ASX tech players are looking to capitalise on global shifts in IT spending — but differentiation is key
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Australia may not be known as an IT hub, but recent trends support the argument that there are some compelling tech investment opportunities to be found on the ASX.
One of the latest examples is fintech payments platform Tyro (ASX:TYR), which successfully joined the ASX boards on Friday in a $1.4 billion IPO.
Along with payments, the local market is populated by other tech sub-industries such as cybersecurity, know-your-customer (KYC) compliance and cloud-based software.
Another listed tech competitor is Vortiv (ASX:VOR), the IT company which recently pivoted into the space via acquisition as part of a strategic push to take advantage of market trends.
Led by a new executive team, the company acquired cybersecurity platform Decipher Works in August 2017 in a $5.1m deal. That was followed by cloud-based software provider CloudTen in February this year.
Speaking with Stockhead, Vortiv managing director Jeffrey Lai said the company’s acquisitive strategy gave it a point of differentiation by focusing on businesses with a blue-chip customer base.
Decipher Works’ client base includes the NSW Office of State Revenue, online lender MeBank and payments company Cuscal.
“While the industry is growing, there’s not many companies targeting bigger clients. For example, the government isn’t going to rely on a startup to roll out their network,” he said.
“Hence the type of clients we have relies on experience, accountability and a track record to build trust in the marketplace. So as more big companies onboard these new tech platforms, that’s where Vortiv is positioned to grow market share.”
In line with that strategy, Lai said the group’s $8.1m acquisition of CloudTen was driven in part by its standing as an accredited consulting partner with cloud infrastructure giant Amazon Web Services — a designation that gives it an advantage when pitching for bigger clients.
CloudTen’s customer base includes Monash University and Origin Energy.
That approach caught the eye of Sydney-based funds management firm Bombora Investments, which maintains a portfolio of businesses across public and private markets.
Bombora chief investment officer Gregg Taylor said the AWS relationship and Vortiv’s exposure to a pipeline of government work gave it a “point of differentiation in the market that underpins the growth opportunity”.
Taylor also cited the strength of management and the fact both operating businesses are already profitable as other factors which give Vortiv a platform for scalable growth.
Looking at the sector more broadly, the battle for marketshare is expected to heat up amid a structural shift towards new or updated IT platforms across multiple industries.
In a recent investor presentation, Vortiv cited a 2018 Gartner survey of more than 3,000 chief information officers who highlighted security and cloud services as two of three biggest focus areas for IT spending globally, along with data analytics.
Within that context, Lai said Vortiv had made a good start in hitching a ride on the wave of ongoing changes in tech infrastucture.
“We’re really executing a transformation of our old ATM business, pivoting away from that and driving value from our acquisitions in cybersecurity and cloud,” he said.
“There’s other companies that we’re looking at, and we’re planning to make more acquisitions in 2020 to complete that transition.”