yesterday:
The Office of Fair Trading is considering whether arrangements are in progress or incontemplation which, if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002. Should it be found to be a relevant merger situation, the OFT will further consider whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services that warrants reference to the Competition Commission for investigation and report.
Personally, I'm not surprised by this. I have little doubt that it has been prompted by Northgate's proposed acquisition of Anite's Public Sector Division, which also includes Revenues & Benefits and Housing systems. I suspect that the Revenues & Benefits market is the area OFT is considering, as if both acquisitions were to go through, effectively there will be only two suppliers, Northgate and Capita (I don't count anyone else as having credible solutions).
My opinion is that Anite's Pericles product is barely competitive in this market, so I consider the likelihood of a successful referral of the Northgate/Anite acquistion to the Competition Commission as minimal (although if OFT does refer it to the CC it may result in Northgate walking away any rate). However, IBS offeres a very credible solution, and if the OFT wishes to see at least three suppliers for R&B then the Capita/IBS acquisition could be over-turned. (I consider that Pericles, even combined with Civica's ageing R&B user base, is unlikely to ever be a major credible competitor).
My understanding is that the 40-working-days clock is ticking down on the Northgate/Anite investigation, and a decision is to be expected around mid-October at the latest. But the Capita/IBS investigation will take longer.
What happens if the Competition Commission rules against the Capita/IBS acquisition? I see it very difficult to do anything other than undo the acquisition (making Capita divest just the Revenue & Benefits software would be difficult as the IBS products share technology and support staff), in which case, whilst IBS could continue as an independent supplier, I believe that they would be better off as part of a larger company. Northgate certainly wouldn't be allowed to acquire IBS, so I guess that Civica would be in pole position - if a price could be agreed. Or could we see someone else with aspirations to be a major supplier to the UK Local Authority market enter the fray?
The Office of Fair Trading is considering whether arrangements are in progress or incontemplation which, if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002. Should it be found to be a relevant merger situation, the OFT will further consider whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services that warrants reference to the Competition Commission for investigation and report.
Personally, I'm not surprised by this. I have little doubt that it has been prompted by Northgate's proposed acquisition of Anite's Public Sector Division, which also includes Revenues & Benefits and Housing systems. I suspect that the Revenues & Benefits market is the area OFT is considering, as if both acquisitions were to go through, effectively there will be only two suppliers, Northgate and Capita (I don't count anyone else as having credible solutions).
My opinion is that Anite's Pericles product is barely competitive in this market, so I consider the likelihood of a successful referral of the Northgate/Anite acquistion to the Competition Commission as minimal (although if OFT does refer it to the CC it may result in Northgate walking away any rate). However, IBS offeres a very credible solution, and if the OFT wishes to see at least three suppliers for R&B then the Capita/IBS acquisition could be over-turned. (I consider that Pericles, even combined with Civica's ageing R&B user base, is unlikely to ever be a major credible competitor).
My understanding is that the 40-working-days clock is ticking down on the Northgate/Anite investigation, and a decision is to be expected around mid-October at the latest. But the Capita/IBS investigation will take longer.
What happens if the Competition Commission rules against the Capita/IBS acquisition? I see it very difficult to do anything other than undo the acquisition (making Capita divest just the Revenue & Benefits software would be difficult as the IBS products share technology and support staff), in which case, whilst IBS could continue as an independent supplier, I believe that they would be better off as part of a larger company. Northgate certainly wouldn't be allowed to acquire IBS, so I guess that Civica would be in pole position - if a price could be agreed. Or could we see someone else with aspirations to be a major supplier to the UK Local Authority market enter the fray?
After Anite and IBS – where’s the next big acquisition?
The market for software suppliers to the UK Public Sector has seen some considerable consolidation recently. With Northgate’s and Capita’s acquisitions of Anite’s Public Sector Division (assuming it goes through later this month) and IBS respectively, who’s next or – more importantly – who’s left?
The one touted about in the press most is IDOX – a company that has itself grown through acquisition (recently of CAPS and Plantech) into the market-leading supplier of systems to local authority Planning and Land Charges departments. My opinion is that IDOX is unlikely to survive as an independent company for more than the next couple of years before it gets gobbled up itself. I suspect that the sole reason that it hasn’t been acquired already is that the big players have been competing over the more-important consolidation of the Revenues & Benefits market (IBS and Anite PS).
Now the likes of Capita and Civica may turn their attention onto IDOX (Northgate – as the second largest supplier of planning and LC systems would not, I believe, be allowed to acquire IDOX). The delaying factors are likely to be the current credit crunch and IDOX’s Directors’ likely valuation of their business – it may be that potential acquirers sit on their hands for a few months to see how IDOX copes with the integration of CAPS and Plantech, hoping for a hiccup and perhaps a reduction in valuation – let’s wait and see.
Another listed company is Gladstone (GLD) – suppliers of leisure centre systems to both local authorities and commercial operators – and starting to broaden its market into the education sector. Although relatively small, in April Gladstone had a major new investor taking 29% of the business (Constellation Software – a Canadian company, listed on the Toronto Stock Exchange), at 25p per share - with the current SP now around 20p (with a forecast of 4p EPS and 9p cash) and a market cap of around £10M (with £4M in cash on the balance sheet at 29 Feb 2008). Revenue is growing slowly and consistently, with current annual revenue around the £9M mark.
Gladstone had problems during the dot.com boom, but those problems seem behind them now. They have a new NED in Robert Critchlow, who in the 90’s was CEO of Tetra when it was listed on LSE in 1997 and subsequently acquired by the Sage Group in1999.
In my mind, the one downside is the leisure centre market – from my time with the leisure centre system RELACS, the customer base was typified by low budgets, high staff turn-over, with inexperienced users, and a consequently high support workload. But Gladstone is now the market leader, seems to have support under control, and is moving well into both e-delivery and the new market area of education. I believe that they will be successful as an independent company, but with the big players looking to grow even more, I suspect that Gladstone will be on at least one player’s shopping list.
Two other possible companies are in the e-procurement area – Proactis and @UK. Both have totally different business models, Proactis the more conventional software product and services model, and @UK a SaaS model based on using local authorities to help them provide e-commerce services to local suppliers.
Proactis has totally changed under the leadership of Rod Jones (ex-Ross Systems) since 2002. Now employing a sales model incorporating both direct and indirect sales, growing through a couple of small acquisitions, and moving into an international market, Proactis had an annual revenue of c £5M in the year to end July 2007 – but has since issued a profit warning and now expects to return a loss in the year to July 2008 – quoting delays in the integration of its two acquisitions and a slowdown in Public Sector sales. Its share price has responded by dropping to c 19p and a market cap of around £6M.
@UK is a totally different kettle of fish. Floated on AIM in 2006 its share price has declined from over 60p to virtually nothing. The £8M raised in the flotation has been nearly all burnt away and at its current share price of around 3p, @UK has a market cap of just over £1M, with annual turnover £2.3M and a loss of £2.2M in 2007 (loss £3.2M in 2006). @UK lost its CEO, Grant Oliver earlier this year (the FD has stepped up to take on the CEO role), and an annual profit seems years away.
My own belief is that pure-play e-procurement companies are unlikely to survive long term – no matter how good their products, in the longer term most customers will look to buy procurement systems along with their financial and/or other systems. Personally, I think @UK’s business model doesn’t fly. Although my company Radius actively partnered with @UK a few years ago, when I was given the opportunity to invest in @UK before its flotation, I declined because of my concerns over their ability to get into profit.
I had similar concerns about Proactis but, current profit warning aside, I think they will return to profit and longer-term are a likely acquisition target – most probably not for Capita nor Northgate as they lack suitable applications to partner with, but could prove interesting for Civica, Agresso (who recently acquired CODA, whose founder Rodney Potts is also a major investor and a NED at Proactis), or even Cedar (who recently acquired a small e-procurement company Belmin).
There are of course, a number of possible service companies that could become acquisition targets, but I’ll leave those for another post.
Note: I am a share holder in IDOX and Gladstone. This blog is not intended as investment advice – please DYOR (do your own research) if you intend to invest in any of the above companies.
The one touted about in the press most is IDOX – a company that has itself grown through acquisition (recently of CAPS and Plantech) into the market-leading supplier of systems to local authority Planning and Land Charges departments. My opinion is that IDOX is unlikely to survive as an independent company for more than the next couple of years before it gets gobbled up itself. I suspect that the sole reason that it hasn’t been acquired already is that the big players have been competing over the more-important consolidation of the Revenues & Benefits market (IBS and Anite PS).
Now the likes of Capita and Civica may turn their attention onto IDOX (Northgate – as the second largest supplier of planning and LC systems would not, I believe, be allowed to acquire IDOX). The delaying factors are likely to be the current credit crunch and IDOX’s Directors’ likely valuation of their business – it may be that potential acquirers sit on their hands for a few months to see how IDOX copes with the integration of CAPS and Plantech, hoping for a hiccup and perhaps a reduction in valuation – let’s wait and see.
Another listed company is Gladstone (GLD) – suppliers of leisure centre systems to both local authorities and commercial operators – and starting to broaden its market into the education sector. Although relatively small, in April Gladstone had a major new investor taking 29% of the business (Constellation Software – a Canadian company, listed on the Toronto Stock Exchange), at 25p per share - with the current SP now around 20p (with a forecast of 4p EPS and 9p cash) and a market cap of around £10M (with £4M in cash on the balance sheet at 29 Feb 2008). Revenue is growing slowly and consistently, with current annual revenue around the £9M mark.
Gladstone had problems during the dot.com boom, but those problems seem behind them now. They have a new NED in Robert Critchlow, who in the 90’s was CEO of Tetra when it was listed on LSE in 1997 and subsequently acquired by the Sage Group in1999.
In my mind, the one downside is the leisure centre market – from my time with the leisure centre system RELACS, the customer base was typified by low budgets, high staff turn-over, with inexperienced users, and a consequently high support workload. But Gladstone is now the market leader, seems to have support under control, and is moving well into both e-delivery and the new market area of education. I believe that they will be successful as an independent company, but with the big players looking to grow even more, I suspect that Gladstone will be on at least one player’s shopping list.
Two other possible companies are in the e-procurement area – Proactis and @UK. Both have totally different business models, Proactis the more conventional software product and services model, and @UK a SaaS model based on using local authorities to help them provide e-commerce services to local suppliers.
Proactis has totally changed under the leadership of Rod Jones (ex-Ross Systems) since 2002. Now employing a sales model incorporating both direct and indirect sales, growing through a couple of small acquisitions, and moving into an international market, Proactis had an annual revenue of c £5M in the year to end July 2007 – but has since issued a profit warning and now expects to return a loss in the year to July 2008 – quoting delays in the integration of its two acquisitions and a slowdown in Public Sector sales. Its share price has responded by dropping to c 19p and a market cap of around £6M.
@UK is a totally different kettle of fish. Floated on AIM in 2006 its share price has declined from over 60p to virtually nothing. The £8M raised in the flotation has been nearly all burnt away and at its current share price of around 3p, @UK has a market cap of just over £1M, with annual turnover £2.3M and a loss of £2.2M in 2007 (loss £3.2M in 2006). @UK lost its CEO, Grant Oliver earlier this year (the FD has stepped up to take on the CEO role), and an annual profit seems years away.
My own belief is that pure-play e-procurement companies are unlikely to survive long term – no matter how good their products, in the longer term most customers will look to buy procurement systems along with their financial and/or other systems. Personally, I think @UK’s business model doesn’t fly. Although my company Radius actively partnered with @UK a few years ago, when I was given the opportunity to invest in @UK before its flotation, I declined because of my concerns over their ability to get into profit.
I had similar concerns about Proactis but, current profit warning aside, I think they will return to profit and longer-term are a likely acquisition target – most probably not for Capita nor Northgate as they lack suitable applications to partner with, but could prove interesting for Civica, Agresso (who recently acquired CODA, whose founder Rodney Potts is also a major investor and a NED at Proactis), or even Cedar (who recently acquired a small e-procurement company Belmin).
There are of course, a number of possible service companies that could become acquisition targets, but I’ll leave those for another post.
Note: I am a share holder in IDOX and Gladstone. This blog is not intended as investment advice – please DYOR (do your own research) if you intend to invest in any of the above companies.
More problems for Anite
Whilst Anite's management wait for confirmation that the sale of their Public Sector busines to Northgate will go ahead, they have confirmed that they are having to cope with the receivership of one of the major customers in their travel division, XL.
Not a major problem says RBS in an investment note - "Management contact confirms that there are no significant outstanding balances owed by XL Leisure and on a run-rate basis it generates about £300,000 of annual profit for Anite". RBS adds "We see £300,000 as manageable in the context of the division which has about £34 million of annual revenues and profits of about £8.6million".
But I'm not convinced that Anite can replace the XL revenue nor shed all of the costs related to it......
Not a major problem says RBS in an investment note - "Management contact confirms that there are no significant outstanding balances owed by XL Leisure and on a run-rate basis it generates about £300,000 of annual profit for Anite". RBS adds "We see £300,000 as manageable in the context of the division which has about £34 million of annual revenues and profits of about £8.6million".
But I'm not convinced that Anite can replace the XL revenue nor shed all of the costs related to it......
Tuesday, 16 September 2008
OT – valuing banking stocks – and FTSE at 3,200
Ok – this post really if Off Topic (OT) – but what value can we put on banking shares?
See my separate post on Jon Moulton's comments about the current situation being "very frightening", and noting Former US Federal Reserve Chairman Alan Greenspan and many other commentators describing the current crisis as the worst in a century, my own view that many if not most banking shares could be worthless. At the moment, I believe that without the support given to them by governments, virtually all banks would fail to survive – they survive on confidence, and only the support of government can keep that confidence up.
Is it right for governments to use tax-payers funds for this? The grumpy side of me says no – why should tax-payers bail out institutions that have squandered their own funds in obscene levels of pay and bonuses to their directors, managers and staff? The logical side says – what if all the banks failed? – the prospect is far more frightening.
But even if governments keep up the support – will all the banks survive? I suspect not – as the credit crunch continues, many economies (like ours in the UK) that have been funded by debt will inevitably contract – as a result there will be a long-drawn out recession – and many of our big name companies will hit hard times. If those companies have high borrowings there is every chance that (although they may be profitable at the operating level) they are unable to pay their interest charges and the banks/financial institutions will not get their loans repaid. i.e. after the sub-prime mortgages and toxic loans, then the rusty car loans, we will have the rancid corporate loans. Will the Banks have sufficient cash to survive – will governments have sufficient cash to provide the support needed – I think not – so my money is not staying in any bank stocks at the moments.
I've not revised my FTSE guesstimate for the end of the year (4,800) – but if this crisis continues for another year – as it looks as if it could – will the FTSE be at 3,200 by the end of 2009?
EDS/HP to shed 8% of staff – going off-shore?
Hewlett-Packard (HP), the world's largest computer company, announced yesterday that it plans to cut 24,600 jobs, almost 8% of its workforce, to streamline its business. Will that result in mass redundancies in its UK operations?
From my contacts it would appear that HP staff in the UK are largely safe – the UK HP operation is judged to be fairly "skinny", and whilst there will inevitably be some overlap and limited job losses, it is felt that the knife is more likely to fall on EDS's workforce. In total, HP/EDS plan to lose some 24,600 employees over three years, half in the States, and mostly through a "restructuring programme" of the EDS business.
But HP states that it plans to replace roughly half of these positions over the three years "to create a global workforce that has the right blend of services delivery capabilities to address the diversity of its markets and customers worldwide." Is this corporate speak for we plan to move a lot of our work out of high-cost employment locations (e.g. like USA, UK, etc...) into lower-cost locations off-shore (like India)?
The current financial crisis - is Jon Moulton right?
OK – so this is a bit Off Topic for this blog – but I recommend viewing Jon Moulton's short video on TelegraphTV. Jon is head of Alchemy Partners, the Venture Capitalists, that backed Radius' buy-out off the Stock Market in 1997. Whilst I wouldn't necessarily recommend Jon's comments on the operational management of software houses, I have great respect for his abilities in acquisitions and brilliance in the analysis of financial situations.
I'll leave you to view the clip on TelegraphTV, but in addition to agreeing to his comments that the current financial crisis is "quite frightening", I have to agree with his comments that "much of it driven by greed of the bankers and the bankers individually" and "greedy investment bankers chasing bonuses".
But unfortunately this is a wider problem than just the Banks and financial institutions – and in my opinion in this country it is more widespread than in the USA - all too frequently companies and their senior managers focus on a very short business horizon – typically the current financial year, rather than the longer term. Very simplistically, bankers have been motivated by their annual bonus for selling a new financial instrument with a large up-front arrangement fee, rather than worrying about the customer's ability to pay it back over the next, say, 25 years.
The skill is for Directors to set bonus schemes and their performance criteria that truly reflect a company's longer-term objectives, whilst also rewarding short-term targets. Focussing on just the short-term targets can lead to just the sort of problems the financial institutions are suffering now.
Monday, 15 September 2008
Memory, cheaper by the gigabyte or kb?
I was phoned by one of my customers* today, seeking my advice on a number of topics relating to one of his projects – one of them being the claimed under-sizing of a server by his supplier. Without going into the detailed contractual position of this, the supplier had sized the server, and for a couple of years it had performed well until the supplier had provided a new release of his software with a pre-requisite of new release of Microsoft system software (which had been acquired and installed by the customer’s own IT dept). Following the upgrade, performance had deteriorated, and now extra memory was required – the question was who should pay for it?
My customer was willing to pay for a day’s consultancy to help with this issue – until I asked him how much the memory would cost. A short delay and he phoned me back to say the cost of the memory would be significantly less than the cost of the day’s consultancy – needless to say I recommended the pragmatic approach, that he agree to purchase the memory (! selling myself short again) - but only after getting his supplier to agree that it would solve the problem, and if anything else was necessary the supplier would cover the cost. (The “brownie points” in being seen to help the supplier out would also help the customer-supplier relationship).
My customer was like me – he comes from an era where memory was expensive – and it is necessary to change mindsets with many computer systems – software and services are much more expensive than hardware – it really is worth spending extra on hardware (and/or extra system software) to reduce the amount of spend on software and services. But do watch the memory needs on individual PC’s – the cost of an extra 512 Mb may be low, but multiplied by a large PC populations, and including the services cost of installation, it may prove to be a project-breaker.
I remember that my first automated taxi despatch system covered the whole of Mississauga (Ontario) and supported over 300 taxis (all with mobile data displays) was delivered on a 16 Kb (yes – 16 kilo byte) Data General Nova computer with a single 2 Mbyte disc – well it was 1975. (For the first command & control system in new Scotland Yard we used a massive 48 Kb memory Nova with a 10 Mbyte disc). In those days, hardware costs normally vastly exceeded the cost of software and services, so the pressure was on to use clever software to keep the hardware cost down.
Not now. Now we use inefficient software generators that typically use massive amounts of memory (and processing capacity) to keep down software costs. But why is it that software development times and man-day estimates for major projects seem to have stayed around the same, or increased???
Don’t get me wrong – we should use the latest software technology – but let’s not get stingy with the server hardware – and bear in mind that application software developers do not always know what hardware requirements Microsoft or Oracle (or others) will build into their next releases....
* I maintain complete confidentiality on my customer (and their suppliers’) names, and only release their names with prior written approval. In this case my customer has allowed my blog on this item, but without revealing names.
My customer was willing to pay for a day’s consultancy to help with this issue – until I asked him how much the memory would cost. A short delay and he phoned me back to say the cost of the memory would be significantly less than the cost of the day’s consultancy – needless to say I recommended the pragmatic approach, that he agree to purchase the memory (! selling myself short again) - but only after getting his supplier to agree that it would solve the problem, and if anything else was necessary the supplier would cover the cost. (The “brownie points” in being seen to help the supplier out would also help the customer-supplier relationship).
My customer was like me – he comes from an era where memory was expensive – and it is necessary to change mindsets with many computer systems – software and services are much more expensive than hardware – it really is worth spending extra on hardware (and/or extra system software) to reduce the amount of spend on software and services. But do watch the memory needs on individual PC’s – the cost of an extra 512 Mb may be low, but multiplied by a large PC populations, and including the services cost of installation, it may prove to be a project-breaker.
I remember that my first automated taxi despatch system covered the whole of Mississauga (Ontario) and supported over 300 taxis (all with mobile data displays) was delivered on a 16 Kb (yes – 16 kilo byte) Data General Nova computer with a single 2 Mbyte disc – well it was 1975. (For the first command & control system in new Scotland Yard we used a massive 48 Kb memory Nova with a 10 Mbyte disc). In those days, hardware costs normally vastly exceeded the cost of software and services, so the pressure was on to use clever software to keep the hardware cost down.
Not now. Now we use inefficient software generators that typically use massive amounts of memory (and processing capacity) to keep down software costs. But why is it that software development times and man-day estimates for major projects seem to have stayed around the same, or increased???
Don’t get me wrong – we should use the latest software technology – but let’s not get stingy with the server hardware – and bear in mind that application software developers do not always know what hardware requirements Microsoft or Oracle (or others) will build into their next releases....
* I maintain complete confidentiality on my customer (and their suppliers’) names, and only release their names with prior written approval. In this case my customer has allowed my blog on this item, but without revealing names.
Friday, 12 September 2008
Local Government is behind the times in ID authentication
PublicTechnology.net reports that Experian has released a report revealing that while citizens are embracing new technology, Local Government is behind the times when it comes to identity (ID) authentication. (For full article see here).
Well no surprise there – although there have been a number of initiatives (I remember Radius and Viacode making proposals for the use of digital certificates for citizen authentication and registration as a Pathfinder project as long ago as 2002), for some reason Local Government just doesn’t seem to get the message.
From a technology point of view, the Government Gateway is potentially one of Central Government’s best initiatives in this area – but politics (and cross-charging) seem to have got in the way. Having been involved in the early stages of this initiative, I’m a bit out of touch these days, but to my knowledge there are still no more than a handful of councils (none?) using this technology to give their citizens a single log-in username/password for access to all Public Sector systems.
Central Government needs urgently to drive this project, both to assist the take-up of e-government across the whole of the Public Sector (not just Central Government, as has happened to date), but to secure electronic access for its citizens both now and for generations to come. To stop with just the GC Connect project for secure communications between public sector organisations is not enough.
After cost, the core issue for any such solution is to manage the registration phase properly, i.e. to confirm that when Phil Benton registers on a council web site, he really is the Phil Benton who lives at 123 Acacia Avenue, has a Midshire DC account no 987654 and a leisure card no 345678. Many companies believe they have found automated solutions for this process, but in practice I believe that we will inevitably move towards a face-to-face registration for the issue of a digital certificate (which can also be used for secure e-mail)
Unless, of course, we get citizen ID cards........
Well no surprise there – although there have been a number of initiatives (I remember Radius and Viacode making proposals for the use of digital certificates for citizen authentication and registration as a Pathfinder project as long ago as 2002), for some reason Local Government just doesn’t seem to get the message.
From a technology point of view, the Government Gateway is potentially one of Central Government’s best initiatives in this area – but politics (and cross-charging) seem to have got in the way. Having been involved in the early stages of this initiative, I’m a bit out of touch these days, but to my knowledge there are still no more than a handful of councils (none?) using this technology to give their citizens a single log-in username/password for access to all Public Sector systems.
Central Government needs urgently to drive this project, both to assist the take-up of e-government across the whole of the Public Sector (not just Central Government, as has happened to date), but to secure electronic access for its citizens both now and for generations to come. To stop with just the GC Connect project for secure communications between public sector organisations is not enough.
After cost, the core issue for any such solution is to manage the registration phase properly, i.e. to confirm that when Phil Benton registers on a council web site, he really is the Phil Benton who lives at 123 Acacia Avenue, has a Midshire DC account no 987654 and a leisure card no 345678. Many companies believe they have found automated solutions for this process, but in practice I believe that we will inevitably move towards a face-to-face registration for the issue of a digital certificate (which can also be used for secure e-mail)
Unless, of course, we get citizen ID cards........
Thursday, 11 September 2008
How to stop drowning in e-mail....
My thanks to my time management guru, Richard Maybury, for bringing a software tool called xobni to my attention.
This product works with MS Outlook to not only auto-index your e-mails but also provide an additional pane in your Outlook window that automatically gives you information on the sender of any e-mail you view, together with a history of previous e-mails and documents exchanged - in my job I find it very useful.
To download a copy (it's at an apparently very solid beta stage - and currently free) visit http://www.xobni.com (yes - that's "inbox" backwards).
Richard introduced me to time management using Outlook way back in 2000 - and it changed my way of working dramatically. I still use all the techniques he taught me, and I struggle to know how I would have survived my senior roles in Radius and Civica without them. If you want to know more about the excellent training courses that Richard provides visit:
http://www.prioritymanagementeurope.com/workshops/workshops.asp?id=Guildford or e-mail him at mailto:richardm@prioritymanagement.com
This product works with MS Outlook to not only auto-index your e-mails but also provide an additional pane in your Outlook window that automatically gives you information on the sender of any e-mail you view, together with a history of previous e-mails and documents exchanged - in my job I find it very useful.
To download a copy (it's at an apparently very solid beta stage - and currently free) visit http://www.xobni.com (yes - that's "inbox" backwards).
Richard introduced me to time management using Outlook way back in 2000 - and it changed my way of working dramatically. I still use all the techniques he taught me, and I struggle to know how I would have survived my senior roles in Radius and Civica without them. If you want to know more about the excellent training courses that Richard provides visit:
http://www.prioritymanagementeurope.com/workshops/workshops.asp?id=Guildford or e-mail him at mailto:richardm@prioritymanagement.com
HIPS will go - but when...
The Conservatives are in the press again today calling on ministers to suspend Home Information Packs to help boost the housing market (see http://news.bbc.co.uk/1/hi/uk_politics/7609414.stm). But the DCLG publicly states that "We have absolutely no plans to suspend HIPs". What is the real position?
Well my mole tells me that HIPS will go, the only question is when. They are likely to be replaced by just the energy efficiency element, and hopefully before the end of this Parliament. The demise of HIPS had been predicted as being announced with the recent announcement on the reduction in Stamp Duty, but it would appear that the government bottled out of this.
Based on the information I've heard I am currently predicting an announcement by the end of this financial year - as house sale volumes continue to drop through the winter, and house price falls increase to over 15%, I expect the Government to use such an announcement, in part, as a second (third?) step to help the housing market.
Will it make any difference to the housing market? - of course not (and many house sellers are already ignoring the requirement for a HIP any rate).
Will it increase the financial pressure on Personal Search Companies? - (if many remain by next year) absolutely - so it may bring a smile to the faces of those in Local Government who have seen severe drops in their revenue from Official Searches (even though they will see a drop in their own revenue as a result).
Is it right to get rid of HIPS? - my view is absolutely yes - if they had included a full survey that purchasers and their lenders had accepted, they might have worked - as they are now without full surveys and (in many cases) a non-official search they are almost worthless, and just an indirect tax on house sellers.
Well my mole tells me that HIPS will go, the only question is when. They are likely to be replaced by just the energy efficiency element, and hopefully before the end of this Parliament. The demise of HIPS had been predicted as being announced with the recent announcement on the reduction in Stamp Duty, but it would appear that the government bottled out of this.
Based on the information I've heard I am currently predicting an announcement by the end of this financial year - as house sale volumes continue to drop through the winter, and house price falls increase to over 15%, I expect the Government to use such an announcement, in part, as a second (third?) step to help the housing market.
Will it make any difference to the housing market? - of course not (and many house sellers are already ignoring the requirement for a HIP any rate).
Will it increase the financial pressure on Personal Search Companies? - (if many remain by next year) absolutely - so it may bring a smile to the faces of those in Local Government who have seen severe drops in their revenue from Official Searches (even though they will see a drop in their own revenue as a result).
Is it right to get rid of HIPS? - my view is absolutely yes - if they had included a full survey that purchasers and their lenders had accepted, they might have worked - as they are now without full surveys and (in many cases) a non-official search they are almost worthless, and just an indirect tax on house sellers.
Wednesday, 10 September 2008
my new blog.....
Welcome to my new blog, pssst......
After running a closed blog for colleagues and friends over the past few months, I've been encouraged to open it up to a wider audience - hence this new blog.
My aim remains to comment on items of interest to those of you who are either involved in the software and services industry, or are employed in the UK Public Sector. I have been persuaded to try to tone down my comments, and as this is a public blog, I will have to be particularly careful with comments that are specific to companies, organisations and individuals - however, I will aim to generate comments and, hopefully, provoke discussion on topics of interest to you.
And so - a request - if you have any topics that you think I should be commenting on, please e-mail me on phil@systemsolveconsultancy.co.uk - I welcome all and any suggestions and comments - even the critical ones. Please feel free to disagree with me - my blog entries will express my personal opinion, and I welcome your suggesting your own comments.
Finally, my advert - if you've not heard of me or my company Systemsolve before, I have over 35 years of experience in the supply of IT systems to the public sector both in the UK and abroad. For 10 years I was MD of Radius Computer Services until acquired by Civica, and now I provide consultancy services with one of my specialisations being in problem resolution - be it an under-performing company/business unit, or a problem project. Please visit my web-site at http://www.systemsolveconsultancy.co.uk/ for information on the consultancy services I supply both to IT/software companies and Public Sector organisations.
After running a closed blog for colleagues and friends over the past few months, I've been encouraged to open it up to a wider audience - hence this new blog.
My aim remains to comment on items of interest to those of you who are either involved in the software and services industry, or are employed in the UK Public Sector. I have been persuaded to try to tone down my comments, and as this is a public blog, I will have to be particularly careful with comments that are specific to companies, organisations and individuals - however, I will aim to generate comments and, hopefully, provoke discussion on topics of interest to you.
And so - a request - if you have any topics that you think I should be commenting on, please e-mail me on phil@systemsolveconsultancy.co.uk - I welcome all and any suggestions and comments - even the critical ones. Please feel free to disagree with me - my blog entries will express my personal opinion, and I welcome your suggesting your own comments.
Finally, my advert - if you've not heard of me or my company Systemsolve before, I have over 35 years of experience in the supply of IT systems to the public sector both in the UK and abroad. For 10 years I was MD of Radius Computer Services until acquired by Civica, and now I provide consultancy services with one of my specialisations being in problem resolution - be it an under-performing company/business unit, or a problem project. Please visit my web-site at http://www.systemsolveconsultancy.co.uk/ for information on the consultancy services I supply both to IT/software companies and Public Sector organisations.
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