New business model for IT market

By Aleksander Nowacki

Wola Info, a midsized IT firm best known for its work with telecom companies, is revamping its business model and looking for external sources of funding to the tune of several tens of millions of złoty. Its president says the company is considering an IPO or possibly attracting a private equity fund. Market watchers give the firm high marks for its performance to date and its new strategy, though they also note that a company spread across the troubled sectors of IT and telecoms may face tough choices on the road to building a healthy business model.

Piotr Majcherkiewicz, Wola Info CEO, says, "We are in the process of a radical overhaul of our business model, moving away from systems integration and towards an increased share of revenues from IT management services. We are changing the revenue structure with a much greater proportion coming from services and redefining our product range." The firm is looking to focus on very specific segments of the market, that will require that "we buy expertise in that market either by hiring a team of experts, or even through an acquisition of a company operating on that market." Wola Info is seeking extra finance with a view to funding such moves.

He adds, however, that the company is not yet ready to "come to investors and say: this is what we do. There is still some way to go before we can start seriously considering an IPO." Its revamped business model, however, promises great things for the future.

"Even those companies that do not outsource want to be able to measure the quality and costs of IT operations," he says. "We want to provide tools that make it possible."

Robert Maciejko, Boston Consulting Group (BCG) managing director, invoked last year's acquisition of PricewaterhouseCoopers Consulting by IBM as an example of a parallel shift in business model.

Andrzej Jasieniecki, an investment analyst at venture capital fund MCI Management, also gives a positive evaluation of the company's declared strategy, saying that it allows to compete on price in integration, while earning high margins on services.

"It is a well-managed company," Jasieniecki says. "But many firm announce ambitious plans mainly for the benefit of the press." He went on to point to inconsistencies in the Wola Info's declared business model.

"They say they want to specialize in services and at the same time are talking about their own specialized version of CRM system," he says. "That looks like trying to become another Prokom. It's simply not their league." He adds that it is a good idea for a company best known as an integrator to move into services, but adding a new element of software-making may prove tricky.

"They risk overstretching themselves by entering an already overcrowded CRM market," he says. He also notes a "negative investment sentiment" towards IT firms.

BCG's Maciejko says that the company, exposed to the ups and downs of the telecom sector, cannot expect IT spending in that sector to return to pre-bubble levels. He notes, however, that Wola Info can be said to be doing better than the global market leaders of telecom-supplies market.

"If they are back to their pre-crush revenue levels, they are doing better than many better-known companies," he notes. Wola Info is expected to record just over zł.140 million in revenues this year, slightly topping its 2001 performance. In comparison, the firm had zł.98 million revenues last year. This volatility underlines another potential weakness of the company's business model: its reliance on just a few key clients.

MCI Management's Jasieniecki points to ComArch's troubles following TPSA's cut of its expenditure on IT projects as an example of the dangers that Wola Info might also face.

Jerzy Szymczak, deputy CEO at BCG, points out, however, that the dependence that results from such partnerships often goes both ways and, while exposing the service provider to radical changes on a year-to-year basis, it guarantees that business would be generated in the long term. Which way it will go for Wola Info, and many things besides, are still unresolved questions. But the general assessment of the company's plans seems to be on the bright side.