New technology offers IT and marketing investment opportunities

The rapid growth in smartphone and tablet use, along with faster mobile Internet access, is…

• Changing the purchasing process:

• Allowing users to better research suppliers of goods & services, and make ordering easier;

• Providing those suppliers with more detailed information on their customers,

• Giving firms the opportunity to increase worker productivity,
• Opening new markets such as location-based services (e.g. taxi hire) and new maintenance and rental services through the “Internet of Things” (IoT).

…leading to a need for a more integrated approach to marketing and IT…

Marketing agencies are:

• Seeking to integrate new online marketing techniques alongside traditional offline methods;

• Building their capability to analyse customer data alongside their existing creative capabilities.

IT service companies are:

• Increasingly offering Unified Communications (UC), i.e. voice/data/ video through one network;

• Striving to integrate users’ own devices into company networks;

• Integrating owned and cloud-based services.

…and potential consolidation in the marketing and IT services sectors

Historically, small and mid-sized marketing agencies and IT service companies were specialists, but the recent trend towards an integrated approach has led them to develop additional services organically, or via acquisition.

Many small players are likely to exit the market, having:

• Failed to offer the integrated approach required, losing customers to those that can;
• In IT services, fallen victim to competition from the Software as a Service (SaaS) solutions of the major providers (e.g. Google, Microsoft).

There is therefore potential to invest in mid-sized players and help them build the scale and breadth of their activities,

However, there will be competition in acquiring from large trade players.  A counter-tactic for private equity is to develop a buy-and-build strategy of companies before they grow to a size which interests trade.