ECsoft Group Plc is the best kept secret in the UK IT services industry, states investor relations director Forbes Cook. The British services firm has kept quietly to its blue-print for the last five years, through a management buy-out in 1994 and two listings, on Nasdaq and London, the latter in June last year.
Originally, the firm was a software reseller, bringing US products over to Europe, developing them and distributing them to European firms. After the MBO, the company was restructured as a pure services company. US ties were still strong, as the Nasdaq listing in 1996 shows. Cook explains that the choice of stock exchange reflects the naivetT of London’s IT services analyst community.
By 1998, ECsoft considered the London stock exchange sufficiently savvy to offer the other half of the company there. This year is the first time that it has broken the $100m revenue mark, the four minute mile for services companies. We want a sustainable business model going forward, cautions Cook, alluding to the graveyard of IT companies who have expanded too fast. EC Soft has been a model of consistency, with average growth in excess of 20-25% (Revenues of $103.1m last year an increase of 28% on figures of $80.3 in 1997), and a few acquisitions to draw occasional headlines. Acquiring Level 7, a Bracknell, UK-based project management services company, in January 1998 for example, gave ECsoft Group some management consultancy expertise with e-commerce skills, but it also leveraged it an important customer, the European Commission in Brussels.
All of Ecsoft’s markets are in Northern Europe, the UK is largest with around 44% of business. Denmark (20%), Norway (24%) and Sweden (12%) are the others, but Brussels gives the firm both representation further south, and a chance to mine the rich EC vein of government contracts. All the acquisitions are selected to give ECsoft increased presence in new territories, whether vertical or geographical.
The company is currently looking at Western Europe, France, Germany and the Netherlands. There will be no snatching of ailing firms however; Cook explains that ECsoft’s investor commitment to share prices means that acquisitions will not be dilutive. They will be at least as profitable as we are, he adds, but demurs from naming any targets.
Application development and implementation represents the bulk of ECSoft’s business (55%), with consultancy (15%) and information systems management (24%) smaller parts. Increasingly, ECsoft is aiming to structure its business not around vertical markets, but horizontal business process sectors. internet components are creeping in to the vast majority of the things we do, says Forbes Cook. He gives an example of a major British airline- this airline is now using ECsoft to provide internet-enabled supply chain management. First and club class passengers can now pre-order their in-flight services, their requests hooked in to the airline’s inventory and distribution system. Other contracts include Alcatel, British Telecommunications, Siemens Nixdorf in Denmark, several Scandanavian banks and the Ministry of Defence and the Foreign Office in the UK.
The year ahead offers a make-over for ECsoft; Cook says the company is looking to get our profile changed quite radically. This is a problem for the firm; 80% of contracts are down to existing clients, and the market in which ECsoft are playing is dominated by some big hitters. Ecsoft needs to push west with advertisement and acquisition to maintain its success.
