“Investment in software for strength after the downturn”

"We are convinced that companies will continue to invest heavily in their information systems, but will shun the 'big bang' approach."

Patrick Bertrand, how do you explain Cegid’s favorable results in 2008, in today’s uncertain economic context?

Patrick Bertrand Corporate resilience in the face of adversity is never a chance event, but the direct result of the quality of the fundamentals the company has put in place during good times. Over the last several years, our strategy has been to strengthen our positions in our areas of expertise, to develop our installed base - which has boosted recurrent revenue to more than 45% of our top line -, to extend our reach to mid-sized and large companies, even while intensifying our presence among small companies. Finally, we intend to become a provider with compelling IT solutions developed and operated in SaaS (Software as a Service) mode.

We have also enhanced our ability to address our target markets, by diversifying our distribution methods. We have implemented a "multi-channel" strategy including a direct network, telesales teams and reseller-integrators. We have launched an aggressive program to create and develop an ecosystem open to Cegid solutions, featuring a network of consultants, agreements with major integrators, and so on.

Last - and far from least in a business characterized by significant investment in R&D - we decided back at the beginning of the decade, in contrast to many of our competitors, to launch a new generation of products. Thus, our strategy of constant investment in technology has put us in a favorable position during this time of crisis, whereas many other companies are having to redevelop their product lines. With an innovative and mature range of products and services, we can offer our customers solutions with a rapid, measurable return on investment, because their deployment is based on an easily-integratable technology, even in a heterogeneous environment.

2008 was very satisfying. The contribution of companies acquired in the last quarter boosted EBITDA and brought net profit nearly to the level of 2007.

Our product mix is now more oriented toward licenses and integration services to the detriment of hardware sales, where steady price declines are squeezing margins inexorably. As the mix continues to improve, it reflects positively in our gross profit.

What is Cegid’s strategic vision in the current context?

The core of our strategy, since the founding of Cegid, has been "Be a specialist". We are convinced that in the years to come, many companies will demand applications that address the specific characteristics of their line of business and will turn away from generalist software.

This strategic vision has prompted Cegid to develop specific expertise to meet the needs expressed in certain corporate functions such as HR/payroll, Accounting-Finance, Taxation and in businesses whose specificity has a strong impact on the way the company is organized (Retail, Manufacturing, Hospitality, CPA firms, Public sector, etc.).

We are also convinced that companies will continue to invest heavily in their information systems, but will shun the "big bang" approach.

Our solutions offer evolution, not revolution. This is in phase with the expectations of companies of all sizes, including large enterprises, who are looking for an alternative to restrictive, monolithic applications whose ROI is too far off in the future.

In the same vein, we believe that companies and the infrastructure are mature enough to allow greater recourse to online software services such as SaaS. In the current period of slower growth, these services enable the enterprise to continue investing in its information system. By leasing its software, the company converts an investment budget into an operating budget, freeing up the related financing. Thanks to the investments we have made since the beginning of the decade, we occupy leading positions in this area today.

Finally, to ensure further expansion, Cegid must remain committed to holding strong market positions in each of the functional and industry-specific areas in which it is present.

In this context, acquisitions are an integral part of Cegid’s strategy. To exist in today’s market, and especially to continue growing, a provider must be able to carry out successful acquisitions. Accordingly, in 2008 Cegid strengthened its expertise with acquisitions in the Hospitality and Retail industries (GD Informatique and VCSTIMELESS) and also brought in related know-how with Civitas and its software for the public sector. This latter acquisition dovetails with our efforts to develop clear, potential synergies with our CPA clients and Groupama, our strategic partner since the end of 2007.

Our strategic partnership with Groupama also reflects our conviction that software developers must not only have strong partnerships with technology providers but also with content providers. Customers today want their software not only to process data but also to provide useful information for their line of business.

Technological quality, ease of use and the relevance of application functions will determine whether a software solution is a hit or a dud with users.

How can software provide a company with a potential response to the downturn?

Periods of slower growth force companies to be more agile and to improve their internal processes so as to reduce their costs and increase their productivity. What better tool than software to address these objectives and constraints?

The productivity gains that naturally result from deploying more efficient software solutions better suited to the specific line of business optimize corporate operations and constitute immediate savings.

Numerous corporate functions can be directly optimized in this way, from production management and logistics to all aspects of human resources management to a more fine-tuned knowledge of the enterprise’s cost structure.

Companies must also work on their sales generation ability, in particular with existing customers, at times when landing new ones is more difficult. Software solutions such as sales management and CRM are important sources of growth.

We have the feeling that companies understand the need for high-performance software and continued investment in this area. In the current recession, however, they will choose their targets carefully, investing in software solutions that address an immediate need and are certain to provide a rapid return on investment.

With its strategy offering specialized solutions, developed with state-of-the-art technologies around a modular architecture, Cegid is well positioned to confront the months ahead and pursue its business development objective, just as it has in recent years.

Patrick Bertrand
Chief Executive Officer