Globally scaled platform
SoftwareONE believes that it differentiates itself from other technology solutions providers through its software and cloud expertise, strong end-to-end capabilities and a global reach, all powered by its proprietary digital platform PyraCloud.
SoftwareONE operates in attractive market segments across the entire technology solutions value chain.
- Advise & design: helping customers plan their development and management of technology
- Buy: transactional solutions for the purchase of on-premise and SaaS software and public cloud products
- Build & implement: migration and other implementation services to move traditional applications to a cloud environment
- Manage & optimize: managed technology solutions helping customers optimize public cloud infrastructure and technology spend
As technology becomes more complex and the strategic significance businesses attach to technology continues to grow, companies of all sizes are confronted with increasingly complex commercial, technology and digital transformation challenges. Businesses today face important strategic decisions around IT expansion, a proliferation of products from an ever-growing number of software and cloud publishers, difficulties with cloud migrations, and a lack of visibility and actionable data around software and cloud usage and spend.
End-to-end value proposition
As a software and cloud-only strategic technology solutions provider with capabilities across the entire technology value chain, SoftwareONE offers an end-to-end value proposition to help its customers address these challenges. It helps businesses define a technology strategy, procure the most appropriate software and cloud solutions at the best price, facilitate their migration to the cloud and manage and optimize their software and cloud estate, thereby helping customers optimize the return on their technology investment. As its solutions and services are designed to help businesses save on technology costs, SoftwareONE is also able to offer customers a strong value proposition in a deteriorating economic climate.
Broad geographic footprint
SoftwareONE has one of the broadest geographic footprints in the industry with local sales and service delivery capabilities in 90 countries, from which it serves a large global customer base of approximately 65,000 business customers worldwide. The company believes that its global presence offers significant competitive advantages, including the ability to serve as a one-stop-shop for multinational enterprise customers’ software and cloud requirements across their geographic footprint worldwide. Its ability to source software and cloud products across a broad range of jurisdictions worldwide further allows it to deliver savings to customers through globally optimized pricing. As a result of its broad geographic diversification, SoftwareONE moreover benefits from reduced risk exposure to specific geographic regions.
Finally, SoftwareONE believes that its proprietary digital platform PyraCloud is unique in the market as a point of contact for customers that connects its end-to-end suite of solutions and provides data-driven, actionable intelligence to help them manage and optimize their software and cloud estate.
PyraCloud lies at the core of SoftwareONE’s business model
Diversified customer base
SoftwareONE enjoys strong relationships with a large and highly diversified global customer base of approximately 65,000 business customers.
The group believes that its results-driven, customer-first approach to business has allowed it to build strong relationships with its customers as a trusted advisor for digital transformation challenges. As a result, SoftwareONE has enjoyed strong gross profit retention and has been able to successfully gain a growing share of its customers’ wallets. On a combined basis for SoftwareONE and Comparex, its Software & Cloud business achieved a net renewal rate of more than 100% over the last several years, reflecting gross profit generated by existing customers at the beginning of the year expressed as a percentage of total gross profit generated the year before. Gross profit per customer for SoftwareONE and Comparex, on a combined basis, increased at a CAGR of approximately 10% between 2016 and 2019. The group also ranks high across key customer purchase criteria such as technical expertise, security and customer service and is one of the most trusted brands in its industry.
In addition to its strong customer relationships, SoftwareONE benefits from a well-diversified business mix across geographies, customers and industries. The group estimates that large enterprises with more than 3,000 FTEs accounted for approximately half of the gross profit of SoftwareONE, with small and medium enterprises with less than 3,000 FTEs accounting for the other half .
SoftwareONE has a highly diversified customer base of approximately 65,000
Strong relationships with software publishers
SoftwareONE benefits from long-standing and deep relationships with software and cloud publishers.
The group has trading relationships with more than 7,500 software and cloud publishers covering the full spectrum of software and cloud spend, including leading global software publishers such as Microsoft, Adobe, Oracle, Red Hat, VMware and Symantec, the best-performing hyper-scalers such as Microsoft Azure and Amazon Web Services and a growing portfolio of disruptive publishers, among others. In particular, SoftwareONE has a long-standing, strong relationship with Microsoft, which dates back more than 30 years and has been a stable source of gross profit growth. Based on the combined global transaction volume of SoftwareONE and Comparex in 2019, the group estimates that it is Microsoft’s largest channel partner globally and its largest Azure partner globally. SoftwareONE has established this differentiated leading position by continuously optimizing its capabilities to service the specific needs of globally leading publishers.
Microsoft software accounted for approximately 54% of gross profit for SoftwareONE and Comparex combined in 2019, of which approximately 62% was attributable to sales of Microsoft Azure, Microsoft Office 365 and Microsoft Dynamics 365, reflecting the group’s strategic alignment with Microsoft’s high-growth SaaS and public cloud products. SoftwareONE believes that it is well-placed to benefit from Microsoft’s growth prospects, as building up the capabilities to deliver Microsoft software cost-efficiently and at scale requires substantial investment and expertise that is difficult to replicate and that allows the group to manage the significant complexity of licensing, pricing and consumption options. According to external industry experts and independent analysts, SoftwareONE’s addressable market for Microsoft products is forecast to grow at a CAGR of 15% between 2018 and 2021, compared to a CAGR of 8% between 2014 and 2018, primarily driven by Azure and Office 365 Commercial Cloud.
Expanding Software & Cloud publishers portfolio with healthy mix across multiple product families
Software and cloud publishers experience a number of “pain points” in the distribution of their products through channel partners, including with respect to the reach, scale and capabilities necessary to drive software consumption, access to a dispersed audience of SMEs, the ability to provide local product support and services in remote geographies, the flexibility to support a range of business models and the ability to drive digital readiness and transformation. As a globally scaled software and cloud-only platform with strong value-add offerings, SoftwareONE is able to provide solutions to these challenges, making it a partner of choice for publishers of all sizes.
SoftwareONE solves Software & Cloud publishers’ pain points
In addition, SoftwareONE believes that by addressing the challenges businesses face in adopting the cloud, it helps enable its key publishers’ cloud and SaaS strategies. SoftwareONE’s cloud advisory and migration services, digital supply chain services and managed cloud offerings facilitate its customers’ adoption of SaaS and the public cloud, thereby accelerating sales for software and cloud publishers. As a globally scaled channel partner with the ability to drive spending on software and the public cloud, SoftwareONE at the same time benefits from C-suite level access with its key publishers and their investments in the development of their channel programs in the form of training, marketing and other resources.
Global and local operating model
SoftwareONE’s business is powered by a lean “glocal” business operating model built to deliver profitable growth at scale. It has a lean group structure with empowered local subsidiaries supported by three global service delivery centers in Delhi, Mexico City and Leipzig and six regional service delivery centers on four continents. This model is both local and global, enabling customer proximity and a focus on local expertise while at the same time ensuring consistent and cost-efficient delivery of the group’s global service portfolio worldwide. Customers benefit from customer-focused local support in 90 countries and centrally delivered 24/7 customer service in 13 languages.
For SoftwareONE, this operating model offers the benefits of a scalable dynamic resource model, in which resources are efficiently shared across regional operations, and standardized functions are carried out cost-effectively from low-cost locations. SoftwareONE has leveraged its dynamic resource model to drive operational efficiency with initiatives to shift additional workloads from local subsidiaries to regional service delivery centers, while also standardizing its global service catalogue and automating many of its processes. Together, these measures have significantly contributed to strong margin expansion in recent years.
Global AND local operating model delivering a virtuous cycle of customer engagement
Historic growth and profitability track record
SoftwareONE has an attractive financial profile based on a proven growth model delivering gross profit growth, margin expansion and strong cash flow. This section focuses on historic performance, to give readers a background on the group's development when it was still a private company.
Double-digit gross profit growth across all dimensions
SoftwareONE has a long-standing track record of strong organic growth. The group has delivered gross profit growth continuously each year for the past decade, increasing at an organic CAGR of approximately 29% from CHF 31.6 million in 2008 to CHF 409.4 million in 2018. Between 2016 and 2018, gross profit increased from CHF 317.4 million in 2016 to CHF 409.4 million in 2018, representing a CAGR of 13.6%.
At the same time, SoftwareONE has leveraged its end-to-end value proposition and the robust growth trends in its markets to achieve double-digit gross profit growth across both of its business lines, Software & Cloud and Solutions & Services. Gross profit from sale of software and other revenue increased at a CAGR of 12.0% from CHF 257.4 million in 2016 to CHF 322.7 million in 2018, whereas gross profit from solutions and services increased at a CAGR of 20.3% from CHF 59.9 million to CHF 86.8 million in the same periods.
For the combined group including Comparex, gross profit increased from aggregated like-for-like gross profit of CHF 571.2 million in 2016 to pro forma gross profit of CHF 724.0 million in 2018, representing a CAGR of 12.6%. Gross profit from sale of software and other revenue for the combined group increased at a CAGR of 12.6% from aggregated like-for-like gross profit from sale of software and other revenue of CHF 437.5 million in 2016 to pro forma gross profit from sale of software of CHF 555.1 million in 2018, whereas gross profit from solutions and services increased at a CAGR of 12.4% from aggregated like-for-like gross profit from solutions and services of CHF 133.7 million in 2016 to pro forma gross profit from solutions and services of CHF 168.9 million in 2018.
SoftwareONE believes that its strong top-line growth demonstrates the strength and quality of the combined group’s software transactional businesses, the successful execution of SoftwareONE’s strategy to reposition itself as an end-to-end technology solutions provider and its ability to capture market growth.
The strong growth in gross profit also reflects its success in winning an increasing share of its customers’ wallet while also selectively growing its combined customer base. SoftwareONE estimates that gross profit per customer for SoftwareONE and Comparex on a combined basis grew at a CAGR of 10% from approximately CHF 9,000 in 2016 to approximately CHF 11,000 in 2018, due in part to its success in cross-selling solutions and services to Software & Cloud-only customers. Its combined customer base grew by approximately 2,000 customers from an estimated 63,000 customers to an estimated 65,000 business customers between 2016 and 2018.
Finally, SoftwareONE enjoys a high-quality revenue base with a significant share of recurring revenue. The combined group’s Software & Cloud business achieved a net renewal rate of more than 100% in 2017 and 2018, reflecting gross profit generated by existing customers at the beginning of the year expressed as a percentage of total gross profit generated the year before. Furthermore, the combined group’s gross profit from managed services, which today makes up approximately one half of SoftwareONE’s Solutions & Service business, approximately doubled between 2016 and 2018 reflecting its strong focus on outcome-based solutions for customers that provide recurring revenue.
Strong profitability with steady margin improvement
SoftwareONE has demonstrated strong profitability with steady margin improvement. On a standalone basis, adjusted EBITDA for SoftwareONE increased from CHF 54.5 million in 2016 to CHF 135.6 million in 2018, representing a CAGR of 57.7%. Adjusted EBITDA margin (calculated as adjusted EBITDA as a percentage of gross profit) increased from 17.2% to 33.1% in the same period. The strong margin expansion between 2016 and 2018 reflects scale effects and efficiencies gained from leveraging SoftwareONE’s dynamic resource model, increasing standardization and automation, and salesforce productivity gains as a result of strong business management focused on rigorous performance benchmarking and reinforcement.
For the combined group including Comparex, adjusted EBITDA increased from aggregated like-for-like adjusted EBITDA of CHF 92.4 million in 2016 to pro forma adjusted EBITDA of CHF 186.9 million in 2018, representing a CAGR of 42.2%. The adjusted EBITDA margin for the combined group increased from 16.2% to 25.8% in the same periods. SoftwareONE believes that the superior margins on a standalone basis illustrate strong upside potential for the combined group.
Attractive cash flow generation due to an asset-light business model
SoftwareONE has achieved strong cash flow generation, enabled by an asset-light business model reflecting limited capital expenditure requirements. On a standalone basis, operating free cash flow increased from CHF 43.8 million in 2016 to CHF 122.9 million in 2018, representing a CAGR of 67.4%. For the combined group, operating free cash flow increased from aggregated like-for-like operating free cash flow of CHF 69.0 million in 2016 to pro forma operating free cash flow of CHF 166.0 million in 2018, representing a CAGR of 55.1%.
M&A expertise / Comparex acquisition
SoftwareONE has a strong track record of supplementing its organic growth with a strategic approach to M&A and since 2015 has completed 10 acquisitions focused on scale, geographic reach and capabilities.
The Comparex acquisition
Following the announcement of the transaction in October 2018, SoftwareONE in January 2019 completed the acquisition of Comparex, a global software, cloud and IT solutions provider with gross profit of EUR 281.8 million in its financial year ended 31 March 2019, and 2,456 employees as at 31 December 2018. SoftwareONE believes that the added scale from its combined businesses, Comparex’ book of business across the EMEA and CIS regions, Mexico and Brazil, its complementary set of specializations as well as its talented local leadership teams will yield significant strategic and competitive advantages for SoftwareONE. The group further believes that the Comparex acquisition presents potential for significant financial benefits and is targeting annual run rate synergies of CHF 60 million at the EBITDA level starting from the beginning of 2021, approximately CHF 20 million of which in the form of gross profit synergies and approximately CHF 40 million in operating expenditure synergies.
In addition to the Comparex acquisition and the acquisition of CompuCom’s contract management and software licensing business in 2015, another acquisition of scale, SoftwareONE has successfully completed a series of smaller, capabilities-driven acquisitions in technology and service areas of strategic importance. These transactions include the acquisition of RightCloud, a Singapore-based managed infrastructure provider with AWS and Azure capabilities, a comprehensive portfolio of multi-cloud solutions and exposure to the APAC region; ISI Expert SAS, a managed services and infrastructure provider based in France; UC Point AG, a Switzerland-based global provider of global unified communications and collaboration; House of Lync, an information technology service provider focused on consulting, designing and servicing Microsoft’s communications solution, Skype for Business; and SAMSentry, a software governance technology provider.
In 2019, SoftwareONE acquired 40% of the shares in InterGrupo, a leading cloud technology and application modernization provider in the Latin American market, with the option to purchase the remaining 60% of the shares. Also in 2019, the group acquired the business of Massive R&D, a Tokyo-based Amazon Web Services specialist, as well as Melbourne-based BNW Consulting, a specialist in SAP platform transformation, public cloud migration and application management services.
SoftwareONE believes that its proven ability to draw on its deep industry relationships and reputation to successfully pursue M&A opportunities, and its strong track record of integrating acquired businesses with discipline and a culture of ownership, are strong assets that will enable the group to further execute its M&A strategy. Moreover, its scalable “glocal” operating model allows both for the efficient integration of acquisitions of scale and the ability to scale smaller, capabilities-based acquisitions.