While IT services has been a sector to watch for a while, we’re seeing some movement towards specification in what firms are doing. Being focused means that these firms are going to be useful to companies working in one particular vertical. The focus makes them more attractive for acquisitions and allows them to have a long-term relationship with customers in the sector as well which can be just as attractive as their service to buyers.
Some firms here are right on the edge of disruptive trends or focused on other core areas in the tech space. This support for the vertical spaces will allow these particular firms to be more valuable and be valued so much higher than other companies. The focus has also helped increase the sales of firms. In particular, we have seen a lot of movement in areas like biomedicine and localization.
We’ve seen companies start selling off portions of their business in order to keep the different businesses separate and seek ‘purity of industry.’ In particular, the Advisory Board Company sold its healthcare section to Optum for $1.3B and the education-focused portion of the business to Vista Equity for $1.6B for the purpose of making each company a little more ‘pure.’
With Focused IT Services companies becoming more valuable and useful, they are even intersecting with several of the other trends on our list of Top 10 Disruptive Trends for 2018. If you want to learn more about the trends that we have discussed, you can listen in to our first webcast of the year: Forecast 2018.