Rapid Growth for Eastern European Software Development Service Providers in North American Markets

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Russ Hertzberg
Vice President, Technology Solutions

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Rapid Growth for Eastern European Software Development Service Providers in North American Markets

  1. 1. Rapid Growth for Eastern EuropeanSoftware Development Service Providers in North American Markets September 15, 2012 Russ Hertzberg Vice President, Technology Solutions
  2. 2. Agenda• Selected Market Growth Highlights• Key Growth Factors: – Roll Ups and Consolidations in the Independent Software Vendor (ISV) Space – Enterprise Marketplace – Professional Investors and Early or Mid Stage Technology Companies – Social Networks• Conclusions
  3. 3. Selected Growth Highlights…US + EMEA andWorldWide
  4. 4. Fast Growth Eastern European Providers vs.Total MarketTop Two Eastern European Total Market• Recent IPO• Largest Dev Center in Belarus• 5 Year CAGR Revenue Growth of 31%
  5. 5. Fast Growth Eastern European Providers vs.Total MarketTop Two Eastern European Total Market• Recent IPO• Largest Dev Center in Belarus• 5 Year CAGR for Revenue of 31%• Privately Held• Largest Dev Center in L’viv Ukraine• 3 Year CAGR for Revenue of 40%
  6. 6. Growth Factor #1: Industry Roll Ups• A Rollup (also "Roll-up" or "Roll up") is a technique used by investors where multiple small companies in the same market are acquired and merged. The principal aim of a rollup is to reduce costs through economies of scale.• Rollups may also have the effect of increasing the valuation the business can command as it acquires greater scale. Rollups may also help rationalize competition in crowded and fragmented markets, where there are often many small participants but room for only a few to succeed in the long run.• http://en.wikipedia.org/wiki/Rollup
  7. 7. Case #1: Systems and Network Management • 11 Acquisitions from 2007 to 2012 • # of Unique Products in Solution Portfolio = over 500 • Ranked 20th Largest ISV in the World • Annual Revenue in 2011 of US Dollars 2.1 Billion
  8. 8. Case #2: Enterprise Content Management• 12 Acquisitions from 2007 to 2012• # of Unique Products in Solution Portfolio = over 1000• Ranked 38th Largest ISV in the World• Annual Revenue in 2011 of US Dollars 1.03 Billion
  9. 9. What Happens to Roll Up ISVs During and AfterSerial Acquisitions• Acquired Business Cost Reduction• Acquired Business Product Ownership and Technical Leadership Exits (Key People Leave)• Code Gets Old• Product Lines Overlap• Product Lines Need to be Integrated
  10. 10. The Advantages of Top Eastern European SoftwareProviders Working For Large US ISV Roll Ups• Lower Costs• Higher Developer Morale and Motivation• Modern Methods• Current Skills
  11. 11. The Advantages of Top Eastern European SoftwareProviders Working For Large US ISV Roll Ups• Lower Costs• Higher Developer Morale and Motivation Better Performance• Modern Methods• Current Skills
  12. 12. Enterprise Marketplace• The Recovery in North American Business is Taking Hold Slowly after a Severe Recession• Financial Services is Now a Smaller Vertical• Healthcare IT Spending Has Been Jump Started by Government Incentives• Media and Telecomm is Always Becoming More Technology Intensive• Technology Enabling any Line of Business is Often an Effective Competitive Strategy
  13. 13. Enterprise Marketplace: No Shortage of Opportunitiesto Implement & Operate Technology More Successfully• Slow Moving ERP Implementations• Workflow and BPM for Content Management• Network Security• Mobility• Data Center Efficiency, Private Cloud• Hybrid SaaS
  14. 14. The Enterprise Opportunity• Large, Slower Moving IT Service Providers Like IBM and Accenture Have Large Market Share• Premium Pricing is Common• Technology Neutral Service Providers Have an Advantage• Large Providers Have Incumbent Reputations Which are Not Always Helpful• Large Providers can be Outperformed and at Much Lower Prices
  15. 15. Professional Investors and Early or Mid StageTechnology Companies• Three Active Classes of Professional Investors: – Private Equity – Venture Capital – Angels• An Early Stage Technology Company: – Less Than 3 Years Old. Shipping Product, Some Customers, Some Revenue• A Mid Stage Company: – 4 to 10 Years Old. Several Rounds of Funding. Facing Growth Pressure from Investors
  16. 16. Professional Investors Have Lot’s of Money toInvest (and Make) in Big Data, SaaS, and Mobile• Big Data: 1.15 Billion US Dollars in Roughly 100 Deals over the Last 12 Months• Mobile: 4 Billion US Dollars Raised in First 6 Months of 2012 on 479 Deals• SaaS: Expensive Acquisitions in the Last 6 Months… – SAP Acquires Success Factors for $3.4 Billion – Oracle Acquires RightNow Technologies ($1.5 Billion) and Taleo ($1.9 Billion)
  17. 17. Case #1: Mid Stage Provider Making Large Investment in NextGen Software Service Because the Original Business is Stagnant• Original Product and Services Business Serves a Declining Large Law Firm Market• Disappointed Investors Have Replaced Sr. Mgmt. Several Times• Derivatives of the Core Technology Concept Drive a Vision for a New B to C Software Service• The Service is a Pure SaaS Model Running on AWS
  18. 18. Case #2: Early Stage Ecommerce Provider• A Round Funding Received (Venture Capital)• Specialty Ecommerce Provider• 8 Instances Running in AWS• Need Dev Ops Experts Every Month at X Hours Per Month Min• 24 x7 On Call Dev Ops During Selected Times of the Year• Starting Mobile Development
  19. 19. Case #3: Very Early Stage Social Travel Network• Angel and Founder Funded• Creating Minimum Viable Product• SaaS Backend• Native iOS Application
  20. 20. Social Networks…Making the World a MuchSmaller Place…with More Communities• Global Personal Business Networks• Worldwide Recruiting and Hiring• Interest Group Affiliation• Prospect Decision Maker Profiling• Inbound Marketing
  21. 21. Conclusions• Leading Eastern European Software Development Service Providers are Gaining Market Share vs. Rest of World• Consolidation of Providers within Eastern Europe Has Already Started• Some of the Biggest and Best Known ISVs and Technology Companies Entrust Critical Product Lines to Leading Eastern European Providers• The Enterprise North American Market is Still Dominated by Expensive and Slow Moving Brand Name Providers
  22. 22. Contacts and Questions? US Headquarters Europe Headquarters 12800 University Drive, Suite 250 52 V. Velykoho Str. Fort Myers, FL 33907, USA Lviv 79053, Ukraine Main Tel: 239-690-3111 Tel: +380-32-240-9090 Main Fax: 239-690-3116 Fax: +380-32-240-9080 E-mail: rhert@softserveinc.com E-mail: info@softserveinc.com Thank You! www.softserveinc.comCopyright © 2010 SoftServe, Inc.

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