PRESS RELEASE
FSN's Gary Simon interviews Mark Thompson
COA Solutions (formerly CedarOpenAccounts) is one of the few remaining British software houses that is thriving independently. With a tight focus on services industries and the public sector it has successfully carved a significant niche in a crowded and competitive market, building revenues of £50.5 million and profits before interest, taxes and depreciation of £10.1m. Mark Thompson, its CEO has a target of £100m turnover firmly in his sights for 3 years time and gave an exclusive interview about his plans and view of the market to Gary Simon , FSN's managing editor.
Thompson, is particularly earthy about the COA Solutions business – a refreshing contrast to the hyperbole and boastful claims of competitors at home and abroad. COA Solutions makes no pretensions about its aims and direction. “We're a British company focussed exclusively on the UK market,” says Thompson. It's a strategy that's stood the company in good stead.
“Concentrating on certain key vertical segments in the domestic market gives us significant competitive advantage when compared to other vendors who are thinly spread. Whilst competitors have become larger and more complex to run we have stayed closer to individual verticals in the UK which has enabled us to better understand them, build more expertise and add more value – especially when the market moves quickly. For example, we were able to respond to Service Line Reporting in the NHS with appropriate specialised business intelligence and performance management capability in Health.
We understand the market,” says Thompson. It's an approach that appears to have paid off with COA Solution leading the way in segments of the public sector, such as local authorities.
COA Solutions' steady growth and measured acquisition strategy is in sharp contrast to the frenetic pace of acquisitions by competitors. “We don't make acquisitions for the sake of it – there has to be a good fit,” says Thompson, who illustrates the point by highlighting that organisational responsibility for acquisitions and product strategy were combined up until very recently.
The group has made acquisitions, for example, the failed QSP business, OpenAccounts and more recently Version One the document management vendor. “The OpenAccounts transaction enabled us to balance our exposure to the public and private sectors whereas the Version One deal allowed us to reach an extensive channel to market and new customers whilst adding collaborative technology to a wide range of the business processes we support.”
COA Solutions' strategy for the future seems firmly grounded in continuing its successful path to date. “We want to drive further into the UK services sector and grow our presence in key verticals such as health, retail and transport,” adds Thompson.
Thompson, a veteran of the UK software industry is scathing about much of the current activity in the market driven by competitors' over ambitious growth targets. “We're in a mature industry and growth is limited to low digit percentages and customers' unwillingness to change software direction. This means that customers are looking to add value to existing implementations through integration and associated services.” Indeed, Thompson confirms that COA Solutions is healthily growing its services and consulting revenues as a percentage of total revenues. He believes some competitors that have grown too rapidly by acquisition appear to be in danger of coming unstitched.
“They have too many competing and overlapping products to sell. When it comes down to it, salesmen are going to push products that are easy to sell and offer the best commissions regardless of product road maps and customer needs.”
“The acquisitions of the recent past have been about acquiring annual revenue streams. To that extent customers are probably more secure than they were with small software houses with a few million pounds turnover.” But many of the consolidators in the market are carrying burdensome levels of debt and the danger Thompson highlights is that if trading conditions get more challenging customers will be left to hang out to dry with products that simply have no direction or development spend.
“They won't rush out and buy something else but they won't add products either.” For the same reason he believes that there is far more consolidation to come. “Small software houses cannot compete in this market,” he adds.
Commenting on the vogue for ‘on-demand software' or Software as a Service (SaaS) Thompson says that COA Solutions is not seeing customer demand. “We're not seeing customers push for it but it is a concept that cannot be ignored. It could become compelling and managed services or hosted solutions can definitely add value. SAP is driving the market for everyone else and it will be interesting to see if SAP is the ultimate beneficiary.”
As for technology trends Thompson sees nothing on the horizon that is going to transform the market, except perhaps advances in mobile computing which continue to grow in importance. “The growth is going to come from Business Intelligence and Performance Management and it makes sense for ERP vendors and suppliers such as ourselves to have this capability when we are well placed to deliver it.”
He agrees that growth in specialist analytics, although taking time is beginning to happen. “The HR department has always been aware of the importance of HR analytics but with the broadening of the role of the finance department HR performance is beginning to catch on there as well. We are also seeing more uptake of collaborative solutions, such as workflow, tied in with better integration across all systems. We now have significant expertise in integration and we are providing more consulting days in deploying our integration capabilities so that the finance director can get at a single view of the business. Our deep knowledge in selected vertical markets in the UK means that we can make this happen more easily.”
“Once customers have compared products – and they are getting more similar all of the time – the purchasing decision comes down to an assessment of risk and expertise. We're here in the UK on the ground which makes a significant difference compared to competitors that simply retain a sales office.”
Reflecting on COA Solutions' performance Thompson is pleased with the Group's achievements. “We've grown the organisation and made healthy returns that give us the scope to develop product and other people. Provided our customers are happy who could ask for more?” he says.
By Gary Simon, FSN's Managing Editor