IT Industry News – October 2018

October 2018 was an interesting month, with some significant M&A activity and the sad passing of yet another tech pioneer, Paul Allen, who cofounded Microsoft with Bill Gates.

On the M&A front, IBM’s $34 billion acquisition of Red Hat was a game changer, leaping IBM to the top of the pack in the cloud systems arena… until the next mega deal!

It is a rare month when a $2 billion deal is eclipsed, but this month two of them look small next to the IBM deal! In the red hot cybersecurity space PE company, Thoma Bravo paid $2.1 billion for Imperva. Twillio also shelled out $2 billion to acquire email company SendGrid rounding out their API offerings.

Other deals saw Honeywell bolster its IoT offerings, paying $493 million for Transnorm; Palo Alto Networks is paying $173 million for security startup Redlock; Computacentre is paying $70 million for FusionStorm to grow its consulting business in North America; GTT Communications is paying $40 million for Access Point to add to its network; and Fortinet is spending $18 million for ZoneFox to improve its threat analytics capability.

There was plenty more M&A activity with big names involved. Some of them include: Google (chatbot company Onwards); Accenture (DAZ systems); DXC (agodesign); Samsung (Zhilabs); CapGemini (June 21); and NTT Data (Sierra Systems).

Other companies in the news include Google who are closing their Google+ social network amid security concerns and Amazon who announced 1,000 new jobs in the UK.

On the economy and jobs front, the news was generally positive around the world. The US economy continues to steam roll along creating skill shortages and positive economic indicators; Canada’s economic indicators were generally positive and all around the world we hear of job growth and some areas of skills shortages. Interesting that Japan is considering an incentive to bring blue collar labour to the country, and announced record numbers of women in the workforce among widespread labour shortages. Even when indicators drop, like the CEO confidence indicator, it is still heavily in the positive, so CEOs around the world are generally confident, just marginally less confident than last month!

In this Issue:

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


> GENERAL INTEREST

General

Global CEO confidence fell in the third quarter following a slight decline in the second quarter, according to The Conference Board. Its measure of CEO confidence decreased to a level of 55 from 63 in the second quarter. A reading of more than 50 reflects more positive responses than negative ones; so while it declined, it is still quite positive!

Lenovo’s push for market share in the PC market appears to be continuing to pay off, while Microsoft has taken a place as one of the leading PC vendors, according to third-quarter sales figures from research firm Gartner. Lenovo saw strong results in the U.S. PC market for the second quarter in a row, with the company growing the fastest of any PC maker during the quarter with unit sales up 22.2 percent year-over-year. Global rankings see Lenovo regaining the top spot — with 23.6 percent market share — thanks to a big boost from Fujitsu. HP fell to No. 2 globally with 21.8 percent share, while Dell placed third with 16 percent share. Lenovo, HP and Dell also saw unit sales rise globally during the third quarter, but fourth-place finisher Apple suffered a drop of 8.5 percent during the quarter, earning the company 7.3 percent market share. Rounding out the top six globally were Acer with 6.1 percent market share and Asus with 6 percent.

Paul Allen, co-founder of Microsoft who went on to become a major investor in technology and media companies, a philanthropist, and the owner of two professional sports teams, has died at the age of 65.

While global economic growth is expected to maintain its momentum over the next 12 months, it is not generating a corresponding improvement in labour productivity or wage growth according to the latest Hays Global Skills Index.

The Economy – Canada

Employment in Canada rose by 28,800 jobs in September from August, according to the ADP Canada National Employment Report.

Tech employment in Canada increased by nearly 45,000 jobs in 2017, to an estimated 1.2 million workers, according to the Cyberprovinces 2018 report released by CompTIA, a nonprofit IT industry association.

The Canadian staffing index, which measures staffing activity in Canada, fell 6% in September on a year-over-year basis to a reading of 103.

Following a decrease in the prior month, the number of jobs in Canada rose by 63,300 in September from August for a total of 18.7 million jobs, according to seasonally adjusted numbers from Statistics Canada. The unemployment rate edged down to 5.9% from 6.0% in August.

The economy – US

Employment expanded modestly or moderately across most of the nation in September through mid-October, according to the Federal Reserve’s Beige Book. Employers nationwide continued to report tight labor markets and difficulties finding qualified workers — including highly skilled engineers, finance and sales professionals, construction and manufacturing workers, IT professionals, and truck drivers.

US real gross domestic product grew at an annual rate of 3.5% in the third quarter, according to the “advance” estimate of GDP growth from the US Commerce Department.

The unemployment rate for graduates six months after leaving university fell to 5.1% this year, the lowest since the 1979 survey when it was 4.9%, according to a study from Prospects, a provider of skills, education, care and support.

US economic growth is expected to continue for the next 12 months, according to the “October 2018 NABE Business Conditions Survey” from the National Association for Business Economics, an organization of business economists and others who use economics in the workplace.

The number of US job openings reached another new record in August, and the number of openings outpaced the number of unemployed in August by 902,000, according to data released the US Bureau of Labor Statistics. There were 7.1 million job openings in August — up 18.1% year-over-year — and approximately 6.2 million unemployed people in the same month.

US private-sector employment rose by 230,000 jobs in September from August, the largest gain since February, according to the ADP National Employment Report.

Economic activity in the US nonmanufacturing sector accelerated in September, according to the Institute for Supply Management’s nonmanufacturing index. ISM’s nonmanufacturing index rose to a reading of 61.6 in September from a reading of 58.5 in August. Readings above 50 generally indicate improving conditions. The employment portion of the index jumped in September to 62.4, up from August’s reading of 56.7 and the highest reading since the inception of the employment index in 1997.

Employment momentum in the US tech sector experienced a modest bounce-back in September, according to CompTIA’s analysis of the US Bureau of Labor Statistics’ monthly employment situation report. The nonprofit IT industry association found the tech sector in September added an estimated 5,900 jobs.

The Conference Board’s consumer confidence index increased again in October following a modest improvement in September. The index rose to a reading of 137.9 (1985=100), up from 135.3 in September. The index remains at levels last seen in September 2000, when it was 142.5.

Economic activity in the US manufacturing sector accelerated in September but at a slower rate than in August, according to the Institute for Supply Management’s manufacturing index. ISM’s manufacturing index fell in September to a reading of 59.8 from August’s reading of 61.3. Readings above 50 generally indicate improving conditions.

Healthcare jobs rose more than 18% in the past decade, and in 2017 had an average annual wage of $57,200, according to a report released by the Office of the New York State Comptroller. The number of healthcare jobs exceeded 1.2 million in 2017.

The Conference Board’s US Leading Economic Index rose 0.5% in September from August to a reading of 111.8 (2016 = 100), following a 0.4% increase in August and a 0.7% increase in July.

IT employment in the US again posted no growth in September from August, the TechServe Alliance announced. After coming to a full stop in August, the number of IT jobs in the US held at a total of more than 5.3 million, according to the group, which serves as the national trade association of the IT and engineering staffing and solution industry.

The TechServe Alliance also measures engineering employment, which edged up by 0.14% in September from August. Engineering employment rose 2.27% on a year-over-year basis, an increase of 58,100 engineering workers.

The Conference Board’s US Employment Trends Index fell in September from August but rose 6.7% year-over-year. The index in September fell to a reading of 110.77 from the upwardly revised reading of 111.18 in August.

The US unemployment rate fell to 3.7% in September, down from 3.9% in August and the lowest rate since December 1969. The college-level unemployment rate — which can serve as a proxy for professional employment — edged down to 2.0% in September from 2.1% in August.

Austin, Texas, had the largest percent of job gains among all 51 large metropolitan areas in the US from August 2008 to August 2018, according to the US Bureau of Labor Statistics. Employment was up 35.5% in Austin. The next-largest increase in employment was in the Nashville, Tenn., area, up 25.7%. The lowest was in Birmingham, Ala.

The economy – Outside North America

The OECD announced that the overall unemployment rate stood at 5.3% in August 2018, unchanged compared to the previous month.
Across the OECD, 33.5 million people were unemployed, around one million more than in April 2008. In the euro area, the unemployment rate declined by 0.1%, to 8.1% in August, with the rate dropping 0.5% in Italy (to 9.7%, following the 0.4% fall in July). The unemployment rate also fell in Japan (by 0.1% to 2.4%), and was stable in Mexico (at 3.3%) and the United States (at 3.9%). Rates rose, however, in Canada (by 0.2%, to 6.0%) and Korea (by 0.4%, to 4.2%).

The euro area (EA19) seasonally-adjusted unemployment rate stood at 8.1% in September 2018, down from 8.9% in September 2017. At the same time, the EU28 unemployment rate was 6.7% in September 2018, down from 7.5% in September 2017. This is the lowest rate recorded in the EU28 since the start of the EU monthly unemployment series in January 2000.

The availability of professional jobs in Ireland decreased by 2% in September when compared to August, according to data from the latest Morgan McKinley Irish Employment Monitor.

Labour productivity in the UK, as measured by output per hour, grew by 1.4% in the second quarter of 2018 ended June when compared with the same quarter a year ago, according to new data published by the Office of National Statistics (ONS). ONS added that productivity is still performing well below the 2% average.

Employers’ confidence in the prospects for the UK economy have plummeted in October, according to the Recruitment and Employment Confederation’s latest JobsOutlook report. The net balance of employers seeing a positive outlook as opposed to a negative one reached -14, a fall of 9% from September and the lowest level witnessed since February 2018.

The number of jobs available in London fell by 38% in September when compared to a year ago, according to the latest London Employment Monitor report by recruitment firm Morgan McKinley. At the same time, there was a 35% decrease in professionals seeking jobs.

This Christmas season is set to generate more than 400,000 temporary work contracts in Spain, an increase of 8.3% over last year and the highest number in history, according to data from Randstad Spain.

Spain’s unemployment rate fell to 14.6% in the third quarter, its lowest level since the last quarter of 2008, according to Spain’s National Institute of Statistics.

According to Eurostat, the unemployment rate in Greece stood at 19.1% in June, the highest of the EU 28 member states.

German companies are increasingly struggling to fill job vacancies due to historically low unemployment according to the Institute for Employment Research (IAB. The unemployed-to-vacancies ratio has fell to its lowest level since 1992, with two jobless Germans per occupational opening in 2017. According to data from Eurostat, Germany had an unemployment rate of 3.4% in August, the second-lowest in the EU 28 after the Czech Republic.

IT hiring in India is set to turn a corner and see growth starting this month right up to March 2019, according to the Experis IT Employment Outlook Survey. Last year the IT sector saw 56,000 employees laid off with the new US visa rules contributing to the layoffs.

Employment growth in India’s formal work sector moderated to 3.8% in FY18, from 4.2% in FY17, with jobs in smaller companies being hit the hardest, according to a study from India-based CARE Ratings, a credit rating agency.

The seasonally-adjusted unemployment rate in Australia fell to 5.0% in September, down 0.5% when compared to the same period last year, according to data from the Australian Bureau of Statistics.
The jobless rate in South Africa stood at 27.5% for the third quarter of the year, down 0.2% from the same period last year.

Japan‘s seasonally adjusted unemployment rate edged down to 2.3% in September, a slight decrease from 2.4% in August and a four-month low, according to data from the Statistics Bureau. Meanwhile, the availability of jobs improved to the highest level since January 1974.

The per cent of Japanese women in the workforce reached a record high of 70% in August amid an ongoing labour shortage in the country as the population ages.

Japan‘s unemployment rate stood at 2.5% in August, down 0.3% when compared to the previous year according to data from Statistics Japan.

Japan today unveiled a plan to attract more foreign blue-collar workers, reports ChannelNewsAsia. Under draft legislation, foreign nationals with skills in fields identified as facing shortages would be awarded a visa allowing them to work for up to five years.

The surveyed unemployment rate in urban areas in China was 4.9% in September, a 0.1% decrease compared to the same month last year, according to data from the National Statistics Bureau. The urban surveyed unemployment rate in 31 major cities was 4.7%, also down 0.1% when compared to the same month last year. China is facing rising economic challenges including high debt levels and an intensifying trade battle with the US.

Hong Kong’s seasonally adjusted unemployment rate stood at 2.8% for the period from July to September 2018, same as that of the previous period from June to August, according to figures from the Census and Statistics Department.

Singapore’s seasonally adjusted unemployment rates among residents (2.9%) and citizens (3.0%) were unchanged from the previous quarter, while the overall rate rose slightly (from 2.0% to 2.1%). When compared to the same period last year, all rates (residents, citizens and overall) remained at or below those in September last year (overall: 2.1%, resident: 3.1%, citizen: 3.2%).

The unemployment rate in Taiwan saw a slight decline to 3.76% in September 2018, down from 3.77% in September 2017, and the lowest rate in 18 years.


> COMPANY NEWS

Google+, Google’s eponymous social network, is shutting down following the discovery of an exploit that could’ve allowed malicious developers parties to collect the data of hundreds of millions of users, according to the Wall Street Journal.

Online retail giant Amazon announced plans to create more than 1,000 jobs in the UK in Manchester, Edinburgh and Cambridge, reports BBC News. At least 600 “highly skilled” roles will be added in Manchester working on software, machine learning and Amazon Web Services, its cloud computing business.


> MERGER & ACQUISITION ACTIVITY

IBM Paying $38 Billion for Red Hat

IBM is buying open-source software developer Red Hat for $34 billion in a blockbuster deal that IBM said will make it a leader in the market for hybrid cloud systems. The companies said that Red Hat will become part of IBM’s hybrid cloud business “as a distinct unit, preserving the independence and neutrality of Red Hat’s open source development heritage and commitment, current product portfolio and go-to-market strategy, and unique development culture.”

Thoma Bravo Paying $2.1 Billion for Imperva

Private equity behemoth Thoma Bravo plans to acquire cybersecurity company Imperva for $2.1 billion, just seven years after the application and data protection vendor filed for an IPO.

Twilio Paying $2 Billion SendGrid

Cloud communications API provider Twilio is paying $2 billion for SendGrid, an email API platform, to bring together voice, messaging, video, and now email creation, into one platform for developers.

Honeywell Paying $493 Million for Transnorm

Honeywell is giving its Internet of Things automation business a shot in the arm by acquiring warehouse and transportation specialist Transnorm for $493 million.

Palo Alto Networks Paying $173 Million for Startup RedLock

Palo Alto Networks has agreed to purchase cloud security startup RedLock for $173 million to help security teams replacing manual investigations with automated, real-time remediation.

Computacenter Paying $70 Million FusionStorm

Computacenter, a $5 billion European systems integrator, is acquiring FusionStorm. The deal gives the United Kingdom headquartered Computacenter a strong foothold in the US market with the addition of the services muscle from San Francisco-based FusionStorm. Computacenter will pay FusionStorm $70 million when the deal is completed and up to $20 million deferred cash depending on the levels of EBITDA (earnings before interest, taxes, depreciation and amortization) and profits achieved by FusionStorm over a 15 month period.

GTT Communications Paying $40 Million for Access Point

Cloud networking provider GTT Communications has acquired communication services provider Access Point in a deal valued at $40 million. Mclean, Va.-based GTT owns and operates a global Tier 1 internet network over which it provides a suite of cloud networking services to clients.

Fortinet Pays $18 Million for ZoneFox

Fortinet paid $18 million for Edinburgh based, threat analytics company ZoneFox. Fortinet says its acquisition will strengthen its endpoint detection and response (EDR) and user entity behavioral analytics (UEBA) capabilities on-premises and in the cloud.

Google Picks Up ChatBot Company Onwards

Google purchased a small startup that enables companies to deploy chatbots that integrate with their service and sales platforms. Onward, founded in New York in 2015 before relocating to San Francisco, looks to help businesses automate many of their interactions with customers to speed processing of help tickets while reducing headcount.

DXC Snaps Up Argodesign

DXC Technology acquired a small Austin, Texas-based design studio and consultancy called Argodesign to add to its services portfolio and accelerate digital transformations.

Accenture Buys DAZ Systems

Accenture has boosted its Oracle capabilities with the acquisition of 300 employee, California-based DAZ Systems. DAZ provides Oracle ERP Cloud services, was founded in 1995 and will join Accenture’s Oracle Business Group.

Samsung Buys Zhilabs

Samsung unveiled an acquisition meant to help prepare its products to work effectively with high-speed 5G internet. South Korea-based Samsung said it has acquired Zhilabs, a firm based in Barcelona that specializes in network analytics, with an emphasis on leveraging artificial intelligence technologies.

CapGemini Buying June21

Paris-based consulting and IT solution provider Capgemini Group showed no signs of slowing its breathless acquisition pace, announcing plans to buy June21, a consulting firm specializing in digital marketing.

Cloudera and HortonWorks Merging

The global big data management software market will change dramatically with the all-stock merger of big data and open source software rivals Cloudera and Hortonworks who have a combined equity value of $5.2 billion.

NTT Data Services Buying Sierra Systems

NTT Data Services has agreed to buy a Canadian IT consulting company to expand its footprint in North America. Sierra Systems, Vancouver, B.C., offers a full range of IT consulting, systems integration, and application managed services across Canada.

SoftwareOne Buying Comparex

SoftwareOne acquired German IT services provider Comparex, creating a software management powerhouse that spans much of the globe.

WestCorp Buying Startup Royal Oak

The purchase of Royal Oak, Mich.-based marketing software startup Ambassador marks the sixth buy this year for the acquisitive West Corp., an Omaha, Neb.-based solution provider. The startup’s cloud-based relationship marketing platform, Ambassador, empowers organizations to increase customers, referrals, and revenue by leveraging the power of word-of-mouth.

Tyler Technologies Buys TradeMaster Inc. (MobileEyes)

Tyler Technologies has completed four acquisitions for a total of about $175 million this year. The latest is 15-employee TradeMaster Inc., commonly known in the industry as MobileEyes, a company that develops software to improve public safety by supporting fire prevention and suppression, emergency response, and structural safety.

Arlington Computer Products and Camera Corner Merging

Two of the most respected family owned solution providers in the Midwest, Arlington Computer Products (ACP) and Camera Corner Connecting Point (CCCP), are merging. The deal creates a combined company with $160 million in sales and 250 employees with small medium business (SMB) to enterprise reach. The combination makes ACP and CCCP among the top partners for HP Inc., Hewlett Packard Enterprise, and Dell with offices in Buffalo Grove, Illinois, Green Bay, Wisconsin, Atlanta and London.

ConvergeOne Buying Advantel Networks

ConvergeOne, which went public earlier this year, has acquired Advantel Networks, in a move that expands the company’s customer base on the West Coast.

Kaseya Buying Spanning Cloud Apps

Kaseya, a developer of an IT management platform for managed service providers, has acquired Spanning Cloud Apps and has already integrated Spanning’s data protection technology into its Kaseya IT Complete platform.

Perficient Buys Elixiter

Perficient has bought Elixiter, a digital marketing company that will boost the solution provider’s marketing automation services as well as help it forge customer relationships with Fortune 1,000 companies across several verticals.

Checkpoint Buys Dome9

CheckPoint Software Technologies has purchased Dome9 to help customers to secure multi-cloud deployments across Amazon Web Services, Microsoft Azure and Google Cloud. The San Carlos, Calif.-based platform security vendor said its acquisition of the Tel Aviv, Israel-based cloud security startup will boost its capabilities around intuitive visualization of security posture, compliance and governance automation, privileged identity protection, and cloud traffic and event analysis.

eSentire Buys Versive

eSentire has purchased AI-based cybersecurity vendor Versive to help correlate and analyze threat data coming in from the network, endpoint and cloud.

Violin Systems Buying X-10 Technologies Storage Business

Violin Systems signed an agreement to acquire the storage business of X-IO Technologies. X-IO at the same time said it has renamed itself as Axellio, taking the brand name of its edge computing and hyper-converged infrastructure technology as its new company name.