Following a recent €90m investment from private equity house Volpi Capital, Irish IT services company Version 1 is on the acquisition trail. CEO Tom O’Connor outlines his strategy.
Tell us about the background to the latest investment?
We are at a tipping point and our plan is to further expand into the UK and Europe, through both organic growth and developmental acquisitions, with the intention of doubling in size over the next three years. We wanted an investor that matched our core values so were very selective and there was no big sale process or roadshow. Clearwater International helped us pinpoint a small number of investors that it felt would be suitable for us, and in the event we found that Volpi and ourselves were kindred spirits.
Why are these core values so important?
Even if you are a company like us with 1,000 staff and turning over more than €100m, why shouldn’t you always maintain excellence despite the size of your operation? The key reason we have grown this business like we have is precisely because we have built it around our core values, around our world-class levels of staff engagement, and our long-term thinking. We could have the best profit and loss (P&L) statement in the world but if that is based on distressed customers or disengaged staff then it is meaningless. Our customers feel and experience a big difference in terms of how we engage with them. We do not hide behind contracts and spend customers’ money as if it was our own. I challenge people within the business all the time to test that our values are working. That matters more to me than anything.
Why do you position the business as a challenger brand?
Because of the different way we do business. If you take the UK it is a very polarised market. At the top you have around two dozen big players with heavily offshored operations, at the bottom you have hundreds of start-up niche players, but in the middle there are surprisingly few players and that’s where we sit. In the UK there is an open space for us to deliver for FTSE 250 companies.
Our sweet spot is the enterprise cloud and unlike many vendors who are aligned to just one vendor we are vendor agnostic and put the customer first. Our focus is all on coding, development and testing, on taking the key applications and migrating them to the cloud, and making them run effectively. We are not a products company but a services player, while another key area for us is helping clients with licencing agreements, making sure they are not out of date and that they are fully compliant.
What about the challenges of moving to the cloud?
Yes, this is another of the big challenges that companies face, navigating the choices they have in terms of taking their legacy estate onto the cloud. How do they chose between vendors? How do they stop vendors picking their own wares? How do you make sense of it? It is the sheer complexity of the options that can be a problem. It is this very confusion and uncertainty that still stops many companies from moving into the cloud. It is simply not understanding how to move assets.
What other challenges do you see clients facing?
It very much depends on what sector they are operating in, although issues such as cyber security do cut across. In terms of cyber security it tends to split into two camps. There are those companies which know they have experienced problems and are looking to deal with them, and those which aren’t even aware they have had breaches. The problem for every organisation is that no matter what infrastructure you have it still comes down to every individual member of staff to prevent breaches. It’s all about training, training, training, and keeping on banging the drum.
What is your strategy now?
A key focus is the continued digital transformation of the public sector in areas such as agriculture, transport and taxation. We are also seeking to extend our platform further through acquisitions in areas such as government, utilities, retail and manufacturing in the UK. We are looking for well-run UK-based companies that match our core values and which are viewed as providing excellent service by their customers.
At the moment nearly two thirds of our revenues come from Ireland with the rest from the UK, but we see this split becoming 50/50 over the next few years. However we are not going to rush growth for growth’s sake, it is all about sustainable growth. Version 1 will only grow as fast as we are able to bring in the right people. This is not just about pedalling hard and fast.
Finally, how might Brexit affect you?
We are very well hedged having operations in both the UK and Ireland. Our biggest concern is the potential impact of Brexit on the UK economy and a possible slowdown in that regard.