Message from the CEO:
DEAR CUSTOMERS, PARTNERS, EMPLOYEES, AND SHAREHOLDERS
|2010 was a good year in many respects. We not only succeeded in boosting new sales in the Nordic region 32%, but we lifted international sales to record levels. International sales now account for 40% of Jeeves’ total sales, having achieved a sixfold increase in just three years.
New sales surge in Nordic region
It is pleasing to note that demand has returned to normal levels and our new sales are growing again, especially in the Nordic region where new sales of licenses surged 32%. In 2010, our software revenue increased 7% in all, but revenues, at SEK 177 million, fell short of 2009 revenues. One reason that sales declined was the divestment of operations in our Reveny subsidiary. In comparable units, revenues increased, though new sales by our international partners outside the Nordic region were weaker than expected. What prevented operating profit from meeting our expectations was an impairment loss on one of our development projects that reduced earnings SEK 11 million, to SEK 2 million.
In last year’s message from the CEO, I wrote about the relative scarcity of major transactions. Now they are back. In 2010, we secured more than 10 transactions in which the software license in the endcustomer contract surpassed EUR 100,000. This was also one of the biggest differences between 2009 and 2010. In addition to the reviving market, a key success factor is what we call “Active Sales.” In Active Sales, Jeeves provides sales assistance to partners on major deals in order to strengthen the team meeting the customer. Interaction between our partners and us is a success factor when we complete transactions and deliver our ERP systems.
SMEs increasingly international
Today a large proportion of our customers have international business operations. And yet sometimes I am asked why Jeeves should be active internationally. Isn’t it enough to operate in the Swedish market, where sales of new licenses and maintenance are robust? The answer is, “No, not if we want to grow in the long run.” The Swedish market is too small to achieve this. What’s more, the needs of small and medium-sized enterprises (SMEs) have changed as more of those enterprises have set up business abroad. To compete for local business deals, a complete ERP system supplier must be able to support its customers in their home market and internationally. The pattern is similar across Europe and North America, where we established operations some time ago.
Corporate groups that are already international have changing needs, too. Many of them have been using a variety of ERP systems in their subsidiaries in different countries. But quality and uniform processes are increasingly becoming high priority at all levels of our customers’ organizations. Jeeves’ ERP systems make it possible to quickly and cost-effectively roll out a uniform ERP system that satisfies the needs of international subsidiaries and replaces local solutions. Some companies used to rule out Jeeves when they were looking for support for international expansion. Today the situation is quite the reverse. International rollouts are one of Jeeves’ strengths.
How we support our partners
New sales in the Nordic region went well, as already mentioned, and the proportion of international transactions keeps growing. However, our international partners have had difficulty reaching their sales targets. One of the reasons is the severe recession still affecting parts of Europe. Another reason is that we underestimated the effort required of new partners to establish their long-term presence in our new markets. They have to learn the ERP system and sustain sales activities while carrying out new projects and continuously supporting their customers. Thus, in 2010 we increased our commitment to assist partners during their start-up phase. At the same time, we are tightening the requirements for selecting new partners, to enhance the likelihood of establishing sustainable sales.
Our partners focus
In the Nordic region we see a pattern with fewer but larger parters. This is a result of the market’s demands becoming ever more exacting. Similar tendencies appear outside the region. Developments have led to more partners producing customized vertical solutions that concentrate on particular market niches, such as building supplies or fruit and vegetable distribution.
Product development reinforced.
The impairment loss on our development project was obviously thefly in the ointment. The purpose of the development project was tomake it possible to use Jeeves on multiple hardware platforms. I want to point out that the project has always been technically viable,but prior to the release we made an assessment and the commercialoutlook had deteriorated. For many customers, the hardware platform is no longer as important. That is also why we chose to discontinue the project and concentrate our development of Jeeves on the Microsoft platform. This means that now we can focus on advancing other projects in which I have more faith, such as Jeeves Apps, improved user efficiency, cloud computing, and ongoing internationalization.
More intense focus on acquisitions
For a fast-growing company like ours, 2010 was a flat year. Our organic growth was unable to offset the disposal of Reveny. To continue growing, we need to make more acquisitions. Now that the market is recovering, we see that potential acquisition targets are more interested than previously. During 2011, we will actively seek out potential acquisitions primarily in the Nordic region and Germany. We are mainly looking for established players who own, develop, and sell ERP systems themselves and have existing customer relationships in their markets.
The Jeeves Community
Jeeves is not just ERP systems. Customers, employees, and partners are also part of the Jeeves Community. The Community is best described as a motivated network in which we share and learn from one another’s know-how and experiences in order to solve challenges on an ongoing basis as well as to drive development jointly in a variety of areas that will appear in our ERP systems in the near future. Close contacts and dynamic relationships between our customers, partners, and employees at Jeeves are essential to how we choose to improve and develop the solutions that customers want. For me it is a great pleasure to experience the deep commitment of people in the Jeeves Community and their passion for continuously improving our solutions.
Allow me to thank my colleagues for their vigorous and vital efforts in 2010, and our entire Community for the great trust partners and customers have placed in us to help them develop their business operations.
Bengt-Åke Älgevik, CEO Jeeves Information Systems