Thursday, 10 January 2008

Goodbye Syan. What does this mean for ITO to SMEs?

I note that Affiliated Computer Services (ACS) has acquired Syan for £30.5m cash. Syan had revenues of c£38m in the last 12 months. You can read Samad Masood's views, from the Ovum Holway, here. (For the record, I have no connection with Ovum Holway anymore and would never reproduce their research without permission. However, Samad's piece is freely available on the web.)

The Syan deal is interesting for me for a number of reasons.

Firstly Syan has been around for as long as I have been an analyst. Readers may remember Jeff Trendell - its Chairman and majority shareholder.

Secondly, given that Syan had revenues of £42m in 2006, it doesn't look as if 2007 was that good a year. Indeed a PSR of c0.75 is not that encouraging either. It is interesting to note that Digica, which was acquired by Computercenter a year back, also hardly met expectations according to CEO Mike Norris earlier this week. Pickroccade, another 'near competitor', was also a pretty troubled player before being swallowed up by Getronics. Digica, Pickroccade and Syan were all in the business of providing outsourced/managed services to SMEs.

There are many who believe that the last big, unexploited IT services market is ITO for SMEs. In theory that is true if you look at any chart of the proportion of UK GDP generated by SMEs or, indeed, even IT spend by SMEs. The problem is that SMEs spend their IT budgets on hardware, packaged software, packaged support and communications. Their spend on IT services is hugely disproportionately small compared with larger companies. ITO (and BPO, come to that) has always been the preserve of the larger IT users; serviced by equally large companies like EDS and CSC. Until someone invents an effective 'packaged' ITO offering, I really do not see the situation changing.

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