IT Industry News – August 2017

August 2017, as has been the case for most of this year, was relatively slow on the M&A front. Symantec is selling its website security business to DigiCert for $1 billion, plus a stake in the larger entity. Cisco paid $320 million for hyperconvergence company Springpath, CGI bought consulting company in Pittsburgh, Summa Technologies and Accenture bought a Toronto consulting company VERAX. While not a pure tech play, the biotech world saw Aclaris pay $100 million for Confluence.

There was some drama at Samsung, as Jay Y Lee was jailed for 5 years for bribery. There was also some internal drama at Infosys that saw their CEO Vishal Sikka resign.

The Canadian economic indicators were mixed, but new proposed tax reforms, NAFTA negotiations, new labour laws in Ontario and an impending carbon tax that will hurt clearly have a negative impact on the Canadian economy. Meanwhile, the US economy seems to keep adding jobs and have fairly positive indicators.

It is also interesting to look at the various job situations around the world noting very low unemployment in places like Japan, Germany and Hong Kong with very high unemployment in France, Greece and Spain. The impact of Brexit on the London job market also seems to be a growing factor.

In this Issue:

> General Interest
> Company News
> Merger & Acquisition Activity
> Primary Sources


> GENERAL INTEREST

The job indicators in Canada

The Canadian staffing index fell 4% in July from June but was up 4% when compared with July of last year. The index, which measures staffing activity in Canada, fell to a reading of 107 from a reading of 111 in June.

Optimism about the Canadian economy rose substantially among professional accountants in leadership positions, according to a survey done for the Chartered Professional Accountants of Canada. The survey included 516 business leaders. Half report they are optimistic about the Canadian economy’s prospects over the next 12 months, up from 38% in the organization’s first-quarter report. Thirty-eight percent are neutral and 12% are pessimistic. However, protectionist trade sentiments in the US topped the list of challenges facing the Canadian economy, with 23% of leaders saying that is the case. It was followed by oil prices with 19% citing that as a top challenge.

Canada added 10,900 jobs in July from May, as gains in full-time work offset a loss of part-time jobs, according to seasonally adjusted numbers released by Statistics Canada.

Forrester predicts in its ‘The Canadian Tech Market Outlook for 2017 to 2018’ report that Canadian tech market growth will slow to 3.7% in 2018 due to lingering uncertainty that has surrounded the economy such as potential Trump administration trade policies. The combined threat of raising household debt, poor wage growth, and double-digit growth of housing prices in urban city centers with uncertainty over what the Trump administration may do with its trade policies and the North America Free Trade Agreement (NAFTA) is enough for CIOs to stand their ground on increasing tech spending.

The job indicators in the US

US real GDP grew at an annual rate of 3.0% in the second quarter, according to the second estimate of GDP growth by the US Commerce Department. The new estimate is up from an “advance” estimate that pegged growth at 2.6%.

US private-sector employment rose by 237,000 jobs in August from July, according to the ADP national employment report.

The Conference Board’s consumer confidence index increased in August after a moderate improvement in July. The index rose to a reading of 122.9 (1985=100), up from 120.0 in July.

The American Staffing Association’s staffing index rose to a reading of 96.74 in the week of Aug. 7 to Aug. 13, marking the highest value so far this year.

The US Conference Board Leading Economic Index increased 0.3% in July to a reading of 128.3 (2010=100) following a 0.6% increase in June. “The US [Leading Economic Index] improved in July, suggesting the US economy may experience further improvements in economic activity in the second half of the year.”

Though more IT and engineering jobs are being created in the US, the latest job numbers show the pace has been falling off, according to the TechServe Alliance, the trade association of the IT and engineering staffing and solutions industry. The rate of growth in IT employment has generally been on a downward trajectory for the past year. Similarly the rate of engineering job growth decelerated after posting stronger June numbers. The number of IT jobs rose 0.1% in July to a total of 5.3 million. Engineering jobs also grew by only 0.1% month-over-month.

The US will add a projected 8.2 million jobs from 2017 to 2022 while 302,930 will be lost, according to CareerBuilder’s analysis of labour market trends.

The Conference Board’s US Employment Trends Index rose in July to a reading of 133.77 from June’s downwardly revised reading of 132.42. Data indicates there will be strong job gains going forward. The US Department of Labour reported the US added 209,000 jobs in July and temp jobs rose by 14,700.

Economic activity in the US nonmanufacturing sector expanded in July at a notably slower pace than in June, according to the Institute for Supply Management’s nonmanufacturing index. ISM’s nonmanufacturing index fell in July to a reading of 53.9 from June’s reading of 57.4 and represents continued growth in the nonmanufacturing sector but at a slower rate. The employment portion of the index fell to a reading of 53.6 in July, down 2.2 percentage points from 55.8 in June. Any reading above 50% generally indicates improving conditions.

Bloomberg reports America’s service industries expanded in July at the weakest pace in almost a year, indicating firms making up the biggest part of the economy tempered their optimism. The index was below the lowest estimate in its survey, where forecasts ranged from 54.9 to 59.0.

Economic activity in the manufacturing sector expanded in July at a slower pace than in June, according to the Institute for Supply Management’s purchasing managers index for US manufacturing. July’s index reading registered 56.3, down from June’s three-year high of 57.8.
Mexico’s economy posted solid growth in the second quarter even though GDP growth slowed to an annualized rate of 2.4% in the second quarter from 2.7% in the first quarter, according to a report from the Federal Reserve Bank of Dallas. Exports, industrial production and employment improved, but retail sales fell.

The job indicators outside North America

The jobless rate in Japan stood at a seasonally adjusted 2.8% in July, steady from June, according to figures from the Ministry of Internal Affairs and Communications. Figures also showed that the job-to-applicant ratio was 1.52, up from 1.51 a month earlier, marking the highest level since February 1974. “Companies are facing labour shortages,” Yusuke Shimoda, senior economist at the Japan Research Institute told the Japan Times. “When you look at the improving job-to-applicant ratio, it indicates that there are more job openings not being filled.”

Overall hiring in India climbed 2% in July compared to the previous year, primarily driven by 9% growth in the IT and software sector, according to data from Naukri. The Naukri JobSpeak index for July stood at 1,928, a rise of 2% from the corresponding period last year.

One third of organizations will have 50% of their workforce as flexible talent according to a report from India-based Flexing It, a platform for independent consultants and flexible management talent. Furthermore, half of organizations will have more than 30% of their workforce as flexible talent. The report, titled Thriving in the Future Workforce, surveyed more than 500 firms.

A study estimates Columbia will need 53,000 information technology professionals by 2018, staffingamericalatina reported. Areas that are demanding more professionals are systems and telecommunications engineering, computer engineering and software engineering.

The seasonally adjusted unemployment rate in Taiwan remained the same at 3.84% in July, when compared to the previous month according to figures from the Directorate General of Budget Accounting and Statistics (DGBAS). The number of unemployed persons was 454,000 in July 2017, which increased by 14,000 (3.12%) from the previous month, but decreased by 18,000 (-3.85%) from the previous year.

The number of employees in Germany grew by 1.5% in the second quarter of 2017, when compared to the same quarter last year, according to figures from Destatis, the Federal Statistical Office. The figures showed there were 44.2 million employees in Germany during the second quarter, up by 664,000 compared to last year. Figures from Eurostat showed that unemployment in Germany for June stood at 3.8%.

The seasonally adjusted unemployment rate in Hong Kong stood at 3.1% in the three months ending in July, no change from the previous three-month period, according to figures from the Census and Statistics Department. Total employment increased by around 11,400 to 3.83 million in the May to July period. At the same time, unemployment increased by around 3,000 to 128,200.

France’s jobless rate fell to 9.5% for the second quarter, down from 9.9% a year ago and from 9.6% in Q1 according to the French statistical body INSEE (National Institute of Statistics and Economic Studies.)

The jobless rate in Australia fell by 0.1% in July compared to the same month last year, according to figures from the Australian Bureau of Statistics. Since July 2016, full-time employment has increased by 197,700 persons, while part-time employment has increased by 41,600 persons.

London (UK) saw a 33% decrease in professionals seeking jobs as well as an 11% drop in jobs available in July, when compared to the previous year, according to the latest Morgan McKinley London Employment Monitor. “The city is still hemorrhaging talent because of Brexit risks losing jobs, too.”

The confidence of UK freelancers has plummeted to the lowest level on record, according to research conducted by IPSE. The decline in confidence was impacted by Brexit as well as government policy, including changes to the IR35 legislation. Meanwhile, the outlook over the next 12 months saw 9% of freelancers express confidence in their businesses performance. This represents a decrease of 9% compared to the previous quarter. More than half of respondents (52%) said confidence in their business for the next 12 months has decreased. Along with Brexit, freelancers attribute their concerns to government policy relating to taxation and regulatory constraints as the main factors behind their declining confidence in the freelance business sector.

Invest in Brazil reported changes in Brazil’s labour laws will generate 1.5 million jobs in the next four years, citing a study by Itaú Unibanco. “In international comparisons, Brazil today stands out for having one of the most inefficient labour markets in the world,” the study stated. “We estimate that labour reform can increase Brazilian GDP per capita by 3.2% in the next four years (0.8% per year) and reduce the structural unemployment rate by around 1.4 percentage points [approximately 1.5 million jobs].”

The euro area (EA19) seasonally-adjusted unemployment rate was 9.1% in June 2017, down from 10.1% in June 2016. This is the lowest rate recorded in the euro area since February 2009, according to figures from Eurostat, the statistical body of the European Union. Among the Member States, the lowest unemployment rates in June were recorded in the Czech Republic (2,9%), Germany (3.8%) and Malta (4.1%). The highest unemployment rates were observed in Greece (21.7% in April 2017) and Spain (17.1%).


> COMPANY NEWS

Samsung Group leader Jay Y. Lee has been convicted of bribing former South Korean President Park Geun-hye and sentenced to five years for bribery, hiding assets abroad, embezzlement and perjury. Park was forced from office in disgrace in March over the payments scandal and is in detention and is in the middle of her own trial for corruption.

Infosys CEO Vishal Sikka resigned citing ‘unrelenting, baseless… and increasingly personal attacks.’ Sikka, who has been the CEO and managing director of Infosys for the last three years, is the company’s first CEO to come from outside of the company’s founders. He previously held executive positions at SAP over the course of 12 years with the company and was SAP’s first Chief Technology Officer. Infosys appointed Nandan Nilekani as the nonexecutive chairman of the board, effective immediately. Nilekani is one of the co-founders of Infosys and served as its CEO from 2002 to 2007. Nilekani plans to remain at the helm only until the business stabilizes and said that the next few months would be devoted to building a strategy and finding a new chief executive.


> MERGER & ACQUISITION ACTIVITY

Aclaris Pays $100 Million for Confluence

BioGenerator’s first co-working lab tenant, Confluence Life Sciences, got acquired by Aclaris Therapeutics, Inc. at a valuation of $100 million. “The Confluence acquisition enables Aclaris to immediately solidify its existing position in inflammatory/autoimmune skin disorders and expand into relevant adjacent therapeutic categories. We look forward to progressing the drug candidate CDD-450, as well as Confluence’s soft JAK and ITK inhibitor programs to identify drugs to treat inflammatory skin diseases.” That Aclaris confirmed the potential to use the St. Louis base to expand into “relevant adjacent therapeutic categories” signals a refreshing confidence in a common sense strategy (at least, for immunologists) to growing a biomedical talent powerhouse in the region.

CGI Buys Summa Technologies

Pittsburgh-based technology consulting firm Summa Technologies, one of the region’s fastest-growing companies, has been acquired by one of the country’s largest independent IT firms. Summa’s specialties include software development, agile technologies and consulting in Salesforce, among others.

Cisco to Pay $320 Million for Springpath

Networking giant Cisco has announced plans to acquire hyperconvergence software company Springpath in a deal worth $320 million. Founded out of Sunnyvale, California as Storvisor back in 2012, the company launched out of stealth three years later as Springpath. Cisco actually led Springpath’s $34 million series C funding round in 2015, and the duo worked closely together to co-engineer Cisco’s HyperFlex, a hyperconverged system that combines software-defined storage software (from Springpath) with networking and compute.

Accenture buys Canadian Consulting Company VERAX

Accenture announced the purchase of VERAX Solutions for an undisclosed sum. VERAX provides a range of business and technology consulting services to banks and financial services companies primarily based in Canada. Accenture continues to acquire firms that can expand its technology capabilities and geographic footprint.

Symantec Selling Website Security Business for Almost $1 Billion

Symantec Corp. announced it is selling its web security and public key infrastructure (PKI) solutions business to DigiCert Inc. for $950 million (USD) in cash and a 30% equity stake in DigiCert. Symantec explains that the move will allow it to continue to focus on its integrated cyber defence platform and accelerate the pace of innovation in the market.


> PRIMARY SOURCES:

IT World Canada – http://www.itworldcanada.com/
TechRepublic –  http://www.techrepublic.com/
ZDNet – http://www.zdnet.com/
Information Week – http://www.informationweek.com/
Staffing Industry Analysts – http://www.staffingindustry.com/