How to win on the Finnish IT services market during market turbulence

1. Riding the COVID-19 wave - strengthening
position on IT market during market
turbulence
VALOR insight
28.5.2020

2. 2
Market discontinuity caused by economic slowdown – also new
demand and opportunities emerge
1) Projects need to be well rationalized and truly strategic
Negative effects New opportunities
Economic uncertainty affects investment
sentiment – projects are postponed and closing
probabilities decline, as risks raise acceptable
returns on investment(1)
In severally affected customer industries,
demand plummets near to zero
Also in customer industries with less issues,
projects are postponed and scaled down driven
by uncertain future
Related to resource outsourcing assignments,
customers typically favour own employees over
consultants in times of financial challenges
Prices experience a downward trend, as
demand-supply balance is shifted
Customers are pivoting their business furiously
back against the wall – demand for designing,
piloting and technical implementation of new
business ventures
C-level interest for technology-powered cost
rationalization (IoT, analytics, automation)
Plethora of public financing available for
business development in the market, which can
be used for consulting services
Optimizing the use of past digital investments
during the times of scarce resources

3. 3
When looking at Q1/2020 results and Inderes analyst expectations,
COVID-19–effect has been marginal – so far
1) Different companies report quarterly results differently: Digia and Gofore report EBITA; Siili, Vincit and Tieto report adjusted operating margin; and Innofactor reports EBITDA
Sources: Inderes, VALOR-analysis
Finnish rivals: Q1/2020 turnover growth
Finnish rivals: Q1/2020 EBITA margin-%(1)
Finnish rivals: forecasted turnover growth
Finnish rivals: forecasted EBITA margin(1)
15,0 %
13,0 % 12,0 % 11,0 %
7,0 %
3,0 %
Digia Gofore Siili Vincit Innofactor Tieto
17,3 %
12,0 %
10,5 % 10,4 %
8,7 %
7,2 %
Gofore Innofactor Tieto Vincit Digia Siili
Varying business
models & offering
0%
2%
4%
6%
8%
10%
12%
14%
2020 2021 2022
Digia
Gofore
Siili
Vincit
Innofactor
Tieto
2020
64 % Driven by
merger
0%
2%
4%
6%
8%
10%
12%
14%
16%
2020 2021 2022
Digia
Gofore
Siili
Vincit
Innofactor
Tieto
Organic

4. 4
During market discontinuity, winners and losers emerge as
competition accelerates – an opportunity of hundreds of millions
1) Advantages of more focused in certain customer: standardization of practices and emerge of products & components, bigger share of customer wallet, potentially lower sales costs, possibility to
stress “defensive” customer industries, increased likelihood to tap into continuous services
2) Broad or subject expert? Differentiate by horizontal specialization, and becoming world-class in something OR deep partnership in digitalization?
How to win during the market turbulence?
Adjust your strategy to
match the altered
market reality
Improve cost
effectiveness
personnel-friendly
Deepen current
customerships
& secure resales
Take advantage of the
situation of weaker
rivals
• Customer focus?(1)
• Offering focus?(2)
• Differentiation
experiences
• Talent retention
• Employee-led lean
processes
• Purchasing
• C-level approach
• Deep co-operation
• Dives into processes
• Aggressive bidding
• Stealing talent from
rivals
• Possible acquisitions
✓ Tens of successful strategy projects (experience
both from local champions & global players)
✓ Particular knowledge of Technology, Media,
Telecom, Energy, and Healthcare
✓ Tens of successful operational performance
projects (especially in purchasing)
✓ Experience in employees-first strategy
development with excellent results
✓ Deep knowledge & excellent customer insight on
Energy, Healthcare, Telecom and Media sectors
✓ Typical important angle in growth strategy projects
(tens of successful growth strategies implemented)
✓ Ability to act both as an investment bank and
strategy consultant in M&A projects
✓ IT industry knowledge
✓ From SMEs to deals with target sales 500+ M€

5. VALOR PARTNERS
ETELÄESPLANADI 24
00130 HELSINKI
VALOR.FI
OLLI KAIJALAINEN
+358 50 348 2093
OLLI.KAIJALAINEN@VALOR.FI
ANTTI HALONEN
+358 50 577 3180
ANTTI.HALONEN@VALOR.FI