Sep 24 2007

Aconex court case – date set for October

 

The legal row between Aconex shareholders – Hawthorn Glen Pty Ltd v Aconex Pty Ltd – is set to reach court in Melbourne, Australia on 9 October (see Aconex in Australia shares court row, 22 August 2007). The trial, likely to last around seven days, is likely to have an impact on the running of the fast-growing business – it claims to be “the world’s largest provider of online collaboration for construction and engineering projects… managing over $160bn worth of schemes”. The litigation has also affected a planned listing of Aconex on the stock market.

The case

The dispute is focused upon the rights of one of Aconex’s major shareholders, Hawthorn Glen, to participate in a new share issue earlier this year. Preliminary hearings were held on 21 and 22 August and 12 September, and some of the claims and counter-claims have already been outlined.

An application seeking “the joinder of Messrs Phillpot and Jasper” to the action was made on 21 August (“joinder”, see Wikipedia, is a legal term referring to the inclusion of additional defendants in a court case where allegations are based on the same facts); Hawthorn Glen’s counsel sought to “outline a case of breach of fiduciary duty against these two gentlemen”: Rob Phillpot and Leigh Jasper are joint MDs of Aconex.

Dates: the key issue

The share issue was only open to existing convertible preference shareholders and up to 1,153,847 convertible preference shares, at an issue price of AU$26, were apparently on offer. Neither Rob Phillpot nor Leigh Jasper were convertible preference shareholders, and so had no rights to acquire any of the new shares unless the offer, made on 15 March, was undersubscribed. Hawthorn Glen intended to subscribe for the maximum number of shares available to it (460,000) but, it is claimed, was prevented from effectively exercising its rights.

At the very hub of the case is a key issue: did Hawthorn Glen’s rights to subscribe expired on 30 April – as it claims – or on 16 April – as Aconex claims. If the court ruled in Hawthorn Glen’s favour on these facts, then the directors’ behaviour would, in the judge’s words, amount to “a gross dereliction of duty”, but on the other hand, if Aconex’s version of events was held to be true, then there would be “no dereliction at all”. Accordingly, Justice Goldberg ruled that if these critical issues are decided in Hawthorn Glen’s favour, then the directors will become defendants in the case.

Documents discussed on 22 August suggest that, while Aconex contended that any reference to 30 April was an obvious mistake, it had considered offering Hawthorn Glen an additional 14 days in which to apply for shares in its fund-raising round. Hawthorn Glen’s counsel, Mr Bick, went on to suggest:

“there is a good case that the directors at all times knew that they’d given the extra 14 days to the plaintiff [Hawthorn Glen]…. They didn’t want the plaintiff to increase its shareholding significantly. Rather they wanted to have those shares available for themselves, Mr Jasper and Mr Phillpot, and about 25 associates, direct or indirect associates, of theirs and some employees. As a result, Hawthorn Glen was cut out of the fourth round….”

Negative business impact

Both sides are keen to expedite proceedings, particularly as the company has undertaken not to issue the disputed shares until the case is resolved, thus potentially delaying a planned public listing of Aconex. Aconex’s counsel, Mr Collinson, was also clear about the ongoing impact of the litigation:

“It is extremely disruptive to a business which is in the channel for a listing in a relatively short time frame, … to have the key players, the joint managing directors, have to be distracted by this litigation, as they would, over another month, and of course, the chairman as well, Mr Hosking, who is a witness as well. It is immeasurable what the loss might be to the company from the distraction of litigation.”

Aconex statement

I invited Rob Phillpot to comment on the case and received the following statement:

An investor is litigating to increase the size of their investment in the Company.  The Company rejected their investment subscription as it arrived late and the Company does not require the additional investment capital.  The litigation does not impact on the company’s operations in any way.

The Chairman, Mr Martin Hosking, has noted that “these things happen with highly successful companies where investors would like to increase their stake in the company”.  He went on to note that the Company expects to win the litigation but, should it loose, the likely impact would only be an increase in the capital base of the company at the fair market price set in April.

Update (28 September 2007): Rob Phillpot and Leigh Jasper have become, respectively, the second and third defendants in the case.

Permanent link to this article: http://extranetevolution.com/2007/09/aconex-court-ca-2/

Sep 24 2007

NEC case study in “Building”

Last week I mentioned the NCCTP supplement to Building magazine (published Friday 14 September). After a slight delay due to technical problems, the whole supplement is now viewable online.

I noticed a small coincidence between the supplement and the main magazine. The latter included a lengthy piece by Davis Langdon‘s Simon Rawlinson: “Procurement – Target price contracts“, which talks at some length about the use of the New Engineering Contract (NEC) to support what Simon calls “co-operative working”. He stresses the need to manage information flows effectively and highlights the role that construction collaboration platforms might have:

“The NEC workflow is extensive and complex, so a management system should be in place to support the project manager and contractor in meeting timescales and updating reports. On projects worth more than £10m, web-based extranet systems designed to support the NEC workflow are invaluable.”

The coincidence? Well, one of the case studies in the NCCTP supplement – the BIW case study on p.8 – relates to the use of a collaborative platform to support an NEC-managed project undertaken by Davis Langdon’s Milton Keynes office (another version is available here).

Contract administration is a great example of where the more sophisticated construction collaboration platforms are moving away from just being regarded as document and/or drawing management repositories (it also helps differentiate construction-oriented systems from more generic ones unable to support the range/complexity of processes involved in construction contracts). Some UK clients, contractors and project managers are now looking to use online systems to support business-critical project processes, and thus extranets’ “co-operative” capacity (making processes and all the associated paper-work more transparent, accessible and auditable) and their support for contract-related workflows can add real value.

Permanent link to this article: http://extranetevolution.com/2007/09/nec-case-study/

Sep 20 2007

NCCTP at Constructing Excellence members’ convention

The NCCTP was introduced as the latest membership forum within Constructing Excellence at yesterday’s Members’ Convention in London (see post), and half the NCCTP members were represented by staff at the event (4Projects, Aconex [no fewer than five of their people!], Asite and BIW).

I also had a long chat with Karl Williams of the IT Construction Forum (another arm of Constructing Excellence) regarding the Uniting Construction Information initiative (see 23 March 2007 post). It seems that, outside of the convergence around Constructing Excellence, little else has changed in the past six months, and we are no nearer achieving a coherent voice for AEC IT in the UK. Another meeting is due to take place on 1 October, apparently.

Permanent link to this article: http://extranetevolution.com/2007/09/ncctp-at-constr/

Sep 17 2007

Novedge interview

I was flattered last week to be interviewed by Franco Folini of the Novedge blog, keen to know my thoughts about how construction collaboration technologies might be employed on AEC projects in the future and examine some of the issues affecting adoption. The finished interview is now online here.

Permanent link to this article: http://extranetevolution.com/2007/09/novedge-intervi/

Sep 14 2007

NCCTP now part of Constructing Excellence

The UK-based ‘extranet’ vendors trade association, the Network for Construction Collaboration Technology Providers (NCCTP), is now a membership forum within Constructing Excellence, the only UK membership organisation bringing together businesses from every part of the AEC supply chain (see press release).

The first major sign of the new arrangement has been the publication of a 20-page supplement to UK trade magazine Building today (it will also be available at Constructing Excellence members’ convention in London next week, 19 September). This latest joint marketing effort by eight different vendors (4Projects, Aconex, Asite, BIW Technologies, Business Collaborator, Cadweb, Causeway Technologies and Sarcophagus) certainly tested the abilities of competing firms to collaborate on a single project, and some have a higher profile than others (it was simply impossible to ensure equal prominence for every company) but promotion of individual members is a byproduct of a supplement that is mainly intended to get some facts about collaboration out into the UK marketplace.

In terms of content, it revisits last year’s NCCTP market research, includes a short legal perspective, looks at the some of the issues surrounding Software-as-a-Service (SaaS), discusses interoperability and standards, and answers a few other frequently asked questions. Scattered through the publication are also eight case studies, one per vendor, describing real projects where construction collaboration technologies have been deployed. The supplement should also be available online shortly.

Having been involved in moving the NCCTP to Constructing Excellence for four or five months, I am pleased and not a little relieved that the transition has finally taken effect. CIRIA was an excellent midwife when the NCCTP was born, but the baby has grown up and now wants to start talking with other collaboratively-minded organisations. Constructing Excellence is, I think, the right place to do that, and I hope members of this organisation take the opportunity to tap into the vendor experience now readily available to them.

Permanent link to this article: http://extranetevolution.com/2007/09/ncctp-now-par-1/

Sep 14 2007

Aconex 2006 results

Having looked at the financial results of most of the major UK construction collaboration (extranet) vendors over the past few months (for example, Business Collaborator yesterday, StoreData earlier in the month), I realised that I hadn’t really examined Aconex in any detail.

Although active in the UK and a member of the NCCTP, Aconex is an Australia-based company and so submits its statutory accounts to the Australian Securities and Investments Commission. One can therefore obtain reports via ASIC information broker partners. The latest set of accounts relates to the year ending 30 June 2006 and were submitted in November 2006; more recent figures will presumably become available later this year.

In 2005-2006, Aconex and the entities it controls had gross operating revenues of AU$11.7m (£4.875m) up a massive 205% from AU$3.8m (£1.6m) in the previous year. The revenues figure puts Aconex slightly ahead of UK-based BIW Technologies, who generated revenues of £4.66m in the year to 30 September 2006, but – in line with most other UK-based vendors (see UK vendor trends) – enjoyed much more sedate growth (Aconex said its increase in sales was achieved “through a heavy investment in foreign markets”).

Aconex’s pre-tax profit (EBITDA) was AU$1.32m (£0.55m), down from AU$2.1m (£0.9m) in 2005, while the order book at 30 June 2006 stood at AU$20.7m (£8.6m), which will be received over the next 2-5 years.

I looked for information about Aconex’s UK operation, and the company’s report helpfully gives a breakdown between its two primary geographical segments: Australia and UK. This shows UK revenues in 2005-2006 of AU$0.775m (£0.323m), but the segment is loss-making, losing AU$0.816m (£0.340m) during the year. In 2004-2005, UK revenues were AU$0.478m (£0.2m), losses were AU$0.736m (£0.307m); growth in the UK in 2006, therefore, was around 60%.

Permanent link to this article: http://extranetevolution.com/2007/09/aconex-2006-res/

Sep 13 2007

A good six months for Business Collaborator

This morning’s London Stock Exchange announcement by Coda of its financial results for the six months ending 30 June 2007 include some snippets about UK collaboration vendor Business Collaborator‘s financial performance in the same period.

Business Collaborator turnover was up 18% on 2006 to £1.381m, generating a £240k profit, marginally up on 2006’s £232k. According to the operational review:

“Approximately 85% of its business is now derived from recurring or more visible revenue streams such as maintenance, hosting and professional services; with the latter rising sharply in the period following contract awards by a number of major clients including Nationwide Building Society, Balfour Beatty and United Utilities. A new release of the core software (BC 5.1) in the period also created increased demand for training and implementation services.”

This is the second set of vendor results this month which has mentioned Nationwide. On 4 September, Styles & Wood’s StoreData claimed Nationwide as a new client (see StoreData results post). Presumably, Nationwide is using the two products for different purposes.

The review makes further reference to BC’s involvement with SEDEX (Supplier Ethical Data Exchange), but there is no indication of how much revenue is derived from this, as opposed to its core construction collaboration services.

Related posts: BC continues to thrive; UK vendor trends

Permanent link to this article: http://extranetevolution.com/2007/09/a-good-six-mont/

Sep 11 2007

CAD Awards 2007

Just over a week after the Construction Computing awards (see post) are announced, I read that the CAD awards 2007 – predictably abbreviated to the Caddies – are to be presented on 29 November.

Permanent link to this article: http://extranetevolution.com/2007/09/cad-awards-2007/

Sep 07 2007

More SaaS stuff

Further to yesterday’s posting (and also my 16 July note), ASPnews.com has published two further articles from Julie Craig in its series on software-as-a-service (SaaS):

The SaaS Steamroller (14 August) underlines the challenges traditional software vendors face if looking to re-engineer their businesses to become SaaS providers, while Weighing the Pros and Cons of SaaS (6 September) look at the state of SaaS in the marketplace today and why companies should consider SaaS as an option for delivering business services.

Permanent link to this article: http://extranetevolution.com/2007/09/more-saas-stuff/

Sep 06 2007

SaaS: the business solution

I have been reviewing quite a lot of material recently regarding Software-as-a-Service (SaaS):

  • First, the pros and cons of SaaS as it applies in the construction collaboration market have been debated by NCCTP members for an article to be published in a supplement to UK trade magazine “Building” next week.
  • Second, I received an email from Chris Perrine of Springboard Research regarding its latest research into the state of the SaaS market in Australia and New Zealand (ANZ).
  • Third, Phil Wainewright has written a withering critique of remarks made by Oracle president Charles Phillips on a recent trip to London.
  • Finally, thanks to the Autodesk staffers’ blog Connected, I was directed to an excellent white paper (PDF) from the Software and Information Industry Association (SIIA) on total costs of ownership as it applies to SaaS.

The forthcoming ‘Building’ NCCTP article is only short and tries to reflect vendors who are pure SaaS and those who also promote self-hosted solutions. Such an article is inevitably something of an uneasy compromise and so cannot convey the full range of arguments and counter-arguments. The other items I have read this week present a strong business case for SaaS over locally-hosted IT solutions.

Springboard
The Springboard research, for example, reflects advice and global trends reported by Mckinsey, Gartner and Saugatuck (among others), indicating greater awareness of SaaS and forecasting dramatic growth in the SaaS market. Springboard forecasts the ANZ SaaS market will “have a compound annual growth rate of 65% and will reach AU$506m (that’s around US$418m or £207m) by 2010.

Why is SaaS making such inroads? Springboard’s Phil Hassey points out: “As maintenance costs go down with SaaS, enterprises have found a spin-off benefit with the opportunity to cut down on expensive in-house or outsourced IT personnel, compared to the traditional software model where implementation and software upgrades cost more money and time.”

Interestingly, some business users are sidestepping the IT team; in many instances, Springboard says, “SaaS applications are being used without the involvement or knowledge of the IT department, as business users find it easy to subscribe to and deploy SaaS.” Ease of deployment, ease of use and management, and zero/low maintenance were all factors driving the use of SaaS and were more influential than pricing.

Wainewright v. Oracle
In “Oracle’s misconceived SaaS strategy”, Phil Wainewright takes issue with four Oracle assertions regarding SaaS. I particularly enjoyed his dissection and rebuttal of Phillips’ views on multi-tenancy, and on ownership of software – as he quite rightly points out: “What customers really want to own is their business processes, and the SaaS model gives most customers much more effective day-to-day control than any conventional software package.”

TCO
The SIIA white paper was published a year ago (September 2006) and its executive summary begins with a Gartner claim that:

“the annual cost to own and manage software applications can be up to four times the cost of the initial purchase. As a result, companies end up spending more than 75% of their total IT budget just on maintaining and running existing systems and software infrastructure.”

SaaS, of course, offers an alternative approach:

"The Software-as-a-Service (SaaS) revolution allows companies to subscribe to software applications and outsource operating the back-end infrastructure to the SaaS vendor. In most cases, the SaaS vendor can do this much more cost effective; providing overall cost savings for the company. As a result, companies can spread their IT budget across many more applications to support and grow their business operations which will in turn contribute to the bottom line.”

The white paper is a very useful introduction to the SaaS concept (chapter 3 gives a succinct explanation of why SaaS is different to application service provision, ASP, while chapter 5 features an interesting discussion on the extent to which IT should support an organisation’s non-core activities), but the real meat in the document comes in the chapters (7, 8 and 9) that focus on the TCO discussion. The executive summary says:

“Software and hardware costs are well understood but the people resources associated with traditional software applications are often underestimated or omitted in a TCO analysis. As a result, the usage driven subscription cost of SaaS applications can seem to be the more expensive solution over a multi-year period. However, when these people resources are correctly associated, deploying a SaaS application becomes – in many cases – the more cost effective option.”

This is backed up (in chapter 6) by examples drawn from analysts such as Gartner and IDC (even Microsoft are quoted as saying “the initial purchase is usually only 5% of the total cost of owning and maintaining a program”) and by analysts’ views on email and groupware applications.

Countering the argument (also presented by at least one NCCTP member in an initial draft of the article) that “even with the higher upfront costs, there is a break-even point where traditional software becomes much cheaper than the SaaS subscription model,” the SIIA refers to research from IDC which showed that “when people resources and cost of upgrades are correctly taken in consideration, this break-even point may never be realized.”

Permanent link to this article: http://extranetevolution.com/2007/09/saas-the-busine/

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