Software & Cloud
Gross profit from Software & Cloud decreased 2.1% YoY in constant currency to CHF 267.6 million in H1 2021, compared to CHF 274.6 million during the prior year period. This development was primarily driven by residual COVID-19-related software purchasing weakness amongst SMEs across both the Microsoft and Multi-vendor businesses, along with a continued shift towards pay-as-you-go in the Microsoft business. By region, LATAM was impacted by a weak COVID-19-related macro-economic environment which affected purchasing across customer segments.
At the gross billings level, SoftwareONE’s Microsoft business developed in line with the overall market in H1 2021 driven by strong renewals and growing demand for Microsoft’s software and cloud products. Microsoft Cloud billings, comprising 365, Azure and Dynamics, continued to see double-digit growth compared to the prior year period while On-premise declined.
By customer segment, SMEs – which typically serve as the group’s growth and profitability engine – exhibited residual COVID-19-related software purchasing weakness, with a partial recovery seen towards the end of H1 2021. Large enterprises, which demonstrate lower profitability, continued to perform strongly in terms of billings growth. Meanwhile, public sector spending slowed down in comparison to the exceptional level seen in 2020. Overall, this mix effect continued to negatively impact the Microsoft business at the gross profit level.
Furthermore, gross profit growth in pay-as-you-go (i.e. xSimple bundles such as 365Simple and AzureSimple) accelerated to >70% YoY, compared to >50% YoY during the prior year period. While positive in terms of promoting ‘stickier’ customer relationships and more recurring revenue streams, this development continued to adversely affect results in the Microsoft business due to (i) less revenue recognized upfront and (ii) the entire services component (i.e. customer mark-up for the managed service and the PyraCloud platform) being booked under Solutions & Services, which delivers highly scalable, IP-driven services.
SoftwareONE’s multi-vendor business includes many market-leading software companies, including Adobe, AWS, Citrix, Google Cloud, Oracle, Red Hat, VMware, Sophos, Symantec and Veeam. While purchasing behavior varied greatly depending on the type of software, SoftwareONE generally saw healthy growth in procurement and consumption of mission-critical enterprise software solutions, with an acceleration towards the end of H1 2021, but at levels not yet comparable to pre-COVID 19.
Solutions & Services
Solutions & Services achieved strong gross profit growth of 53.4% YoY in constant currency to CHF 146.7 million in H1 2021, up from CHF 96.2 million during the prior year period. This result includes a gross profit contribution from InterGrupo of CHF 15.9 million, following its consolidation from November 2020 onwards. Excluding InterGrupo, the gross profit growth rate of Solutions & Services corresponded to 36.0% YoY in H1 2021.
The strong performance in Solutions & Services was broad-based across SoftwareONE’s services offering, customers and geographies. This business line now represents 35% of group gross profit, up from 26% in H1 2020.
The Commercial and Technology Transformation portfolios grew 15% and 39% YoY in gross profit, respectively, while the group’s strategic growth areas, including Application Services, SAP on Cloud and Industry Vertical Solutions, delivered growth in excess of 100% YoY.
Managed cloud support in particular demonstrated excellent growth, with 5.4 million users now supported 24/7 in 13 languages in the cloud.
During H1 2021, SoftwareONE also continued to expand its hyperscaler offering to include AWS and Google Cloud-related services to support customers with their multi-cloud strategies.