IT Industry News – June 2017

Summary of June 2017

The largest deal of the month was Amazon’s purchase of Whole Foods for $13.7 billion or $42 a share. Westcon-Comstar’s American business is being bought by Synnex for approximately $800 million. US fintech provider, Fiserv purchased British financial services technology firm, Monitise for $88.7 million. Microsoft has purchased Israli cloud startup, Cloudyn, for a price between $50 million and $70 million. Rackspace has acquired TriCore in an effort to increase Rackspace’s business from customers who want help running their critical applications. Ebix Inc. has entered into a joint venture with Essel Group. while acquiring a majority stake in ItzCash for $120 million. 

Travis Kalanick, founder and CEO of Uber, resigned due to investor pressure as a result of various scandals and setbacks throughout the organization. Google is being fined $3.575 by the European Commission for breaking antitrust rules. 

industry-news-2017

In this Issue:

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


> GENERAL INTEREST

The Economy – Canada

According to Staffing Industry Analysts, the Canadian staffing index rose 11% in May from April and 9% when compared with May of last year.

Real GDP is expected to grow by 2.6% in 2017 and 2.1% in 2018 according to the RBC Economic Outlook quarterly report. Business investment and government spending on infrastructure are both rising, which RBC Economics believes will spark economic growth at nearly double the average pace of the 2015 and 2016. British Columbia is anticipated to lead the provinces with a projected 3% growth in 2017 while Newfoundland and Labrador is projected to experience an economic contraction of 2.2%.

According to the Canadian Long-Term Outlook: Mid-Year Update,

The Canadian economy is expected to experience growth well above 2% in 2017. Growth will slow after 2017 because of Canada’s aging population and lukewarm growth in productivity. The largest contributing factor to Canada’s modest economic growth after 2017 is the inevitable exodus of the baby boomers from the workforce, which will cause the labour market to tighten.

The Economy – US

The US Commerce Department reported US real GDP grew at an annual rate of 1.4% in Q1 of 2017. Research conducted by Staffing Industry Analysts has demonstrated growth in the staffing industry is strongly correlated with GDP growth.

The seasonally adjusted four-week moving average of initial claims for unemployment insurance fell by 2,750 according to the US Labor Department.

The US staffing industry increased to 96.30 in mid-June, its highest value for the same week since 2007, according to the American Staffing Association. Temporary and contract staffing employment rose 0.21% from the prior week.

The Conference Board’s consumer confidence index rose to a reading of 118.9 (1985=100) in June. Consumers expecting more jobs in the months ahead increased to 19.3% in June while those anticipating fewer jobs also increased to 14.6%.

According to the new Robert Half Technology IT Hiring Forecast and Local Trend Report, US CIOs plan to add more IT staff in the second half of 2017. The top five cities with IT job growth are: New York, Dallas, Salt Lake City, Houston, and Los Angeles. The IT skills in greatest demand are: database management, Windows administration, desktop support, network administration, and wireless network management.

The Conference Board’s US Leading Economic Index reached 127.0 (2010 = 100) in May. The index is made up of ten variables, which include average weekly initial claims for unemployment insurance.

The seasonally adjusted four-week moving average of initial claims for unemployment insurance hit 244,750 last week according to the US Department of Labor.

Spherion Staffing’s 2017 Emerging Workforce Study indicated 25% of US workers plan to look for a new job in the next three months and 35% plan to do so sometime in the next year. The main factor contributing to employees looking to find new opportunities is compensation. Of the employers surveyed, 62% said they recognize a need to pay higher wages to retain employees, but cannot afford to do so. According to 74% of the employers surveyed, competitors are increasing compensation packages to attract top talent.

The Worker Confidence index rose to a level of 107.6 in the first quarter according to staffing provider Yoh and HRO Today magazine. This is the fifth straight quarter of US Worker Confidence increases. Yoh’s index measures workers’ perceptions of four drivers of worker confidence: perceived likelihood of a job loss, a promotion, and a raise as well as a perceived overall trust in a company.

TechServe Alliance reported a slow-down in IT and engineering job growth in May amid a talent shortage in many skill sets. The number of IT jobs in the US has risen to almost 5.3 million.

According to the ADP National Employment Report, US private-sector employment rose by 253,000 jobs in May. Service-providing jobs rose by 205,000 and goods-producing jobs rose by 48,000. In May, midsize businesses added 113,000 jobs, small businesses added 83,000 jobs, and large businesses added 57,000 jobs.

The Federal Reserve’s Beige Book report indicated the pool of available talent continued to shrink from early April through late May. Most firms across the districts noted little change to the recent trend of modest to moderate wage growth, although many firms reported offering higher wages to attract workers where shortages were most severe.

The Conference Board’s US Employment Trends Index increased to a reading of 133.70 in May. The May reading, which followed a sharp increase in April, is up 6.4% from the same month a year ago. The US added 138,000 jobs in May and temp jobs rose according to the US Department of Labor.

The Institute for Supply Management’s nonmanufacturing index indicated an expansion in economic activity in US nonmanufacturing in May. The index fell in May to a reading of 56.9 from April’s reading of 57.5, and readings above 50 indicate growth. The employment portion of the index increased to a reading of 57.8. Fifteen industries reported increased employment, led by arts, entertainment, and recreation; construction; and real estate, rental and leasing, respectively. The information industry was the only segment to report decreased employment.

The Economy – Outside North America

According to the latest ManpowerGroup Employment Outlook Survey, jobseekers around the world should expect to see more opportunities in Q3 of 2017. The survey indicated employers in 41 countries plan to add staff, and hiring confidence is strongest in Japan, Taiwan, Hungary and the United States, while employers in Italy, the Czech Republic, Finland, India, Brazil, and Peru report weak hiring prospects.

According to the latest ‘Business in Britain’ report from Lloyds Bank, overall business confidence in the UK hit an 18-month high and increased to 24% in June. ‘Business in Britain’ gathers the views of more than 1,500 UK companies, predominantly small to medium sized businesses. Of the companies surveyed, 52% said they had experienced difficulty in recruiting skilled labour in the last six months.  

The growth forecast for 2017 UK GDP was upgraded for 2017 from 1.4% to 1.5% according to a report from the British Chambers of Commerce. Wage growth is expected to remain negative due to a rise in inflation and little to no movement in average earnings growth. The impact of negative wage growth will be weak consumer spending, which is a key driver of UK growth.  

According to the latest JobsOutlook survey by the Recruitment & Employment Confederation, EU employer confidence in the economy has stabilized, but has not fully recovered from the EU referendum. The survey showed that 33% of employers felt UK economic conditions were improving, compared to 27% who thought it was getting worse.  

Eurostat, the statistical office of the EU, reported employment in the Euro Area increased by a seasonally-adjusted 1.5%. Estonia recorded the highest increase in employment at 2.8% while Latvia saw the biggest decline at 1.9%. Hourly labour costs rose by 1.5% in the euro area. Romania experienced the highest annual increase in hourly labour costs (+17.2%), while Finland experienced the biggest decrease (2.7%). The EU28 unemployment rate was 7.8% in April 2017. The euro area (EA19) seasonally-adjusted unemployment rate stood at 9.3%, which is the lowest rate recorded in the euro area since March 2009. The lowest unemployment rates in April 2017 were recorded in the Czech Republic (3.2%), Germany (3.9%) and Malta (4.1%). The highest unemployment rates were observed in Greece (23.2% in February 2017) and Spain (17.8%).

The Institute for Economic Research (Ifo Institute) reported the Ifo employment barometer in Germany increased to 110.9 in June. There was more hiring in construction, wholesale, retail and services while manufacturing was the only sector that saw a fall in hiring. In June, unemployment remained stable at 5.7% according to Germany’s Federal Labour Agency.

According to the National Institute of Statistics and Economic Studies (INSEE), employment in France rose by 89,700 in Q1 of 2017. There were 17,000 temporary jobs added in the first quarter, which represents a quarterly increase of 2.5%. Most of the new jobs created in France were in the private sector and total employment in now stands at 24.93 million.

According to a report from Yonhap using data from Statistics Korea, the number of long-term unemployed in South Korea reached 120,000 (11.9% of the total jobless) in May – a 13-year high. reports Yonhap with data from Statistics Korea.

According to the latest Naukri JobSpeak Index, the IT and Software industry in India saw a decline in hiring of 17% when compared 2016. In May, Telecom and BPO/ITES declined by 7% and 10% respectively, while Banking saw an 8% increase in hiring. Overall new job creation in India fell by 4% in May when compared to 2016. Hiring activity declined by 21% in Delhi/NCR, while Coimbatore experience an increase of 17% – the only city that saw an increase.

According to the Ministry of Internal Affairs and Communications, Japan’s seasonally adjusted jobless rate stood at 2.8% in April – the lowest level since 1994. The jobs-to-applicants ratio came in at 1.48 in April – the highest in Japan since 1974. In April 2017, the number of employed persons was 65 million and the number of unemployed persons was 1.97 million.

The Australian Bureau of Statistics reported the jobless rate in Australia fell to a seasonally adjusted 5.5% in May. Unemployment in Australia decreased to 711,900, the number of unemployed persons looking for full-time work decreased to 489,300 and the number of unemployed persons only looking for part-time work increased to 222,700. Total employment increased to 12,152,600, Full-time employment increased to 8,287,400, and part-time employment decreased to 3,865,200. The economy has added approximately 150,000 new jobs in Australia since January.

The latest Quarterly Employment Survey from Statistics South Africa

indicated employment in South Africa decreased by 48,000 jobs to 9.6 million in the formal non-agricultural sector due to end of contracts for workers who were employed during the festive season. Increases in employment were reported in the construction and mining industries.


> COMPANY NEWS

Founder and CEO of Uber, Travis Kalanick, has resigned under pressure from investors after a string of setbacks and scandals. Kalanick’s departure caps a tumultuous period for the world’s largest ride-services company that has revolutionized the taxi industry and challenged transportation regulations worldwide. The scandals this year range from the unearthing of a culture of sexism and bullying at Uber to a U.S. Department of Justice federal investigation and a high-stakes lawsuit filed by Alphabet Inc’s (GOOGL.O) autonomous car division, Waymo, that threatens Uber’s self-driving car ambitions.

Google has been fined $3.575 billion by the European Commission for breaching EU antitrust rules. The Commission ruled that Google used their stronghold over the search engine market to promote Google Shopping over and above competing comparison shopping services, giving their own service an illegal advantage in the online commerce market. The Commission uncovered that Google has been systematically demoting their competition in the comparison shopping space since 2008 by placing Google Shopping at the top of relevant search results.


> MERGER & ACQUISITION ACTIVITY

Amazon Purchases Whole Foods

Amazon has purchased Austin-based grocery chain Whole Foods for $13.7 billion. Pairing Whole Foods with Amazon was unexpected, but it has been reported Whole Foods had been under pressure to find a buyer by Jana Partners LLC who acquired a stake in Whole Foods and began pushing to sell. Despite the purchase, Whole Foods will still operate under its own brand and run by Whole Foods co-founder and CEO, John Mackey.

Westcon-Comstor’s American Business Bought by Synnex

Business process services company, Synnex purchased Westcon-Comstar, a leader in security, UCC and network technologies, for $800 million broken down as: $500 million in stock, $100 million in cash at closing, up to $200 million earn out if financial targets are achieved by February 2018, and $300 million for 10% ownership of Datatec’s Westcon EMEA and APAC business. Westcon-Comstar is owned by Datatec Ltd., a South African conglomerate valued at $6 billion.  

Fiserve Buys Monitise

Monitise, a British financial services technology firm that has been up for sale since 2015 has been purchased by US fintech provider, Fiserv for $88.7 million. After struggling to find a buyer, Monitise was offered 2.9 pence in cash per share by Fiserv.

Microsoft Acquires Cloudyn

Microsoft has finalized their acquisition of Israeli cloud startup, Cloudyn for a price between $50 million and $70 million. With this purchase, Microsoft now has a cloud billing and management solution. The Cloudyn acquisition comes on the heels of other noteworthy Microsoft purchases of Israeli enterprise security firms, including: Heaxdite, Aorato, Adallom, and Secure Islands.

Accenture Acquires Intrepid

Intrepid, a Boston-based mobile design and development firm, has been acquired by Accenture. 150 Intrepid employees will join Accenture Digital to develop innovative digital services and solutions that help brands transform the mobile user experience.  

Ebix Buys Major Stake in ItzCash

International supplier of On-Demand software and E-commerce services, Ebix Inc., has entered into a joint venture with Essel Group, an India-based business conglomerate. Ebix has purchased an 80% stake in ItzCash, India’s leading payment solutions Exchange, for $120 million. The Ebix-Essel joint venture aims to make ItzCash India’s largest Financial Exchange.     

Rackspace Buys TriCore

In an effort to be a managed services provider, Rackspace, a cloud services firm, has acquired TriCore for an undisclosed amount. TriCore provides support and management services for ERP, BI and analytics systems. The acquisition enables Rackspace to offer customers managed services by helping them run their critical applications, such as Oracle ESB.


> PRIMARY SOURCES:

IT World Canada
TechRepublic

ZDNet

Information Week

Staffing Industry Analysts