General economic uncertainty has increased. However, according to research institutions, the global enterprise software market continues to grow. The market growth in Asia Pacific and Europe is estimated to compensate the decline of the US market. Basware operates in the electronic procurement and purchase invoice area, which is expected to grow more rapidly than the average for enterprise software. Basware solutions generate cost savings and therefore the demand is not heavily dependent on the economic situation.
Western Europe and the United States represent approximately three quarters of overall demand for enterprise software. Invoice processing and procurement software remain at the beginning of their lifecycles in these regions. The purchase management and invoice processing software markets are relatively heterogeneous with regards to the competitive situation. However, strong growth may attract more competitors to the market. The industry is consolidating rapidly and this development is expected to continue in the future. Basware is a medium sized software company on a global scale, in terms of sales and number of personnel.
Basware’s direct competitors are mainly smaller companies that operate locally. Document management, scanning and workflow solution developers compete with Basware especially in invoice processing. Competing solutions also include tailored software solutions that complement Enterprise Resource Planning (ERP) systems and require extensive client-specific project work.
The competitiveness of the software is still good due to new value added products and the integrated concept that the products form.
The Company’s international growth is based on the Company’s own sales and marketing efforts as well as on reseller operations. The development of the indirect channel continues especially in Europe and North America and in Russia and Asia. In Scandinavia, the focus is on profitability, supported by the extending product portfolio. In Finland, the focus is on profitability and the moderate growth comes mainly from the purchase management area.
The profitability of the regions outside the Nordic countries continues to be improved in all of the Group’s country units which decreases the Group’s tax rate in the long term.
As a result of the acquisition of Digital Vision, the Company gained a foothold in the Indian market. The Company extends it research and development unit to India which in the future results in a decrease of the research and development costs’ share of the Company’s net sales.
Of the Company’s EUR 11.1 million backlog of SaaS orders, approximately EUR 1 million will be recognized as income in 2008.
Basware has complemented its organic growth with acquisitions. The Company continues to review possible acquisition targets especially in the United States and Europe during 2008. With the acquisitions, the Company can extend the sales channel in international markets.
In 2008, Basware expects the growth of net sales for the financial year to be from 15 to 25 percent compared with the Group’s net sales in the previous year. The first quarter of the year is milder in growth resulting from the high level of the restated comparative figures for the first quarter of 2007. Operating profit (EBIT) is expected to be from 10 to 15 percent of net sales.