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Softcat CEO talks expansion, AI and growing in a tough market
With the publication of the channel player’s FY25 results, Softcat’s boss shares context around the firm’s strong performance
Softcat’s full-tear numbers are impressive and even more so when they were delivered against continued challenging conditions and the firm’s CEO has taken time to talk about the numbers, expansion possibilities and the impact of AI.
Graham Charlton talked about the firm’s solid numbers, reaching £3.62bn GII for the 12 months ending 31 July. “That was both from kind of double-digit growth across all the segments, customer segments and technology areas that we play,” he said. “Our volume and run rate business was in good health across the broad spectrum.
“Our approach hasn’t changed, and it’s been very consistent. We’ve continued to invest in the modernisation of what we can do for customers, and the modernisation development of our own internal systems, following customers who’ve asked us to do more work for them outside of the UK and Ireland as well,” he added.
During the fiscal year, the business added 7% to headcount and moved into larger offices in both Manchester and London, with plans to expand more offices as part of that programme.
“The markets continue to be challenging, but despite that – and as we have done over many, many years – the breadth and quality of what we do shows we can grow whatever the market conditions might be, so we’re optimistic about the future,” said Charlton.
Growth has been consistent for more than two decades at Softcat, but the difference with this fiscal year has with the acquisition in April of data and AI consultancy Oakland.
M&A activity
Charlton said that the key to the Oakland deal was not only due to the expertise Oakland offered but the cultural fit with the larger Softcat family.
“It’s gone really well. We worked with Oakland as a customer of theirs a few years ago, so we got to know them and their capabilities well, but more importantly, we got to know their people and their management team. We could see that there was a similar ethos between the way they worked and the way that we did business as well,” he said.
“When we then looked at the work they were doing for us, we knew it was the kind of work that all our customers were facing. The way that we lay out our offering to customers had a very natural position for Oakland to slot into. So, it became compelling for them and for us.
“What we’re never setting out to do was to buy them and rip a load of people out and just absorb them into Softcat. We wanted to own them and empower them as a team alongside all the other teams we have.”
If there is to be more M&A activity, it will likely be overseas as Softcat responds to customer demand for localised support on the other side of the Atlantic and mainland Europe.
“We haven’t changed how we think about M&A,” said Charlton. “We’ve been thinking about it for a long time – whether it’s capability add-ons like Oakland, or whether it’s geographic expansion.
“If we were to do geographic expansion, it would be into the US, which is the market we’re most strongly pulled to by our customers. It’s the obvious one for us to take, as it’s the biggest single market in the world for what we do.
“If we found the characteristics that we saw with Oakland [with a] management team that really cares about people, had the cultural affinity and the right offering – and was on the East Coast so we had some overlap in the working day – then we would take the step and invest in that as well. But if we don’t find it, then that’s fine too, because we’ve got more than enough opportunity to go out,” he added.
Homegrown opportunity
Softcat’s explanation about why it took so long to dip into M&A is that the UK&I continues to present opportunity for growth – and Charlton restated that position.
“We opened up in Ireland five or six years ago; we’ve got strong foothold there as well now. So, I think our future opportunity in the UK and Ireland today is stronger than it was three or four years ago,” he added.
“We are getting pulled by customers overseas, and we’ve got the scale and capacity of organisation now where I think we could do that without it being a distraction on the core business.”
Charlton said that lot of organic growth comes from listening to customers and anticipating their needs, as well as ensuring the product and skills portfolio meets those demands.
“We listen and respond, because we’ve already working with all the vendors that they might be buying technology from,” said Charlton. “It’s the skills and capabilities we need to help our customers embrace the technology they’re interested in, and then effectively take to market those solutions from our vendors.
“So, the collaboration with our vendors is important. They’re always telling us, ‘Here’s where we want you to go’, and that’s an input, but when that resonates with what customers are looking to move to, that’s where we then invest and build those capabilities.
“The Oakland acquisition is a good example, because customers are interested in AI – they know they must embrace it and find a way of working with it. Vendors are pushing that very strongly. So, how do we help them? We help them get their data, their data engineering and their governance ready. And that leads us to invest in Oakland, but we’re making organic investments in that area as well. So, security as well as data and hybrid and public cloud environments,” he added.
AI is coming
Having touched on AI, with Softcat being an early adopter of Copilot and keen to use and support the technology, the view is that this will evolve over the next few years.
“The transformation that it will bring to how organisations operate models work will be profound, but it will take years to play out as well,” said Charlton. “So, datacentres are being configured and created to handle these workloads that are happening now. Applications like Copilot are in place and are being further developed.
“The work that people could do, proprietary work in their own organisations, creating agents to automate tasks, linking those agents together, we’re just at the beginnings of that. That creation of proprietary agents and levering AI models will be really exciting to see over the next two or three years, and that brings massive benefits for our business and our industry.”
Talking around the FY24 numbers, Charlton was optimistic that 2025 would be an improvement. Sadly, that turned not to be the case, but Softcat is in a position to deliver the sort of numbers it produced today despite challenging conditions.
“This time last year, I was optimistic that the market would improve, and it hasn’t, but we still delivered these kind of results,” said Charlton. “If the market stays like this, we can continue to deliver growth and success. Our guidance and our growth are not predicated on a market improvement. We will grow, even if the market doesn’t improve.”
