31st Mar 2007
Disruption

I’ve had “Disruption” as a theme for my talks for several years. Like many of my themes, it seemed quite provocative at first but the theme has entered the mainstream now and is much imitated (should I be pleased?)
Two years ago I used internet advertising as one example of the effect that “Disruptive technologies” were having on established businesses. For several hundreds of years, newspapers have relied on a lead position in advertising spend. Then along comes TV which dislodged them from that pole position... some 30 years ago. The pace of change, as you can see, in the past was measured in numbers of decades!
Oh how things have changed! In 2000 internet advertising basically didn’t register on the scale. I first wrote about it in the second half of 2004 when the annual run rate first exceeded exceeded £1b.
Latest figures from IAB show internet advertising up a massive 41% to £2.02 billion in 2006 compared to a miniscule 1% rise in overall advertising spend. For the first time Internet advertising overtook national newspaper advertising (£1.9b) and is now >50% of TV advertising (£3.9b). 58% of internet advertising is now search related. For more on "Advertising looks to an online future" see Sunday Times 1st April 07. http://business.timesonline.co.uk/tol/business/industry_sectors/media/article1595910.ece
I'm giving another speech on the Disruption theme in a few weeks time so I had cause to update my internet advertising slide which I thought I'd share with you (see below)

28^th March 2007

More BPO IPOs

Further to my comments yesterday about the upcoming IPO of UK BPO player Xchanging, the FT today Click here reports that "two of the world's largest BPO players" - Genpact and Sutherland Global Services - are also "plotting" (the FT's word) IPOs on NASDAQ or NYSE.
Now, if you are into fancy valuations, get this. Genpact has annual revenues of $600m and "the listing is expected to value the company at more than $4billion". Sutherland is half that size and therefore expecting a $2billion valuation.
So US BPO companies are valued at nearly SEVEN TIMES revenues?
For a sanity check, I would point out that the very best and biggest BPO company in the UK - Capita - has revenues of £1.77billion and a market value of £4b. Makes it look decidedly cheap at just over TWO TIMES revenues!
I note that there have been a number of BUY notices issued recently on Capita with a 2007 target of 790p - Capita closed tonight at 681p...
Personal note - In the past I've been unable to buy Capita shares whilst I was an analyst at Ovum. Freed from such constraints, I bought in last week!

27^th March 2007

Xchanging to float

BPO specialist, Xchanging, has announced plans for an IPO to be completed in late April. The IPO plans to raise around £150m; c50:50 in new money and share sales by existing shareholders (General Atlantic holds 54% of the equity)/ Xchanging says it increased revenues from £350m to £393.5m in 2006 and increased profit “before exceptionals and other items” - whatever that might mean – from £13.6m to £17.5m.

More details see http://www.insurancejournal.com/news/international/2007/03/27/78130.htm

Although Xchanging is not commenting on the valuation, the media has suggested c£500m post IPO. That rather implies an enterprise value of c£350m or around one-times revenues. Even taking the rather nebulous £17.5m profit, that’s an EBITDA multiple of 20….

Of course, Xchanging will want us all to believe that it is another Capita. But even the wondrous and “Boring” Capita only has an EV/EBITDA multiple for 2006 of 19!

BPO and associated valuations

Although “IT-related BPO” has been around for several decades – indeed I’ve been reporting on it since 1989 – interest in it has exploded since 2000. Growth expectations were then somewhat over-egged. The result was that investors – in particular private equity – piled in creating extremely high valuation expectations. As well as Xchanging, private equity is involved in other BPO “Top Ten” players like HBS and Liberata (and now Vertex of course).

When General Atlantic-backed Xchanging was setup in 1998, David Andrews, their CEO, told me that they expected to achieve a valuation of £1 billion with 3 years!

This is an extract from my review in 2001:

“The primary example of a UK-owned pure play BPO company is, of course, Xchanging, set up in 1998 by David Andrews. Ex-Andersen Consulting, Andrews spent 20 years specialising in shared services and built up Andersen’s (now Accenture’s) outsourcing business. Xchanging has been built up on the back of an investment of £60m by General Atlantic Partners, which owns 70% of the business.

The company has ambitious targets and has forecast annual revenue in 2005 of £1bn. Perhaps even more ambitious is the plan to float in 2002 with a valuation of up to £1bn. “

The reality now is quite, quite different. Xchanging, in 2006, had revenues of <£400m and, I should point out, Xchanging is ONE OF THE BEST performers of all the new “pure-play BPO players”!

We got a guide to BPO valuations metrics in Vertex’s recent sale by United Utilities to a private equity consortium. The £217m paid represents a PSR of around 0.5. Last year valuations of up to £500m had been openly talked about for Vertex.

So I will watch Xchanging’s IPO very closely – as an observer rather than investor methinks.

Footnote – Trawling the newswires concerning the Xchanging IPO, I came across this news item http://www.supplymanagement.co.uk/EDIT/Top_stories_item.asp?id=15790
which basically reported that last week Xchanging had bought out BAE Systems from their procurement JV setup in 2001 for £57m. Seems a bit steep for “a procurement function mainly covered "back-office" items such as fleet, mobile phones and stationery”. Obviously a desk-tidying pre IPO.

27^th Mar 07

All of a Twitter

It seems just like the “olde days” of 1999/2000 when the Financial Times page one headlines a Silicon Valley firm with a daft name like Twitter (and no revenue, profits or anything equally “daft” like that either)

Twitter was predicted by Jonathan Schwartz – CEO of Sun Microsystems – to be a hot property. Twitter allows blogging on mobiles. Basically you can keep everyone updated on what you are doing throughout the day and anyone interested can keep tabs on you.
I have to admit its one advantage is that at least you have to keep your blogs short – 140 characters! This will be more than enough for me to report important things like “I’m on the train now – be back at 7.00pm”. Or, in this viral world, “Just read Holway’s blog on Atos today – it’s really good”.

It’s also interesting that this comes at a time when other pundits have signalled the end of the web based blog boom. Apparently over 200m blogs have been discontinued or not updated. A blogging peak was reached last October apparently.

I have written many times about the “Pace of Change/Disruption” getting faster and faster. Just like I can SEE the plants grow in my garden right now, you can SENSE that this is happening right now in the TMT sector too. New opportunities seem to arise daily. A “daft” idea today becomes a $1.65 billion acquisition next week (a la Youtube!)

So is it all a rerun of the dot.com bubble?

I have a feeling not. When you are backing companies one star will pay for 99 dogs or to find a Prince you have to kiss a lot of frogs! So, you should expect many failures – some spectacular. But in the current environment there will be stars too!

The opportunities will be in the “ICT-enabled” space NOT in “pure” technology itself. Youtube and Twitter just use the available technology (which is not particularly groundbreaking). Indeed the "enabling technology - the mobile space - is in its "maturity" phase right now.

27^th Mar 07

Atos Origin

So Atos Origin has now confirmed what has long been rumoured that they are up for sale and that private equity is the most likely suitor. Rothschild and Goldman Sachs are appointed as Atos Origin’s advisors.

My friend Phil Codling wrote an excellent piece yesterday for the Holway@Ovum service. As they put it on the web for all to see, I’ll attach a link!

http://www.ovum.com/news/euronews.asp?id=5559

Les Echos today reports that French investment fund Eurazeo has expressed interest (never heard of them!) Reuters reported “A source familiar with the matter had told Reuters a group comprising buyout firm Permira and hedge fund Centaurus Capital was in talks with Atos.”

Atos has said that it wishes that the process is quick so as not to disrupt its business. Atos, at its current share price of Euro51, has a current market value of around Euro3.5billion. This looks as if it has already taken on board any bid premium!

So, compared to ACS last week (private equity MBO valued at $5.9b) or the biggest of all, Sungard (March 2005 valued at $11.3b) and others, Atos Origin would be relatively “mid sized” in the private equity scheme of things.
If I was a betting man, I’d take bets on Atos not being the last high profile IT Services companies to fall to private equity in the next year. I’d include EDS and CSC in my target list. Could be an interesting year!

26^th Mar 07

Finsbury Technology Trust in share issue?

As you will know I joined the board of Finsbury Technology Trust in January this year. After a “Beauty Parade” we selected Walter Price and his team from RCM Technology to be our new fund managers and have already announced a change of name to RCM Technology Trust plc (to be agreed at the AGM on 10^th Apr 07)

We have just issued the RNS notice below which is self explanatory. I really hope that the new fund raising goes ahead and is successful; thus building a technology fund of size, substance and influence.
The market seems to like it as the discount of share price and NAV has narrowed ever since the first announcement.

FINSBURY TECHNOLOGY TRUST PLC 




POTENTIAL SHARE ISSUE 




RNS - 26 MARCH 2007 

19th Mar 07
Google Act 2.0

Two articles caught my eye this morning:

- The Financial Times, Click here, comments on Google's recent share price decline (down 12% since January) and questions whether Google can make it big in any other area than search-based advertising. As readers know, my “Who are you?” speech/theme used Google as an example of a company that was great in its “core dna” but I too questioned its ability to break out of this and develop into, say, SaaS-based office apps.

- The other article was brought to my attention by the excellent Marketclusters/Strategywire service. This highlighted several other news sources and blogs reporting on rumours that Google is developing a “Blackberry+Java” mobile phone. The problem in this (apart from the fact – see above – that Google really doesn’t have “mobile phones” in its dna, let alone handset development!) is that we could probably trace sources saying that Google was developing everything including a new high tech kitchen sink (that last bit is a joke…I think!) Anyway for more info on the rumour Click here.

19th Mar 07
Google phone?
Response from Julian Hewett

I was delighted to get the response below from Julian Hewett who most of you will know as one of the founders and latterly CEO of Ovum to 2000 before becoming Ovum's Chief Research Officer. Together we launched EuroView before Jules left to become a property developer! He gave permission for its publication (just in case the others who have responded in the past fear I might publish their "off-the-record" comments too!)
BTW - I'm going to update this Blog to use "proper" software soon which will make handling your responses much easier.

Jules wrote:
I remember saying to a Times journo that I was 99% certain that Google would launch VoIP well before they actually did.  This resulted in the most press coverage I ever had.  The next day I did no real work at all - the phone rang all day and 3 camera crews came through Ovum. 
 
(Note - If you want read one of the original articles on the "Google Phone Challenge" from The Times 24th Jan 2005 Click here)

18^th March 07
What a week!

I haven’t had any time to write this blog this week – for good reason.

Maybe you will indulge me if I work this week’s comments around my own week. 

Monday – Dinner with HRH Prince of Wales at Windsor Castle
This was a magical evening for Patrons of the Prince’s Trust. As you know, I was one of the founders of the  Prince’s Trust Technology Leadership Group in 2002 and our efforts have raised in excess of £4m since. I got elevated to a Patron as my speeches – now held twice a year – have, in themselves, raised over £500,000 for the Trust.

My table had Patrons from Ernst & Young, Liberata and BEA Systems as well as Mike Lynch from Autonomy. 

BBC Jam –I’ve known Mike for many years and have the highest respect for him as one of the very few people from the UK who have built a sizable global software company. Unknown to Mike, our paths crossed again a few months back. For the first time in 30 years, I had actually seen a job advertised that I really wanted to do. I really wanted to be a non executive director of the BBC. And I applied for it. Only recently did I learn that Mike Lynch had been appointed to the role. I am truly jealous.

Mike and I did have the opportunity to discuss the BBC Trust’s decision this week to suspend their online education service - BBC Jam. This followed complaints to the European Commission from other commercial providers of online education services.

Although Mike was pretty unhappy about this, my own views are rather different. Anyone who saw my “Who are you?” speech about corporate dna, will know that I think that it’s “Broadcasting” that is the BBC’s dna. “Broadcasting” used to mean radio and TV but now clearly embraces “new media” in all its senses from the “Listen again” on the internet to pod-casting. But I don’t think it should get into software development – anymore than I think it should make TV sets, publish magazines or newspapers. We have some fine educational software providers in the UK – RM plc for example. I don’t think that taxpayers money should be used to compete against those companies. 

Footnote – Dinner at Windsor Castle will undoubtedly remain as a highlight of my year. Made even more special because we had a long chat with Ozzy and Sharon Osbourne as we were waiting for our cars to arrive at the end of the evening. I even got a kiss (from Sharon, not Ozzy, I’m pleased to add!) 

Tuesday – The Holway Debate at the UK Technology and Growth Forum at the London Hilton.

I replayed my “Who are you?” speech about corporate dna and then had a panel debate with: 

•         Mark Hunter, Chairman and CEO, Axon Group

•         Alistair Cox, Chief Executive, Xansa

•         Jim McKenna, COO, LogicaCMG

•         Chris Stone, Chief Executive, Northgate

•         John Brigden, CEO EMEA, Symantec 

I started off by asking each person to describe their dna in as simple and short a description as they could. Mark Hunter (Axon) managed to do it in half a dozen words and it’s interesting that his company has been THE best performing of ALL the other companies on the panel over any timeframe in the last five years. Indeed their share price has doubled in the last year alone.

It was interesting that Chris Stone took the longest (by far) to describe what Northgate does – something that several people remarked upon afterwards! Northgate’s share price has been flat in the last year.

I asked Jim McKenna whether LogicaCMG really had products in its dna. Now that LogicaCMG has sold off its Telecomms products activity (see below) he was able to agree that it did not! Clearly Paul (or is that Jim?) on the road to Damascus.

Doing my research on Symantec, I’d actually come across a quote at the time of the Nov 04 acquisition (merger?) of Veritas where the merger was questioned as “oddly combining consumer and enterprise dna”. John tried hard to say that, 2+ years on, the corner was turned. With a share price half that what it was at the time of the merger, a slew of top level resignations and Symantec’s most recent results – I’m not quite so sure!

But the memorable quote of the session came from Mark Hunter. A member of the audience asked about integrating “cultural dna” on acquisition. In our industry it has been differences in “cultural dna” that really “did for” many – Capgemini and E&Y, Compaq and Digital, Compaq and HP etal. Chris Stone has already indicated that, when he acquires companies, the acquired have to fit in with Northgate’s “cultural dna”. “We rather like Northgate’s culture just the way it is” he said at the time of the SX3 acquisition. Hunter said that Axon applied the FIFO approach to integration.

FIFO? ...."Fit In or F*** Off!"

I bet that is the only thing the hundreds in the audience will remember! 

Wednesday – Prince’s Trust ICT Leaders Gala Dinner at the Banqueting House

Around 350 ICT CEOs attended. John Thompson, CEO at Symantec gave the address.

It was an amazing success and, with the auction, we raised over £90,000.

I take on the Chair in a few weeks time and this was as good a send off to James Bennett – the current Chair – as you could get. James will be a very hard act to follow. 

Friday – Computer Software Group (CSG) agrees to HG Capital-backed MBO

I have a considerable interest in this. I’ve been a Limited Partner and investor in Elderstreet Capital Partners since 1998. Vin Murria was at ECP at that time and has been the main mover behind CSG as its CEO. It wasn’t all plain sailing – they hit a real low in 2003. But since then the share price is up nearly 10-fold. Indeed, CSG is ECP’s largest shareholding (they held c20% of CSG’s equity) and this deal will represent a considerable and welcome return to the fund. 

The offer price of 150p a share represents a premium of 37% on Wednesday’s closing price and values CSG at £99.6m. CSG were forecast by their brokers to have revenues of c£42m and EBITDA of c£9.5m in the year to end Feb 07. The 10.5 historic EBITDA multiple is OK – but not exceptional.

So what is HgCapital up to? HG recently beat Sage to acquire Visma, the Norwegian software company. HgCapital also owns four other software companies in the same sector: IRIS Software and Exchequer in the UK, and Addison Software and PBSG in Germany. When Visma was acquired, HgCapital estimated that these combined companies would have total revenue of approximately €85m in 2006 and an EBITDA of €32m.

Recently there has also been much speculation about HG floating or selling Iris with valuations in the “£250m-£300m” range. Iris and CSG have pretty similar revenues but Iris is significantly more profitable.

But perhaps the other alternative HG is now considering is putting together all these quite synergistic business software companies, specialising in vertical markets for SMEs, creating a much larger, European-focused business software organisation to be built on both acquisitive and organic growth.

With Michael Jackson (who was Sage’s Non Exec Chairman up to 2005) in the MBO team and chairing the newco, and Vin Murria’s ambitions undimmed, are we seeing a Sage Mark 2 in the making?

18^th March 07

Finsbury Technology Trust to become RCM Technology Trust plc

On 29^th January 07, RNS reported that I had joined the board of Finsbury Technology Trust as an NED. Interestingly, one of the first activities on the board was the selection of a new fund manager. On 6^th March 07, it was reported that RCM had won that particular “Beauty Parade”. RCM, has assets under management of $77.6bn including $2.6bn in global technology mandates (as at 31 December 2006).
Walter Price and Huachen Chen are the co-lead portfolio managers of the RCM global technology team and will jointly manage the portfolio.
Assuming shareholders back the move at the April AGM, the UK fund will be known as RCM Technology Trust plc.
It was a very interesting exercise and I think the future will be just as “interesting”. The fund’s share price has risen since the announcement and the discount to the NAV has declined significantly – always a positive sign! I’ve never been involved with an Investment Trust before but I’m pleased to say that both the Chairman (David Quysner) and the other NEDs are all experts in that area. Indeed, the reason for my appointment was to add some “technology” expertise to the board. But, of course, as an NED I’m not allowed to go “stock-picking”- that really is the role of the fund manager. Although I do get a say in the “general strategy”.

7th March 07

Misys “giveaway”

My views on the way Kevin Lomax ran Misys in the second half of his tenure – i.e. the last ten years – are well know. The damage this did to shareholder value (of which I was, and still am, one) are in the public record and beyond dispute.

I thought that Mike Lawrie, the “new” Misys CEO, put it rather well in an interview in the Guardian today.

"The way Misys was built is they had a global distribution network and they would buy companies and sell those companies' products through the distribution network and when people stopped buying those products they would buy more companies," he said. That model worked until the turn of the century, but companies now expected their IT suppliers to do much more than just sell software, he said. "Although every other software company on planet Earth moved in that direction Misys didn't. As a result Misys became less relevant to its customers."
Its core banking business had not added any significant new customers for years. “

Misys announced yesterday the sale of its Sesame operations in an MBO. I say “sale”, but “given away” might also be a valid term. Sesame has been “up for sale” for several years and a price tag as high as £300m had been reported. When, last year, Misys itself was put up for sale, every interested party, including those bought in by the Lomax-led MBO team, found that the usual rules of synergy did not apply at Misys – the sum of the value of the parts just did not add up to the whole. The value put on Sesame was one of, if not the, most significant stumbling blocks. Investors quickly found out that, in order to meet FSA regulatory requirements, they had to leave in excess of £100m cash in the business. Sesame, in fact, had a negative value in the scheme of things.

And, that’s exactly the bullet that was bitten yesterday. Under the terms of the MBO deal announced yesterday, Misys is leaving £105m cash in the business and is getting £90m paid over 8-10 years for 60% of the business. Misys retains a 40% stake. In the Telegraph “Matthew Hammond, a Credit Suisse analyst, said the deal implied that Misys had "paid [Sesame's] management £15m.” The deal does not yet have FSA approval. When it is completed, it will knock c2p off Misys' EPS... as well as c£350m of revenues. 

My view, for what it is worth, is that this is probably the best deal that could have been done at the current time and circumstances. It rids Misys of a considerable distraction. Again, the person who should be criticised is Lomax for getting Misys into this situation in the first place and not taking the remedial action many years ago.

The other point, picked up by many of the commentators today, is the “long term” nature of Lawrie’s plans for Misys. We have been presented with a long haul 3-5 year turn around plan. This is EXACTLY the kind of plan that private equity would present. But the intention is that Misys will remain as a publicly quoted company.

That’s a very brave, maybe even naive, move. Private equity can take that kind of view because it is out of the public gaze and not prone to short term shareholder action. Already Misys share price is down on the news. Short term shareholders will say “I’ll sell now and wait to see if the plans show any sign of succeeding. I can always buy back in later”. Indeed, if the brokers notes coming across my desk this morning are representative, they all recommend Sell or Reduce. That just makes Misys more vulnerable to another round of bids and attendant insecurity later on.

5th March 07

CEO sells £50m Datamonitor shares

I've developed a keen interest in Datamonitor over the last few years, reaching its height on their acquisition of Ovum which was completed just before Christmas. Their results for 2006 were announced last week and were pretty impressive. Revenues up 27% at £70.4m and PBT up nearly 60% at £13.3m. That's a PBT margin of 19%. EPS increased by 49% to 15.88p.
The share price has performed equally well with a rise of 50% from c400p a year back to over 600p in the last few weeks; although it has dipped by c50p along with the general market in the last few days. Anyone with a calculator can work out that that is an historic P/E of nearly 40. Analysts are forecasting EPS of 24p for 2007. But even that is a forward P/E of 25!
We were therefore intrigued to note that CEO Mike Danson sold half his remaining holding last week. His sale of 9m shares at 575p raised £52m. This is not an isolated sale. Danson has sold a further 7.5m shares in the last year (making 16.5m in total); with proceeds of c£80m. He retains c9.5m; c13% of the total equity. Bernard Cragg, Datamonitor's Chairman, also exercised options and sold shares acquired (27.5p...)  last week - 275K in total also at 575p. Cragg was granted these options when the share price hit is nadir of 14p in 2002. Datamonitor has since stopped granting options to non-executives as it is against Corporate Governance guidelines. 
Datamonitor IPOed in late 2000 at 150p and it has had a pretty roller-coaster ride since!  Lately its had an amazing record. One that we shall watch in the future with great interest as Ovum, Datamonitor's largest acquisition, starts to have an effect on its performance. 

3rd March 07

Indices in reverse 

Tech stocks, in the UK, Europe and the US, reversed much of the gains they had made in January. NASDAQ was down 1.95% and is now back, at 2416, to where it started 2007.
Telcom in the UK was the worst effected - down 4% with Mobile down 4.3%. But UK SCS was down just 0.2% and is still showing a 0.75% gain for the year. This was all  largely before the major "adjustment"? in world indices this week. All the forecasters reckon we are in for a volatile time and who am I to disagree?
For the detailed changes in the indices I track, Click here.

2nd March 07

Cycles 

The UK top ten providers of IT services are pretty much the same, year in, year out. But their individual rankings and fortunes seem to go in quite different cycles. This month, many of those majors have reported their 2006 results. They show to me that:
- Capgemini and HP are well on the up with their recovery well established. I'm really impressed by Capgemini embracing the offshore model. Who would have thought it for a French company! And HP have just returned to sound mature business practices under Hurd after the Carly misadventure. That has been reflected in their share price already
- EDS is showing all the signs of a successful recovery with great short/medium term potential. Again as a result of good old fashioned mature business practices under the equally "mature" leadership of Jordan
- CSC is at its nadir. All the "For sale" deliberations have been damaging as evidenced by the exodus of top staff.
- Atos Origin probably isn't even at its nadir yet. It has to wake up to the offshore challenge. A period o readjustment is still required before they too make their painful way out of their current dilemma.
- Fujitsu Services is almost the classic anti-cyclical IT services company. It managed to do appallingly badly, under Bonfield and Keith Todd, in the period up to 2000 when, as Geoff Unwin of Capgemini so famously said "making profits in 1998 was like shooting fish in a barrel". Under Richard Christou it came to its senses and, in the UK, ex-EDSer David Courtley has produced a market leading performance. But we feel that the struggles might just be starting again. With its over dependence on public sector, no offshore capability and also no real exposure outside the UK, it looks increasingly vulnerable to the disruption now affecting the sector.
- IBM Global Services has had a pretty good run but seems to have reached its peak and is now on a plateau (at best).
- Accenture is the one company out of the top boys where I can see no sign of the current strong run coming to an end. They seem to have done many things right - move to BPM, considerable offshore capability etc. The NHS project debacle is behind them - some might say it was an added bonus to be rid of this. 
That just leaves the two UK-owned top ten IT services players. BT Global Services and Capita. "Boring" Capita really is the exception that proves the rule. It doesn't have a cycle as it only knows one direction and that is "up". (see comment below) As I'm a member of BT Global Services Advisory board, I think I better stay stum on that one right now!
If you accept that the fortunes of individual IT services companies do go in cycles then what goes up, does come down but inevitably will go up again! I guess if I was so inclined (or indeed FSA regulated) I could translate that into a Buy and Sell list. 
Maybe I'll revisit that in a few months time and see if the theory would have translated into a profit.

2nd March 07

Recapping February 

Looking back over the last four weeks since I last updated HotViews, I'd pick out the following news items as being the most significant:

- LogicaCMG disposing of their Telecomms products business to private equity for £265m. This was always on the cards. We are glad that Martyn Read held on so that he could get a decent price. Readers might remember my "Who are you?" speech and presentation in Dec 06. Does LogicaCMG have software products in their dna? I would contend not. They are a services company and that's exactly what they again now are. But LogicaCMG's results were not exactly exciting - particularly the mere 2% growth from the UK. Perhaps they can now concentrate on getting all their IT services cylinders firing at the same time - something that they never seem to have achieved to date!

- Google launched Google Apps providing the equivalent of Outlook, Word and Excel as a service. Although I've been championing SaaS for, well, actually 10 years now, I don't think this is the breakthrough. I would only ever consider it on a "static" PC right now. Until there is an always-available high speed link from anywhere I don't think I would rely on these applications being available in that way. I do much work on trains, airplanes and ships (in the Indian Ocean see below!) Google Apps would be of no use and I would have to continue to have a version of these apps on my laptop. I would use it to access shared or backed-up data, contact lists etc from a remote PC. I would use it for seldom used, non time critical applications (pdf file creation for example)

- The Home Office reported that the number of visas issued to IT workers to come to work in the UK increased from 25,000 to 33,756 in 2006. 79% were from India. As usual the Association of Technology Staffing Companies complained bitterly. I've commented on this issue on many occasions and, indeed, this 32% increase is far from surprising. It will go higher. The number of UK students studying computing (or, indeed, any numerate subject) continues to decline and graduate starting salaries are on hold; even if you can find someone to take you on. The new incomers are highly educated and highly motivated. Although they are prepared to work in the UK for lower salaries than UK employees - it's still a lot more than they earn at home. At first everyone thought that offshoring meant exactly that. But what is happening now is that the offshore companies are sending their high quality IT staff to work onshore to do the customer-facing jobs that we mistakenly believed were our forever. Bluntly, we shouldn't fight this as it is as impossible to stop as the tide coming in. We must learn how to harness this for our own benefit. Conventional IT jobs as a gravy train for life are a thing of the past. That's why I wouldn't advise my Grandson to go into that kind of IT as a career.

- Oracle acquiring Hyperion for $3.3b. The significance here, apart from it registering on the Richter Scale of Tech M&A and confirming that Oracle's appetite for large scale M&A is far from satiated,  is that it will probably start a new wave of M&A in one of the few sectors pretty much untouched by the genre. Cognos, Business Objects and SAS are clearly now "in the frame". Just think of the fees waiting to be earned! 

- Capita remains "Boring" with another year of EPS growth - 24% in 2006. That means not one reversal since their 1989 IPO (actually even from before IPO). What a company and the reason why we all strive to be "Boring"!