AI, services and an internal reorg: The big takeaways from SoftwareOne's full-year results

In its first set of results since its strategic review, the Swiss solutions provider asserted its services focus and laid out a new vision

AI, services and an internal reorg: The big takeaways from SoftwareOne's full-year results

SoftwareOne, announced its Vision 2026 initiative alongside an encouraging set of financial results for FY2023.

The strategy, outlined at the reseller's Capital Markets day in Zurich, entails five key pillars.

In a move to address spiralling cloud costs, the reseller will look to deepen its relationships with the three hyperscalers. The move comes as SoftwareOne is also looking to become a competitive solution provider, by integrating its marketplace and services divisions internally.

Microsoft Copilot, unsurprisingly, received a mention. SoftwareOne believes the offering represents a medium term opportunity of CHF100m (£90.1m) and will aim to capitalise on this through value-added services.

The third pillar of the strategy focuses on data and AI, where SoftwareOne aims to capitalise via its Intelligence Fabric offering.

The solution provider is also ramping up its focus on key independent software vendors (ISVs) with dedicated global and regional teams.

Finally, the Swiss firm is looking to improve client interactions by leveraging its client portal, which the company believes presents a compelling value proposition as a self-serve one-stop-shop for both clients and vendors.

"As we embark on Vision 2026, 2023 was critical in terms of laying the foundation for us as an organisation. So to make sure we were laying the right foundation," CEO Brian Duffy told analysts, as he explained some of the senior leadership changes and teased further internal reorganisation.

The reorg will see SoftwareOne's services and marketplace teams brought closer together.

"Customers today are no longer buying solutions, instead they're buying outcomes. In order to receive that outcome, what's critical for the customer is the managed services which they will receive on an ongoing basis.

"Previously our organisation was set up so that we had the marketplace on one side and services on the other. I firmly believe that if we want to deliver for our customers, we need to be structured internally in the right way, Duffy told the Zurich audience.

"So as we bring both marketplace and services together, we now have the opportunity to not only look at marketplace and services, but to look at the resale piece the way the customer does, which is the outcome that they're going to be receiving."

Financial results and targets

Under Vision 2026, SoftwareOne sets forth new financial targets, signalling a transitional period in 2024 followed by accelerated growth and margin expansion by 2026.

The outlook for 2024 includes a projected eight to ten per cent year-on-year currency revenue growth, with an adjusted EBITDA margin ranging between 24.5 per cent to 25.5 per cent. Looking further ahead, Vision 2026 aims for 'mid-teens' revenue growth and an adjusted EBITDA margin approaching 28 per cent.

This builds on the reseller's 2023 performance within guidance, which saw global revenue up 8 per cent to CHF1.01bn (£910m) and EBITDA up 6.5 per cent to CHF245.2m (£229.2m).

Thanks to reorganisation efforts in the second half of 2023, the group achieved cost savings of CHF47m (£42.4) in 2023, significantly surpassing the full-year target of CHF15m (£13.5m). The annualised savings for 2023 amounted to CHF63m and are anticipated to reach an increased target of CHF70m (£63.08) in 2024.

SoftwareOne to move forward as an independent company

The strategy comes on the heels of SoftwareOne firmly rejecting several takeover bids by Bain Capital and opting to move forward as an independent company, following a strategic review.

The board of directors considered options for value creation, including a potential sale of the company in the strategic review that started in July 2023.

Bain submitted its first bid in June, for CHF 2.7bn (£2.5bn). This was rejected by the reseller on the grounds that the offer did not match the company's actual value.

Later in July, the private equity firm raised its offer to CHF 3.2bn (£2.8bn), but was yet again denied

In early January, SoftwareOne stated that it was still in discussions with the PE firm, but ultimately announced that it would not be proceeding with the discussions.