COMARCH STRATEGY 2016
TABLE OF CONTENTS
1. COMARCH STRATEGY PILLARS
5
1.1. Strategy based on delivering proprietary software
7
1.2. Definition of annual strategies
9
1.3. Diversification of Comarch offer with respect to products, industries, and regions
9
1.4. Stress on efficient delivery 1.5. Sustained investment in human resources
11
1.6. Conservative finance management
12
1.7. Lean and mean organization13
10
2. COMARCH MEDIUM AND LONG-TERM GOALS
15
3. RECENT DEVELOPMENTS
19
3.1. Extension of sales network 20
3.2. Increased R&D effort
22
1. COMARCH
STRATEGY PILLARS
1. COMARCH STRATEGY PILLARS
Comarch is a global IT challenger established in 1993 by Professor Janusz Filipiak as a university spin-off.
In 1999 the company launched its Initial Public Offering on the Warsaw Stock Exchange and now, 23 years from
inception, it employs more than 5000 people worldwide. The size of the company enables it to implement
large contracts while remaining efficient and agile in sales, R&D, and delivery.
Janusz and Elżbieta Filipiak own the majority of shares in Comarch. This private control allows for the definition
and execution of annual strategies adapted to the changing global business environment.
Comarch headquarters is located in Krakow, which is now well-recognized as a global IT center. The company
also has R&D sites located in all the largest cities in Poland, and some in Germany and France.
THE COMPANY’S LONG-TERM MANAGEMENT IS BASED
ON THE FOLLOWING STRATEGY PILLARS:
EXTENSIVE R&D AND DEVELOPMENT OF OWN PRODUCTS
PRECISE DETERMINATION OF ANNUAL STRATEGIES BASED ON CURRENT COMPANY STATUS
AND CHANGES IN THE EXTERNAL BUSINESS ENVIRONMENT
DIVERSIFICATION OF COMARCH’S OFFER WITH RESPECT TO PRODUCTS, INDUSTRIES,
AND REGIONS
EFFICIENT DELIVERY OF PRODUCTS AND PROJECTS
PROFOUND AND SUSTAINED INVESTMENT IN HUMAN RESOURCES
CONSERVATIVE FINANCE MANAGEMENT
TRULY LEAN AND MEAN ORGANIZATION, WITH ONLY A FEW LEVELS OF MANAGEMENT,
SIMPLE REPORTING HIERARCHIES, AND DELEGATION OF RESPONSIBILITY TO PRODUCTION
AND BUSINESS UNIT MANAGERS
6
COMARCH STRATEGY
Some of these features may be found in other companies but, uniquely, Comarch has executed them strictly
over the past 20 years. The rest of this document describes each of the strategy pillars in more detail and provides graphs and data to show their effectiveness in the long term. The information is based on stock exchange
reports. To allow comparisons over time, the financial data are given in the Polish zloty (PLN). At the time of
creation of this document the Polish zloty was fluctuating at about EUR 4.2 and USD 4.
Since Comarch’s inception, the average annual growth rate, as regards basic performance parameters (revenues, balance sheet total, and employment), has always been well above 30%.
The financial results for 2015 are particularly good, which is a consequence of many years of sound strategic
management.
1.1. STRATEGY BASED ON DELIVERING PROPRIETARY SOFTWARE
Since inception, Comarch has always been based on strong R&D and the development of its own products.
At the moment, the company’s product portfolio comprises more than a hundred product lines for a broad
spectrum of industries.
Some of those products have been included in the Gartner Magic Quadrant reports for years. In the telecommunication segment, they include the Comarch Business Support Systems and the Comarch Operations
Support Systems, both deployed at a large number of both European and global telcos,and featured in the
Magic Quadrant reports for Integrated Revenue and Customer Management and Operations Support Systems,
respectively. The Comarch EDI was also included in the Gartner Magic Quadrant.
Several other products were also covered by Gartner, Forrester, Berg Insight, Frost & Sullivan and Ovum analysts.
As a result of sustained investment, Comarch revenues from sales of proprietary software have been growing
with CAGR (Compound Annual Growth Rate) of 29% over the past 18 years.
REVENUES FROM SALES OF PROPRIETARY SOFTWARE
CAGR 29% (1997-2015) - IN PLN THOUSANDS
200 000
181 407
160 000
120 000
80 000
40 000
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
99
20
8
19
19
9
19
9
7
0
COMARCH STRATEGY
7
Comarch does not, in principle, resell third party products. In 2015, sales of own licences and services needed
for their implementation accounted for 83% of Comarch’s total sales. The following graph shows the share
of added value in this regard.
SHARE OF SALES OF PROPRIETARY PRODUCTS AND SERVICES
100%
87,8%
80%
60%
40%
20%
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
99
20
98
19
19
19
97
0%
Traditionally, Comarch has only sold third party hardware and software products as a means to deliver turnkey
solutions. The costs of hardware were high in the past, so the percentage of Comarch’s added value was lower.
Because the prices of hardware and software have decreased over time, the share of third party products
in Comarch sales has also gone down over the last years.
SHARE OF SALES OF THIRD PARTY PRODUCTS AND SERVICES
80%
70%
60%
50%
40%
30%
20%
12,2%
10%
8
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
99
20
98
19
19
19
97
0%
COMARCH STRATEGY
1.2. DEFINITION OF ANNUAL STRATEGIES
Comarch redefines its strategy annually, taking into account the changing business environment, industrial
trends, and internal challenges. Every year, in January and February, 10% of Comarch’s top managers summarize the results of the previous year and define the company’s renewed annual strategy. Their work is presented at the Comarch Annual Strategy Meeting. The agenda for Comarch’s Management Board and divisions is
a result of that joint effort.
Annual strategies indicate, among other things, the directions of company development, including opening
new business lines. For example, in 2007 it was e-Health, and in 2014 the Internet of Things, along with a decision to build a hardware factory.
1.3. DIVERSIFICATION OF COMARCH OFFER WITH RESPECT TO
PRODUCTS, INDUSTRIES, AND REGIONS
Care is always taken that Comarch sales are diversified across various industries and geographical regions.
Offer diversification is important to ensure stable growth. As an example, during the financial crisis in 2009 the
sudden drop of contracting by banks and financial institutions was compensated by orders from the telecommunication sector.
COMARCH STRATEGY
9
DIVERSIFICATION OF COMARCH SALES ACROSS VARIOUS INDUSTRIES
– IN PLN THOUSANDS
80 000
70 000
60 000
50 000
40 000
30 000
20 000
10 000
0
Telecoms,
Finance
Media & IT & Banking
Trade
& Services
Industries
& Utilities
Public
sector
SMEs
– Poland
SMEs
– DACH
Medicine
2014
Other
Q1-Q4 2015
1.4. STRESS ON EFFICIENT DELIVERY
With its rich product portfolio, Comarch could possibly be run as a software house. However, it is a real challenge to prepare standard, out of the box software products for large corporations. Each corporate client
requires software customization and, during exploitation phases, expects development of specific additional
functions and modules. To comply with these requirements, Comarch develops its products as frameworks
and sets of interacting modules. This enables fast and efficient customization, but at the same time requires
strong interaction between developers and implementaion personnel during the delivery phase.
To ensure efficient delivery, Comarch does not use integrators for the implementation of its products. It develops its own implemenation resources and project management procedures. Customers
appreciate having one vendor which takes end to end responsibility for the successful delivery
of IT solutions and the full IT stack.
This approach has become even more relevant because Comarch nowadays delivers most of its solutions
according to the full outsorcing, managed service, SaaS, or cloud computing paradigms. For this purpose
Comarch has developed a global network of own data centers.
10
COMARCH STRATEGY
1.5. SUSTAINED INVESTMENT IN HUMAN RESOURCES
Comarch started in 1993 from scratch, with Professor Janusz Filipiak and a group of four students. At the
moment, the Comarch group employs more than 5000 professionals.
Development of human resources over the last 10 years is presented below.
NUMBER OF EMPLOYEES IN COMARCH GROUP
CAGR 35% (1993 – 2015)
6000
5037
5000
4000
3000
2000
1000
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
19
19
93
0
Employment in Poland
Employment abroad
Comarch mainly employs candidates from the primary job market, i.e. students and university graduates.
Every year the company runs its well-recognized summer internship program. Computer science students in
their fourth and fifth year of study come to work for Comarch during three months of their summer holidays.
They are organized in small groups, each with a mentor from Comarch. They get a stipend, and brand new
equipment connected to the company intranet. The program attracts applications from around 1500 IT students each year, out of which 300 are selected to participate. The annual total cost of the program exceeds one
million euro.
The Comarch summer internship program has a very good reputation in Poland, and is the main source of
human capital for Comarch (nearly 70% of program partcipants decide to work part time for Comarch at the
completion of their internship). Running such a program is possible due to a large pool of IT talent in Poland.
In 2015, Comarch increased its number of employees by more than 800 people. The average age of people in
Comarch is 31. The attrition rate is at the level of 11%. Salaries of most IT specialists in Poland are at Western
European levels.
COMARCH STRATEGY
11
1.6. CONSERVATIVE FINANCE MANAGEMENT
Comarch has always had a surplus of cash. Loans were never taken to finance working capital.
CASH BY END OF THE YEAR
– IN PLN THOUSANDS
250 000
200 000
150 000
100 000
50 000
0
2010
2011
2012
2013
2014
2015
Mortgages are taken to finance the development of office space and data center infrastructure. But even with
those mortgages taken into account, Comarch has significantly more cash then debt.
More about Comarch finance management can be found in the next section of this document.
12
COMARCH STRATEGY
1.7. LEAN AND MEAN ORGANIZATION
Comarch is a truly lean and mean organization. Despite employing more than 5000 people, there are only
three levels of management:
nn Division
nn Business Unit
nn Profit and Loss Center
REPORTING HIERARCHIES ARE VERY SIMPLE AND THEY DO NOT OVERLAP.
RESPONSIBILITY AND TRUST ARE FULLY DELEGATED TO HEADS OF ORGANIZATIONAL UNITS.
MANAGEMENT PROCESSES ARE CLEARLY DEFINED.
BONUSES ARE BASED STRICTLY ON INDIVIDUAL, MEASURABLE PERFORMANCE.
ALL MANAGEMENT PROCEDURES ARE KEPT VERY SIMPLE.
COMARCH STRATEGY
13
14
COMARCH STRATEGY
2. COMARCH MEDIUM
AND LONG-TERM
GOALS
COMARCH STRATEGY
15
2. COMARCH MEDIUM AND LONG TERM GOALS
The very basic objective of Comarch’s majority shareholders is defined by Janusz Filipiak as balanced growth.
Growth is mainly achieved by sustained organic development of company assets, people, products, technology, market reach, and other areas of business. Organic growth is supported with minor acquisitions (to obtain
new innovative products, increase market scope, and develop new business models).
The company is not oriented toward quarterly or annual profit maximization.
Annual budgets assume a predefined level of EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization). If during a year a financial surplus is obtained, it is used to speed up the R&D processes and increase the reach of Comarch’s offer. This does not mean that assumed EBITDA levels are low. The graph below
shows EBITDA increase (in PLN thousands) over the last 18 years, with significant growth in 2014 and 2015.
EBITDA
CAGR 24% (1997 – 2015) – IN PLN THOUSANDS
180 000
168 577
160 000
140 000
120 000
100 000
80 000
60 000
40 000
20 000
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
19
19
97
19
98
0
This strategy helps to keep Comarch’s offer attractive, resulting in a permanent, steady increase in sales over the
past 20 years. The data below (in PLN thousands) show that year on year sales have been constantly growing.
16
COMARCH STRATEGY
REVENUE FROM SALES
CAGR 37% (1994 – 2015) – IN PLN THOUSANDS
1 200 000
1 132 489
1 000 000
800 000
600 000
400 000
200 000
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
0
Comarch’s listing at the Warsaw Stock Exchange, and the need to meet the profit expectations of minority
shareholders, helps the company to avoid overinvestment and to keep the balance between long-term strategies, as defined by majority shareholders and capital market expectations.
As a rule, Comarch does not pay dividends. Accumulated capital is used to fuel R&D and increase the scope of
the company’s offer. This strategy is clearly communicated to minority shareholders, and has ultimately been
accepted, because the reason behind it is that the company’s value has been growing since the first IPO in 1999.
TOTAL ASSETS
CAGR 36% (1997 – 2015) – IN PLN THOUSANDS
1 306 723
1 400 000
1 200 000
1 000 000
800 000
600 000
400 000
200 000
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
19
98
19
19
97
0
COMARCH STRATEGY
17
18
COMARCH STRATEGY
3. RECENT
DEVELOPMENTS
COMARCH STRATEGY
19
3. RECENT DEVELOPMENTS
In spite of any economic instabilities in many geographical and vertical markets, over the recent years Comarch
has continued to steadily invest in:
nn Sales network
nn R&D capacity
nn Delivery potential
3.1. EXTENSION OF SALES NETWORK
Comarch started its business in Poland. The first international subsidiaries were opened in 2000, in Germany
and the USA. Between 2000 and 2010 Comarch mainly developed its presence in Europe, with the highest
emphasis put on Germany. Since 2010 the company has gone truly global. In the last couple of years the expansion of global business centers has intensified.
Recent developments include:
nn Establishment of new Comarch subsidiaries in Italy, Malaysia, the USA, Sweden and Argentina in 2015
nn Decision to open new Comarch subsidiaries in Peru, Colombia and Saudi Arabia in 2016
nn Investment of USD 8 million to obtain 42.5% of shares in Thanks Again LLC (an operator of loyalty
platforms at USA airports), headquartered in Atlanta, Georgia, USA
20
COMARCH STRATEGY
NUMBER OF SUBSIDIARIES IN COMARCH GROUP
50
45
40
35
30
25
20
15
10
5
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
01
20
00
20
99
20
98
19
19
97
96
19
95
19
94
19
19
19
93
0
Subsidiaries in Poland
Subsidiaries worldwide
Investments in opening new branches outside Europe have resulted in significant growth in sales on international markets.
REVENUE FROM SALES ON INTERNATIONAL MARKETS
CAGR 49% (1998 – 2015) – IN PLN THOUSANDS
700 000
600 000
500 000
400 000
300 000
200 000
100 000
COMARCH STRATEGY
4
15
20
20
1
2
13
20
20
1
11
10
20
20
09
8
20
20
0
07
06
20
20
05
20
04
20
3
20
0
02
1
20
20
0
00
20
99
19
19
98
0
21
3.2. INCREASED R&D EFFORT
Comarch maintains high outlays on R&D, which were further enhanced in 2015. The graph below shows money
spent on the development of new products. Additional significant investments are put into new releases of
existing products.
R&D EXPENDITURES
CAGR 34% (2001 – 2015) – IN PLN THOUSANDS
120 000
100 000
80 000
60 000
40 000
20 000
15
20
14
20
13
20
12
20
11
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
20
00
0
Recently, the greatest effort has been made to develop truly innovative products in the areas of shared precision
mobile marketing, IoT (to deliver end to end solutions), and e-Health (devices and software for telemedicine).
22
COMARCH STRATEGY
ABOUT COMARCH
Comarch was established in Krakow, Poland, in 1993. The company delivers projects for leading Polish and global brands in the most important
sectors of economy such as telecommunications, finance, banking and insurance, trade and services, IT infrastructure, public administration,
manufacturing, healthcare, and SMEs. Comarch has already designed solutions for global brands on 5 continents in about 60 countries:
Heathrow Airport, BP, Carrefour, Heineken, Goodyear, Pepsi, Vodafone, T-Mobile, Telefónica, E-Plus, KPN or MTS, BNP Paribas Fortis, Alior Bank
SA (Carlo Tassara Group), Allianz, Aviva, AXA, Banque Populaire des Alpes, BRE Bank, BZ WBK (Grupa Santander), CitiFinancial (Citigroup),
Delta Lloyd Life, Deutsche Bank PBC, ING Insurance, among others.
Comarch’s products have been mentioned in analyst reports by Gartner, IDC, Forrester, and Frost & Sullivan. Every year, Comarch invests a
significant percentage of its revenue in innovative projects. In 2015, expenditure on research and development exceeded 12% of sales revenues
of the Group (33 million EURO).
The company has been listed on the Warsaw Stock Exchange since 1999. It currently employs over 5000 experts in 74 offices in 25 countries:
from Asia, via Europe, all the way to Chile.
In 2015, revenue from sales of the Comarch Group was 270 million EURO, an increase of 23 million EURO, compared to 2014. The operating
profit amounted to 27 million EURO. Net profit attributable to shareholders of the parent company was of 19 million EURO. In the said period
Comarch Group generated an EBITDA of 39,8 million EURO.
[email protected]
|
www.comarch.com