The executive chairman of Australian software company TechnologyOne has dismissed the efforts of global tech giants like Oracle to make up ground in cloud computing, after its own offering impressed in annual results released on Tuesday.
Speaking after his company announced a full-year net profit increase of 16 per cent to $41.3 million, and a 14 per cent revenue increase to $249 million, Mr Di Marco was particularly bullish about the long-term prospects of its fast-growing cloud computing division, which is set to hit profitability ahead of schedule.
Like most software companies TechnologyOne has had to shift its strategy as the world moved towards cloud-hosted software as a service rather than traditional on-premise systems paid for on long-term licenses.
Its annual results commentary showed that it is doing a good job of encouraging new and existing customers on to its cloud offering, and Mr Di Marco said it would turn a profit of $1 million in 2016-17, rather than the previously planned break even.
The company's cloud division increased its annual contract value by 100 per cent to $16 million, with Mr Di Marco saying it was consistently taking customers off global giants like Oracle and SAP.
The new Australia and New Zealand managing director at Oracle Rob Willis claimed in Tuesday's Financial Review that his company was making strides into the midmarket through cloud computing, but Mr Di Marco said this was not how he saw the situation on the ground.
"It's the 'same old same old' from the traditional ERP vendors – we have heard it so many times before," Mr Di Marco said.
"They are in most bids we go for – it's just that they hardly ever win against us in our markets; and last time I looked they have been pushing cloud hard for the last two years."
He said the large traditional ERP vendors had not been providing strong competition in TechnologyOne's core markets of government and education for many years, and that many of its largest deals in recent years had been at the very top end of the market, which was "their last bastion".
Aside from the progress in its cloud division, Tuesday's annual results showed a broader sense of good health in the company. It was the seventh consecutive year of profit growth and investors will receive an 8 per cent increase in the total annual dividend to 9.45¢ per share.
The dividend for the second half was increased to 5.09¢, up 10 per cent on the previous year. TechnologyOne shares rose 11.1 per cent to $5.89, below a 12-month high of $6.13 hit in October.
Mr Di Marco said the company's plans to enter the US market, to take on the likes of Oracle on its home turf, remained two or three years in the future, and also that planning for his succession as CEO were also continuing.
He said the company would set up a US research and development centre to regionalise its products, once its UK operations were fully bedded down. He described its UK operations as experiencing "great traction," having added 13 new customers this year to take its total in the region to 40.
He said TechnologyOne would introduce its human resources and payroll software into the UK market in 2017, followed by its student management system in 2018.
"The challenge for us in the coming years is to build a successful and profitable consulting practice in the UK," Mr Di Marco said in his report commentary.
"This is not an insignificant undertaking as we will need to have, in the coming years, a very large consulting practice in the UK."
