Dear Tech Enthusiast,
Welcome to the latest edition of the Stay Ahead in IT newsletter. As we approach the end of 2024, the technology landscape continues to witness rapid advancements and strategic movements. In this edition, we explore how Edge AI is revolutionizing real-time data processing and IoT capabilities, providing businesses with unparalleled opportunities for efficiency, security, and innovation. Additionally, we dive into the latest wave of M&A activities reshaping the IT services landscape, from cloud solutions to cybersecurity.
Highlights from This Issue:
Edge AI: Revolutionizing Real-Time Processing
Discover how Edge AI is transforming industries by enabling instantaneous insights, enhancing operational efficiency, and supporting smarter IoT ecosystems.Key M&A Movements in IT Services
The IT services sector continues its dynamic evolution with notable acquisitions and partnerships, such as Cloud Value’s acquisition of Open as App and Bain Capital’s investment in AQ Compute. These developments highlight the industry’s focus on innovation and consolidation.Interview with Arne Christes: Mastering Due Diligence in IT
Gain exclusive insights into financial and tax due diligence in the IT sector from Arne Christes, a leading expert who has overseen over 1,000 assessments. Learn how to prepare for and navigate the complexities of IT transactions.Upcoming IT and Investment Conferences
Stay informed about essential conferences shaping the future of technology, including Gartner’s Cloud Strategies Conference and DevOpsCon Munich 2024.
Join us as we delve into these trends and insights, equipping you with the knowledge to stay ahead in a constantly evolving IT landscape.
Edge AI: Revolutionizing Real-Time Processing and IoT Capabilities
As businesses strive for faster and more reliable digital operations, Edge AI is transforming data processing at the source. By integrating AI directly into edge devices, such as those in manufacturing, retail, or smart cities, organizations can achieve near-instantaneous insights, eliminate latency issues, and reduce data transfer costs associated with cloud computing. Industries from manufacturing to healthcare are experiencing new levels of efficiency, security, and automation, leading to smarter and more responsive environments.
Edge AI combines on-device intelligence, advanced machine learning, and real-time data processing, enabling businesses to act immediately and autonomously. The global Edge AI market is projected to grow at a compound annual growth rate (CAGR) of 21.0% from 2023 to 2030, reaching approximately $14.79 billion by 2022 (grandviewresearch.com). This technology is set to redefine interactions with and value derived from IoT devices.
Our Key Takeaways:
For Entrepreneurs:
Improved Decision-Making: Processing data on-site allows Edge AI to provide real-time insights and faster responses to operational changes, enhancing decision-making in dynamic environments.
Enhanced Security: Local processing of sensitive data minimizes the need for cloud transfers, reducing risks associated with data breaches and ensuring compliance with privacy regulations.
Operational Cost Efficiency: By decreasing reliance on high-latency cloud processing, Edge AI helps companies reduce data transmission costs and maintain continuous operations.
For Investors:
Scalability and Profitability: Companies utilizing Edge AI can streamline data processing and improve operational scalability, leading to significant cost savings and increased profitability.
Future-Proofing Investments: Edge AI aligns with data sovereignty and security trends, positioning companies ahead of regulatory changes in data privacy and compliance.
Environmental Impact: On-site data processing reduces energy consumption associated with data centers, supporting sustainability goals and enhancing a company’s environmental profile.
How Edge AI is Driving Innovation
Smart Manufacturing: Edge AI enhances automated quality checks, equipment maintenance, and inventory management. It enables manufacturers to detect anomalies and predict equipment failures instantly, significantly reducing downtime and improving productivity.
Healthcare and Remote Monitoring: In healthcare, Edge AI powers real-time diagnostics in critical environments, from hospitals to remote patient monitoring devices. Local data processing provides fast, reliable insights, crucial for emergency care or long-term monitoring.
Retail and Customer Experience: Edge AI enhances customer interactions by offering personalized recommendations, optimizing store layouts based on foot traffic, and enabling touchless, AI-powered self-checkouts. This improves the shopping experience and supports operational efficiencies.
The Future of Edge AI and IoT Synergy
As Edge AI advances, its integration with IoT enables more dynamic applications across industries. Together, Edge AI and IoT facilitate seamless, real-time intelligence that empowers businesses to achieve more reliable, autonomous systems. This synergy is paving the way for fully self-sufficient, intelligent networks that can learn and adapt over time, transforming operational models and unlocking new growth opportunities in a connected, real-time world.
Key M&A Developments Reshaping the IT Services Landscape
In our last Stay Ahead in IT Newsletter, we highlighted major trends and developments shaping the IT services sector. Since then, the industry has witnessed another surge of strategic M&A activity, underscoring the relentless pace of transformation and innovation. Below, we bring you the latest acquisitions and partnerships that are redefining the competitive landscape, creating new growth opportunities for IT leaders, and driving the future of digital transformation.
November, 2024: Cloud Value Acquires Open as App
Cloud Value has acquired Open as App, a Munich-based SaaS pioneer in no-code app generation. This strategic move enhances Cloud Value’s portfolio in automation and low-code solutions, enabling businesses to create apps directly from data sources like Microsoft Excel without coding expertise. Open as App’s innovative platform and established reputation align with Cloud Value’s growth strategy under CEO Ralf Hertneck, marking a new phase of platform development and expansion.November, 2024: FIELDS Group Invests in Erik Sterck GmbH
FIELDS Group has acquired a majority stake in Erik Sterck GmbH, a German leader in data center, cloud-native, and cybersecurity solutions. This partnership aims to grow Erik Sterck’s footprint in the DACH region and integrates TTNL’s Hyperplattform into its offerings, aligning with FIELDS’ focus on scaling strategic IT capabilities across Europe.November, 2024: Bridgepoint Partners with Schuberg Philis
Bridgepoint has acquired a majority stake in Schuberg Philis, a Dutch IT leader in mission-critical applications and cloud-native solutions. This collaboration focuses on expanding into the Nordics, DACH, and UK regions while maintaining its unique Plan-Build-Run model, leveraging Bridgepoint’s expertise to fuel growth and innovation in enterprise IT services.November, 2024: Netrics Boosts Cloud Services with Solify Acquisition
Netrics has acquired Solify GmbH, a Swiss cloud specialist focused on Azure solutions, to enhance its public cloud capabilities. Solify will continue to operate independently while benefiting from Netrics’ extended service portfolio and customer reach in managed cloud and digital workplace solutions.November, 2024: Bain Capital Backs AQ Compute’s Green Data Center Growth
Bain Capital has acquired an 80% stake in AQ Compute to drive the expansion of sustainable, AI-ready data centers across Europe. With green energy-powered facilities, including a flagship site in Oslo, this partnership aligns AQ Compute’s eco-conscious strategy with Bain’s expertise in scaling digital infrastructure.November, 2024: Arrow Electronics Acquires iQmine GmbH
Arrow Electronics has strengthened its automotive innovation capabilities by acquiring iQmine GmbH. Specializing in AUTOSAR and ECU software development, iQmine’s expertise bolsters Arrow’s Automotive Centre of Excellence with new development centers in Munich and Istanbul, advancing next-gen automotive solutions.November, 2024: catworkx Expands with EverIT Acquisition
catworkx has acquired EverIT, a Budapest-based Atlassian partner. Operating as catworkx Hungary, EverIT extends catworkx’s presence in Central and Eastern Europe and adds Atlassian expertise to support global enterprise clients.October, 2024: Xantaro Group Grows with nicos Acquisition
The Xantaro Group has acquired nicos, adding 200 experts in managed services and IT security. This move strengthens Xantaro’s enterprise focus, introducing global capabilities in network and security automation and expanding partnerships with Cisco and other key players.October, 2024: connexta Adds BS2 Systemhaus GmbH
The connexta Group has acquired BS2 Systemhaus, bolstering its regional presence in Rheinland-Pfalz. BS2 brings expertise in IT security, cloud, and managed services, enhancing connexta’s ability to serve SMEs with end-to-end IT solutions.October, 2024: Nomios Acquires Dionach to Enhance Cybersecurity Expertise
Nomios, supported by Keensight Capital, has acquired Dionach, a UK cybersecurity leader. Specializing in penetration testing and cyber resilience, Dionach strengthens Nomios’ advisory services and presence in the UK, furthering its mission as a European cybersecurity powerhouse.October, 2024: Sofyne and AG Solution Form SAPHIR
Sofyne Active Technology and AG Solution have merged to create SAPHIR, a European leader in Industry 4.0 transformation. Backed by Waterland Private Equity, this partnership combines MES/MOM expertise with automation and operational intelligence to address industrial digitalization challenges.October, 2024: abtis Joins Your.Cloud
abtis has joined Your.Cloud, expanding the European MSP’s reach in Germany. With expertise in Modern Workplace and cloud infrastructure, abtis strengthens Your.Cloud’s position as a premium IT service provider, supporting its pan-European growth ambitions.October, 2024: Bechtle Acquires Kubernetes Specialist KubeOps
Bechtle AG has acquired KubeOps, a Kubernetes service provider, to advance its cloud computing offerings. The acquisition complements Bechtle’s managed services and positions the company as a leader in container solutions for critical infrastructure.October, 2024: Advania Acquires CCS Media
Advania has acquired CCS Media, a leading UK IT solutions provider. This move strengthens Advania’s UK presence, combining expertise in cloud transformation and managed services to offer comprehensive IT solutions to midmarket enterprises.October, 2024: Allgeier SE Divests Personnel Services to emagine
Allgeier SE has sold its personnel services division to emagine GmbH, focusing on its core IT and software solutions business. The transaction enables Allgeier to reinvest in digital transformation and supports emagine’s growth in the staffing market.October, 2024: Bechtle Expands in the UK with Qolcom Acquisition
Bechtle AG has acquired Qolcom, a UK-based system integrator, to enhance its managed services and IT security offerings. This move marks Bechtle’s third UK acquisition in three years, strengthening its market share in the B2B IT sector.September, 2024: accompio Strengthens Cybersecurity with r-tec
accompio GmbH has acquired r-tec IT Security GmbH to expand its cybersecurity capabilities. With over 90 experts, r-tec’s expertise in Advanced Persistent Threat defense complements accompio’s IT services for industrial clients.September, 2024: PROM12 Invests in openfellas
PROM12 has acquired a stake in openfellas, supporting its growth in the ERP sector. The Munich-based odoo-ERP specialist plans to expand its operations in DACH and international markets with PROM12’s strategic backing.September, 2024: Dataciders Adds PASO Solutions in DACH Expansion
Dataciders has acquired PASO Solutions, an Austrian Data & AI expert. This addition strengthens Dataciders’ Microsoft ecosystem expertise and expands its embedded systems and IoT capabilities.September, 2024: QITS Acquires GERMO to Strengthen Document Solutions
QITS GmbH has acquired GERMO GmbH, a software developer specializing in document generation and output management. This strategic acquisition enhances QITS’s platform, catering to industries like healthcare and supporting its digital transformation mission.September, 2024: Sonio Acquires Flow Swiss
Sonio AG has acquired Flow Swiss AG, enhancing its cloud services with Swiss-hosted solutions. The move integrates Flow Swiss’s public cloud capabilities with Sonio’s portfolio, delivering secure, innovative IT solutions hosted in Switzerland.
Interested in IT-Service Investments? Request our Fund Memorandum.
Interview with Arne Christes, Managing Partner at AC Christes & Partner: Mastering Due Diligence in the IT Sector
IT Capital Partners: Good morning, Arne. We’re delighted to have you with us today. As an expert in Financial and Tax Due Diligence, having conducted over 1.000 assessments, could you start by sharing your general approach to evaluating a business for acquisition or sale, particularly in the IT sector?
Arne Christes: Thank you for having me. Due diligence, especially in the IT sector, requires a comprehensive analysis that goes beyond just the numbers. Our credo for all engagements is: “understand the business”. By this we mean first and foremost the business model of the target, but also the business of the investor and, if applicable, other parties such as lenders. In IT, this often means evaluating the scalability of technology platforms, understanding the business’s recurring revenue models, and assessing the talent retention, which is critical in a people-driven industry like IT services.
IT Capital Partners: Given your vast experience, what are the specific challenges you encounter when conducting due diligence for IT companies?
Arne Christes: One of the most significant challenges is assessing intellectual property and technology assets. IT companies often rely on proprietary systems or custom-developed software that may not be easily transferable or scalable. Another challenge is understanding how revenue is generated, whether it’s based on one-off projects or long-term contracts. IT service companies, in particular, can have complex financial structures with deferred revenues, which can complicate the financial assessment. Finally, talent retention is critical. In such a competitive market, the loss of key personnel can significantly impact the company’s valuation.
IT Capital Partners: How do you ensure that you capture both the strengths and weaknesses of an IT company during due diligence?
Arne Christes: It’s a structured and multi-layered approach. We ask for a copy of the accounting data and use tools we have developed ourselves to carry out in-depth analysis. The tools allow us to reduce the quantitative work and focus on the qualitative work, the analysis. We dive into the financials and identify any red flags, such as revenue recognition issues or excessive reliance on a few key customers/suppliers. We then analyse operational aspects such as the robustness of the company’s systems, processes and team structures. We also look at the strategic fit of the business in its market, what gives it a competitive edge and where it may be vulnerable. In parallel, I always recommend a close look at tax and legal issues, particularly in cross-border transactions, which are common in the IT sector.
IT Capital Partners: With your extensive experience with both financial due diligence and tax structuring, how do you integrate tax considerations into your evaluations?
Arne Christes: Tax considerations are often a deciding factor in M&A deals. A well-structured transaction can result in significant tax savings, both for the buyer and the seller. We look at the entire tax framework, whether it’s how intellectual property is taxed, the implications of employee stock options, or the corporate structure in different jurisdictions. For IT companies, particularly those operating in multiple markets, it’s crucial to optimize the tax structure post-transaction to ensure long-term sustainability.
IT Capital Partners: Can you share an example of a situation where your due diligence uncovered a critical issue that impacted the transaction?
Arne Christes: Absolutely. In one case, during a financial due diligence for a mid-sized IT service provider, we discovered that a significant portion of their revenue came from one large customer, but the contract was due to expire in less than a year with no renewal in sight. This raised significant concerns about the sustainability of their revenue stream and ultimately led to a price adjustment in the deal. It’s situations like this where a thorough analysis of contracts, customer dependencies and recurring revenues makes all the difference.
IT Capital Partners: Given the rapid pace of change in the IT sector, how do you stay up to date with emerging trends and technologies when conducting due diligence?
Arne Christes: Keeping up to date is essential, especially in IT. We invest a lot of time in lifelong learning, whether it’s attending industry conferences or researching the latest technologies and market trends. For example, the rise of cloud computing, AI and cybersecurity has changed the way we evaluate IT companies. These trends present both opportunities and risks that need to be carefully weighed during due diligence. We also draw on experts in specific areas where necessary, as no one can be an expert in every niche. An invaluable source for understanding the evolution of the IT sector are the numerous transactions we have been privileged to accompany.
IT Capital Partners: Finally, Arne, what advice would you give to IT entrepreneurs or investors preparing for a due diligence process?
Arne Christes: The best preparation for success is preparation. For entrepreneurs, make sure your financials are clean and your key documents, such as contracts, intellectual property rights and employee agreements, are in order. Transparency is key; any hidden issues will eventually come to light, and it’s better to deal with them up front. For investors, I recommend a holistic approach to due diligence – don’t just focus on the financials, but also on the operational and strategic aspects of the business. Understand the business. Understanding the big picture is critical to making an informed decision.
IT Capital Partners: Thank you, Arne, for sharing your insights with us today. Your expertise in due diligence is invaluable for those navigating the complexities of IT transactions.
Arne Christes: My pleasure. Thank you for the opportunity to discuss these important aspects of due diligence in the IT sector.
Digital Experience Services in Germany: Insights and Trends
The market for Digital Experience Services (DXS) in Germany remains resilient despite economic challenges. The latest Lünendonk study highlights key trends, growth drivers, and challenges faced by the industry, providing valuable insights for IT service providers and investors.
Key Insights:
Market Growth: The DXS market grew by 4.4% in 2023, a slowdown compared to 18.3% in 2022. However, providers are optimistic about 2025, forecasting an 11.8% revenue increase driven by digital transformation and demand for personalized customer experiences.
Strategic Priorities: Customer Data Platforms, Data & Analytics Platforms, intelligent automation, and cloud-native technologies are identified as top priorities by over 90% of respondents. Generative AI is expected to play a central role in shaping future digital experiences.
Full-Service Demand: The complexity of digital transformation has increased demand for providers offering end-to-end services. In 2023, 59.3% of projects were executed using a full-service approach, with expectations for further growth in this model.
Generative AI Adoption: Generative AI is already being used by DXS providers for process automation, user behavior analysis, and personalized content creation. Its potential is recognized in customer service, trend analysis, and content generation, but challenges like limited resources, expertise gaps, and data quality remain barriers to adoption.
Regional Landscape: Leading providers such as Accenture, Deloitte, and Valantic are recognized for their strong market positions. Full-service models and technological innovation are key differentiators for success.
Upcoming IT and Investment Conferences:
- Gartner IT Infrastructure, Operations & Cloud Strategies Conference: November 19-20, London, UK - This Gartner conference focuses on the future of IT infrastructure and operations, covering topics from cloud computing to cybersecurity, essential for leaders in the digital transformation space.
- Big Data Conference Europe: November 19-22, Vilnius, Lithuania - Focuses on Big Data, High Load, Data Science, Machine Learning, and AI through workshops and sessions.
- FIMA Europe: November 28-29, London, UK FIMA 2024 is the world’s leading data and analytics event for investment banks and asset managers. Connect with data and analytics leaders from T1 banks to explore precise, data-driven decisions from financial institutions.
- DevOpsCon Munich 2024: December 2-5, Munich, Germany Dive into the world of DevOps methodologies, automation, and container management. This event provides expert-led sessions and hands-on workshops for IT professionals.
- IT-Tage 2024: December 9-12, Online Covering software architecture, development, DevOps, IT security, and cloud, this comprehensive conference features 10 parallel tracks with over 220 speakers. Expect deep dives into topics like Agile and IT operations, and explore visionary themes like New Work and the future of IT.
- Global Digital Transformation & Customer Experience Summit 2024: December 5-6, Berlin, Germany The 10th edition of this summit offers insights on digital transformation and customer experience, focusing on key themes like Emotion AI, e-commerce trends, and cybersecurity.
