When a British technology company’s ship comes in, it is usually to be found waiting at the airport ...
The British technology sector has missed many boats bound for world domination but things change fast – relatively speaking – in the technology sector, especially in the software world, so there is still a chance for a UK player to make serious waves.
READ: Don't sleep on London’s technology shares
Those waves are arguably most likely to be made in the following areas: big data; the cloud/software-as-a-service; mobile; cyber-security.
Big data: seeing the wood, not the trees
To a certain extent, all of the big areas mentioned above are interlocked.
The increased use of mobile devices, the existence of the cloud, the evolution of the Internet of Things, the development of business models where the user gives away personal data in return for a “free” service (e.g. Google, Facebook); all of these are contributing to the growth of an overwhelming amount of data, all of which can be mined and exploited in one form or another.
IBM, in its description of big data, said it is “a term applied to data sets whose size or type is beyond the ability of traditional relational databases to capture, manage, and process the data with low-latency”.
Latency, as you probably know, is the interval between stimulation and response – the gap between asking for the data analysis and actually getting it.
Big data analytics, meanwhile, “is the use of advanced analytic techniques against very large, diverse data sets that include structured, semi-structured and unstructured data, from different sources, and in different sizes from terabytes to zettabytes,” according to “Big Blue”.
Not surprisingly, IBM is a big player in data analytics but Britain is not without its participants in the field.
WANdisco PLC (LON:WAND) may sound like a company that organises dance nights for goths but it is a company with a patented technology that enables the replication of continuously changing data to the cloud or customer’s own data centre.
The company primarily serves the big data and source code management markets. Its shares have more than doubled in the last year to around 1,200p; two years ago you could’ve grabbed the shares at around 150p.
It is the most eye-catching of the London-listed “big data” players, partly because it has a foot in the cloud sector as well as big data, but the UK software sector does feature other participants, including database specialists such as D4t4 Solutions and Rosslyn Data Technologies.
Head for the cloud
Strictly speaking, software-as-a-service (SaaS) is not the same as the cloud; the latter facilitates the latter, along with infrastructure-as-a-service (IaaS) and platform-as-a-service.
Analogies are not always useful but if you are trying to get your head around the cloud, think of the difference between receiving your gas via a gas main from a utility company and getting your gas from a giant Calor gas bottle stored in the kitchen.
The former – the gas main – is analogous to the cloud. Essentially, the wherewithal to provide a particular service is “out there (somewhere)” in the cloud – a remote location that is connected to its users, often via “that there internet”.
A software’s application’s data and core processing functions are hosted off the customer’s premises and are accessed in real-time from any PC, laptop or mobile device that has a network connection.
The great benefit of this arrangement, as opposed to the “buy a licence and install it on your PC” system, is that it makes it easier to add new services or, indeed, dispense with existing services. It is a pay-as-you-go model, typically with the bills coming in steadily every quarter as opposed to, say, in a big lump every two years when a serious software upgrade comes out.
In fact, on the subject of upgrades, because the core software is held centrally (albeit, perhaps, in several locations), upgrades become a lot easier to do; just upgrade the central server and no-one has to worry about users clogging up their own office network with downloads of security patches and program updates.
You’ll have to excuse me for 40 minutes, but Windows 10 is telling me it needs to download and install some vital upgrades …
… and we’re back.
Computing, at your service
Most software companies are making the transition to the “as-a-service” model and if they are not, they probably will bite the bullet and do so in the near future.
From an investor’s perspective, it is important to note that switching to the “as-a-service” model from the “upgrade the licence every n years” model almost invariably results in the company’s revenue taking an initial hit.
Imagine switching from getting paid a month in advance to getting paid weekly in advance; it will take a while for the income received to level out and that’s exactly what tends to happen when a software provider switches to a SaaS model.
From the point of view of the software company’s finance director, the customer’s finance director (FD) and the market, however, everyone seems to be happy with the pay-as-you-go model as it gives some clarity on revenue/payments.
It’s true that a customer can more easily back out of a service agreement or cut back on services under the “as-a-service” model but there is none of that angst of the supplier wondering whether a big customer will get budget authorisation for the next generation of software; there is no “next generation” of software, just the current one, constantly evolving.
The difference between SaaS, PaaS and Iaas
The SaaS is usually accessed via a web browser. Examples of SaaS products include Google Docs and the customer relationship management software, Salesforce.
Some of these services are ostensibly provided free, although as we are quickly coming to realise, “if you are not sure what the product is that the company is selling, the product is probably you – and your personal data”; some use the “freemium” model, where the basic service is provided free of charge while support and extra features cost money; and some just plain flat-out charge for the service.
PaaS is where a computing platform, such as Microsoft Azure, is “rented or delivered as an integrated solution, solution stack or service through an Internet connection,” according to Techopedia.
“The PaaS service delivery model allows a customer to rent virtualised servers and associated services used to run existing applications, or to design, develop, test, deploy and host applications.”
So, the software developer uploads some code and leaves it to the PaaS provider to worry about bandwidth, server space and so on.
IaaS is the provision of virtual servers and storage that organisations use on a pay-as-you-go basis. The provider will give the user access to hardware, storage, servers, data centre capability and various other bits and pieces that get techies salivating.
Clients usually pay on a per-use or utility computing basis.