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Iomart builds out hybrid cloud play with £12.5m SystemsUp acquisition

Hosting company buys public cloud consultancy to capitalise on enterprise appetites for hybrid IT models

Glasgow-based hosting firm Iomart Group is looking to safeguard the financial performance of its cloud service business by acquiring IT consultancy SystemsUp for £9m in cash.

As part of the deal, Iomart could shell out up to £3.5m more for the firm, depending on its revenue performance during the 2016 financial year, which ends in March.

London-based SystemsUp specialises in the delivery of public cloud consultation services, and the move has been applauded by Kate Hanaghan, research director at IT analyst house TechMarketView.

“It’s a smart buy for Iomart as we believe the real margin value for suppliers, and the future ongoing interest from buyers, will come from understanding how public cloud can be implemented as part of the broader IT landscape,” she wrote in a research note.

“We believe companies with these capabilities will be in increasing demand from buyers directly, but also via partners such as Amazon Web Services and Google.”

Furthermore, with hybrid cloud widely tipped to become the de facto IT deployment model of most enterprises, the acquisition is a “particularly canny” move on Iomart’s part, Hanaghan added.

“Most enterprises are targeting a hybrid cloud computing model but won’t be able to achieve this without external advice and guidance,” she added in a further research note.

Iomart CEO Angus MacSween said the deal will help the firm meet the cloud needs of the enterprise more effectively.

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“The market for cloud computing is becoming increasingly complex and the demand for public cloud services is increasing at pace,” he said.

“With the acquisition of SystemsUp, Iomart has broadened its ability to engage at a strategic level and act as a trusted advisor on cloud strategy to organisations wanting to create the right blend of cloud services, both public and private, to fit their requirements.”

Meanwhile, SystemsUp managing director Peter Burgess said his company plans to draw on the acquisition to provide a wider range of cloud services to its existing customers.

"As part of Iomart, we can widen our toolset to deliver a broader set of cloud services, alongside continuing to deliver the strategic advice and deployment of complex large public and private sector cloud projects," he said.

Iomart's cloud financials

Iomart has also released its full-year results, which revealed the firm banked a pre-tax profit of £10.8m during the 12 months to 31 March 2015, up from £9.7m in 2014, against a revenue of £65.8m.

In Iomart’s half-year results, released in December 2014, the company’s hosting business achieved lower-than-forecast organic revenue growth of 8%. It also revealed elsewhere in the results it was focusing its efforts on mergers and acquisitions activity, as well as forging partnerships with the major players in the public cloud space to drive up growth.

Six months on, and the situation is looking little better, with the company describing the 9% organic growth rate of its hosting revenue, chalked up over the course of its full year, as “satisfactory”.

However, Hanaghan said the company is positioned to improve on this. “There is headroom to push that growth rate up further. Indeed, we see both the managed hosting and the public cloud markets strengthening as enterprises transition more spend to external providers,” she added.

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