Scottish Technology Industry Survey 2016

Scottish Technology Industry Survey

02

>> | CONTENTS

01 02 03 04 05 06 07

Welcome

03

Key Messages

04

Review of 2015

06

Outlook for 2016

08

Industry Voices

10

International Opportunities

12

Industry Overview

14

PLEASE NOTE: ALL NUMBERS SHOWN ON THE INFOGRAPHICS WITHIN DENOTE PERCENTAGES.

08

09

10

Benchmark One: Smaller Companies (1–35 Employees)

18

Financial Environment

20

Sales

21

Benchmark Two: Medium Companies (36–500 Employees)

22

Financial Environment

24

Sales

25

Benchmark Three: Larger Companies (501–1000+ Employees)

26

Financial Environment

28

Sales

29

11 12

Employment & Skills Commentary

30

What People Say: Members’ View of ScotlandIS

33

13 14

Concluding Remarks

34

Advice from Fellow Businesses

35

“Strategy, Stay focused, Create culture to execute” Alan Middleton | CAPITO

03

WELCOME | 01 ScotlandIS would like to thank everyone for taking part in this year’s Scottish Technology Industry Survey for their invaluable input, providing feedback on performance in 2015, and their forecasts for 2016.

INTRODUCTION Scotland is home to a vibrant digital technologies industry with over fifteen hundred companies engaged in a variety of activities from software development and IT services to digital agencies, games development and telecommunications.

The industry provides products and services across a wide range of end markets from public services through traditional industries such as banking and insurance to the new and innovative industries like renewables and biotechnology.

The industry has grown substantially over the last five years despite a challenging economic climate, with increasing start-up activity creating a wide range of new entrants. Over 84,000 people currently work in digital technologies roles across Scotland, generating more than ÂŁ5bn in GVA.

Each year the Scottish Technology Industry Survey provides information on the health of the digital technologies industry. Once again the analysis breaks down the results by size of company; small, medium and large. Also included at the end of this report is an analysis of the employment and skills outlook for the year.

This survey fieldwork was carried out by ScotlandIS in early 2016.

ScotlandIS would like to thank all the businesses that participated in the survey.

Polly Purvis Executive Director // ScotlandIS T E

+44 (0) 1506 472200 polly.purvis@scotlandis.com @scotlandis www.scotlandis.com

04

02 | KEY MESSAGES

INDUSTRY CONTINUES TO GROW

EMPLOYMENT GROWTH

The 2016 survey highlights business confidence and growth expectations despite the increasingly uncertain global operating environment. There are high levels of confidence with 70% of businesses being optimistic or very optimistic about the year ahead.

The survey results suggest the demand for talent has cooled slightly from the exceptional levels of 2015. Employment is expected to continue to grow with 66% of businesses expecting employment to increase though this is a decline from the high figures reported in 2015 (83%) and 2014 (75%).

Sales growth in 2015 was reported by 68% of businesses, with over a quarter reporting growth in turnover of 20% or more.

In particular, graduates will be in great demand as 74% of recruiting businesses expect to require graduates in 2016, a similar figure to last year.

81% of businesses expect sales to increase over the next 12 months but 14% expect sales to decrease.

The recruitment of modern apprentices remains relatively low and static with 29% of companies likely to recruit and 57% unlikely to recruit.

As for previous years, 60% of businesses predict the majority of talent will come from Scotland and 20% from the rest of the UK.

74%

2016

66% 2015

2014

83%

05

KEY MESSAGES | 02

SKILLS DEMAND LIKELIHOOD OF GRADUATE RECRUITMENT

Software and Web Development skills remain the biggest requirement to support business growth with 70% of businesses needing these skills, but with a wider range of specific languages being sought than in previous years.

74

Project Management 65%, and Commercial & Business Support 70%, are also in demand with Infrastructure Support at 48%.

In terms of commercial skills businesses expect to have the greatest demand for sales roles. All aspects of marketing are also in high demand.

29 LIKELIHOOD OF MODERN APPRENTICE EMPLOYMENT 57

SOFTWARE SOFTWARE&& WEB WEBDEVELOPMENT DEVELOPMENT PROJECT MANAGEMENT COMMERCIAL & BUSINESS SUPPORT

RECRUITMENT FROM SCOTLAND VERSUS 20 THE WIDER UK 60

INFRASTRUCTURE SUPPORT SALES & MARKETING

06

03 | REVIEW OF 2015

Businesses reported another good year in 2015, with sales growth and profit increases. figure 1

SALES LEVELS Sales in 2015 continued to grow with 68% of business reporting an increase, with over a quarter (27%) reporting an increase in turnover of 20% or more.

14

2015

17

2014

2011

6

19

9

15

20–50% DECRE ASE

0–10% INCRE ASE

50% + DECRE ASE

17 14

20

20

10–20% DECRE ASE

10–20% INCRE ASE

21 21

17

0–10% DECRE ASE

20–50% INCRE ASE

S TAY THE SAME

18

10

2013 2012

13

50% + INCRE ASE

20

8

3 3 3

15

18

15

6

13

28

23

5

15 22

8 6

5

5

212

5

3 2

8

2 3

35 figure 2

2015 Actuals compared to budget at the beginning of 2015

10 28

Results show 2015 was as good as or better than predicted at the outset of the year. 72% of businesses reported that their actual results were as good or better than budgets set at the start of the year. 28% reported outturn results were less than expected. These figures were similar to the previous year.

27 19 9

SIGNIFIC ANT INCRE ASE SLIGHT INCRE ASE S TAY MUCH THE SAME SLIGHT DECRE ASE SIGNIFIC ANT DECRE ASE

07

REVIEW OF 2015 | 03 12 30 figure 3

Profit margin performance in 2015 compared to 2014 The reported increase in sales for 2015 also contributed to profit as businesses again reported an increase in profit margins with 42% reporting increased margins and 35% stable margins over the results in 2014.

7 35

16

SIGNIFIC ANT INCRE ASE

SLIGHT DECRE ASE

SLIGHT INCRE ASE

SIGNIFIC ANT DECRE ASE

S TAY MUCH THE SAME

figure 4

SIGNIFIC ANT INCRE ASE SLIGHT INCRE ASE S TAY MUCH THE SAME SLIGHT DECRE ASE SIGNIFIC ANT DECRE ASE

Profit margins over five years While the number of companies reporting increased margins rose, there was also a rise in those reporting a significant decrease compared to 2014. However, that year was a historic low following on from the profit margins squeeze in 2013.

The figures for 2015 are between these two extreme years and similar to previous years.

2015

12

30

35

2014

13

29

36

34

2013 2012

9

2011

8

12 31 35

6

16

7 20

31 35

17 21

35

2

17

4 5

08

04 | OUTLOOK FOR 2016 Optimism is high with 70% of businesses having a very optimistic or optimistic view (compared to 87% in 2015) and only 16% having a pessimistic or very pessimistic view. However, with turmoil in many markets, confidence is less buoyant than last year.

70%

16%

14%

OP TIMISM EQUABLE PESSIMISM

09

OUTLOOK FOR 2016 | 04 figure 5

Expected change in sales over the next 12 months Businesses are even more optimistic about expected sales levels for 2016 with 81% of companies predicting an increase and only 14% expecting a decrease.

Unpacked, these figures are somewhat less buoyant than in 2015 but 34% of businesses still expect a significant increase in sales of 20% or more, compared to 40% of businesses in 2015.

50% + INCRE ASE

0–10% DECRE ASE

20–50% INCRE ASE

10–20% DECRE ASE

10–20% INCRE ASE

20–50% DECRE ASE

0–10% INCRE ASE

50% + DECRE ASE

S TAY THE SAME

15 19

2 8

4

0 24

5

“Have a clear defined offering that is easy to understand and easy to buy” PETER PROUD | CORTEX

23

10

05 | INDUSTRY VOICES

“Think big & move fast” Gareth Biggerstaff | Be-IT

“Learn to sell properly.

Too often an underrated skill and under appreciated but essential to grow a business.”

Gavin Lush | DataVita

“Never underestimate the speed of change in the market” Donald Cameron | Logicalware

“Keep a clear view of the focus areas and objectives of the business, don’t get distracted by every opportunity” Alison Mclaughlin | Sopra Steria

“Be bold but prudent and don’t fear failure!”

CALLUM SINCLAIR | DIAPIPER

11

“Encourage innovation within your technology area to benefit your teams and ultimately your business” Sarah Ager | Sumerian

“Spot your top technologists early, nurture them, and provide the environment in which they can shine” Gerry Docherty | Smarter Grid Solutions

“Trust your judgement - it got you to where you are today.

Trust your people - they’ll get you where you want to be tomorrow” Greg Soper | Sales Agility

“Build teams with passion beyond their professional responsibilities” Gary Clark | Cooper Software

INDUSTRY VOICES | 05

12

12 06 | INTERNATIONAL OPPORTUNITIES

Many businesses have an international outlook and either sell overseas or are part of a larger company with an international presence.

48% 44%

47%

figure 6

Export levels

USA & CANADA

Engagement in international markets continues to increase with 67% of businesses reporting they are already exporting, and another 19% planning to do so in the future. This is an increase in the levels from previous years – last year 57% reported that they were exporting with 16% planning to export.

EXPORTING

PLANNING TO

NO PLANS TO

67 57

53

34 27

16

2016

2014

2015

2013

25 14

19 13

17

EUROPE

14%

AFRICA

10%

CENTRAL & SOUTH AMERICA

58

REST OF THE UK

13

INTERNATIONAL OPPORTUNITIES | 0613 “DIVERSIFY INTERNATIONALLY” IAN RICHARDSON | VCODEX

figure 8

Business from different geographies

25% MIDDLE EAST

41% ASIA

10% REST OF THE WORLD

8%

Businesses reported on the percentage bands for each geographical location. An analysis of these estimates show that the biggest market by sales is Scotland, 33%, followed by the rest of the UK, 23%, with 33% of sales from outside the UK. These figures are similar to last year and show that there are significant international sales by all measures.

11

AUSTRALIA & NEW ZEALAND

6 16

13 25

13

2015

33

2014

figure 7

16

Attractive markets for exports When asked to highlight three geographical markets, respondents ranked Rest of the UK (48%), USA & Canada (47%) and Europe (44%) as the most attractive markets for exports.

11

9

24 23

SCOTL AND

EUROPE

ASIA

RES T OF THE UK

AMERIC A

RES T OF THE WORLD

14

07 | INDUSTRY OVERVIEW “Focus on the outcome you’re trying to achieve, not the obstacles preventing it from happening. Clearly define your goals and don’t let short-term hiccups hinder your ability to achieve” Martin Bowman | Lockheed Martin

figure 9

MAIN ACTIVITY OF BUSINESS Development of software solutions and services (28%) and software products (15%) continue to be the most significant activities respondents are engaged in.

15 15

SOFTWARE PRODUCT SOFTWARE SOLUTIONS & SERVICES

28 21

SERVICES TO TECHNOLOGY

14 8

IT BUSINESS CONSULTANCY

10 10

APPLICATION DEVELOPMENT

8 7 4

TELECOMMUNICATIONS

6

eCOMMERCE & WEB DEVELOPMENT

6 5

SYSTEMS INTEGRATION

1 4

INFRASTRUCTURE & NETWORK MANAGEMENT

7 4

DATA & STORAGE MANAGEMENT SOFTWARE TESTING 2015 2014

OTHER

2 2 0 1 5 17

15

INDUSTRY OVERVIEW | 07

figure 10

0%

0 0

HEADQUARTERS LOCATION

HIGHLANDS & ISLANDS ABERDEEN & GRAMPIAN

There is little significant change in survey respondents’ headquarters’ locations, which are spread across the country. The biggest cluster is in Edinburgh & Lothians. Until 2014 Edinburgh and Glasgow were very evenly matched, with about 29% of respondents being based in each city but over the last two years Edinburgh has become the leading Scottish base ahead of the Greater Glasgow area. The only other significant Scottish cluster is in Aberdeen & Grampian with all other locations at a similar level to last year.

FIFE & TAYSIDE FORTH VALLEY

GLASGOW, LANARKSHIRE, RENFREWSHIRE & DUNBARTONSHIRE

2%

22% 1%

AYRSHIRE

2015 figures in l arge print

4%

13 10

3 4

4 4 37 29

24 29

12%

34%

EDINBURGH & LOTHIANS

2 1

2014 2013

6 9

8%

0 1

US HEADQUARTERED

4 1

4%

OTHER

6 10

10%

1%

REST OF THE UK

BORDERS, DUMFRIES & GALLOWAY

EU HEADQUARTERED

2%

1 2

16

07 | INDUSTRY OVERVIEW figure 11

SECTORS BEING SUPPLIED The industry supplies a wide range of sectors and of the top three selected by companies, the public sector (14%), energy & utilities (12%) and financial services (10%) received the most responses.

However, while respondents indicated a likely increase in demand in all sectors, over a third (39%) of those supplying energy & utilities believed that business in this area would decrease and a quarter similarly thought the food and drink sector (25%) would decrease.

“Be agile and customer focused at all times and respond to your customers needs, not your current product / services portfolio�

DAVID STUBLEY | 7 ELEMENTS

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17

INDUSTRY OVERVIEW | 07 figure 12

Multinational s and Very L arge organisations (+1000 employees)

Size of Customer Base

L arge (250–1000 employees) Small to medium-sized (50–250 employees)

Respondents report that multinationals or very large organisations with over 1000 employees, are the main customer base in 42% of cases. This is an increase from 31% in 2015. For the first time individual customers have been specifically included and for 6% of companies they are their main customer base.

Supplying the large and medium-sized firms categories has decreased in relative terms due to the reported shift to the largest companies.

Small firms (LESS THAN 50 employees) Individual s

17 31

24

28 6 16 42 14

22

18

08 | BENCHMARK ONE

SMALLER Companies 1–35 EMPLOYEES figure 13

SMALLER BUSINESSES SUPPLY

Reflections on 2015 2015 was a good year for smaller businesses, with 63% reporting an increase in sales, 42% increasing their profit margins and 72% have an optimistic outlook for 2016.

22%

21%

software products

SERVICES

63 INCREASED SALES 42 PROFIT MARGINS

18%

SERVICES TO TECHNOLOGY

14%

IT BUSINESS CONSULTANCY

72 OPTIMISM figure 14

INTErNATIONAL SALES

81%

OF SMALLER BUSINESSES WERE FORMED IN OR AFTER

2000

Smaller businesses reported an increase in those who sell internationally to 58% with those who plan to export staying stable at 29% leaving only 13% who have no intention to export.

ALREADY EXPORTING

49 29 29

PLANNING TO EXPORT NO PLANS TO EXPORT

13

22

2015 2014

58

19

SMALLER COMPANIES | BENCHMARK ONE | 08

RECRUIT MORE S TAFF S TAY THE SAME DECRE ASE IN PERSONNEL figure 15

PEOPLE & SKILLS 68% of small businesses expect to increase employee levels, fewer than in previous years. This is a considerable reduction from last year’s level of 82%.

Most of these, 54%, expect to employ up to 5 staff.

25% expect staff numbers to stay the same, with only 7% expecting employee levels to decrease.

67% of respondents are likely to recruit graduates and 22% are likely to take on modern apprentices.

figure 16

24 20 19 15 7 4

SALES OUTLOOK FOR 2016 78% of smaller businesses expect their sales to increase over the next 12 months, 7% anticipate they will stay the same, while 15% forecast a decrease in sales. Similarly to last year more of the smaller businesses, 45% predict sales growth in the top two bands compared to the industry average of 34%.

8 3 0 50% + INCRE ASE

0–10% DECRE ASE

20–50% INCRE ASE

10–20% DECRE ASE

10–20% INCRE ASE

20–50% DECRE ASE

0–10% INCRE ASE

50% + DECRE ASE

S TAY THE SAME

78

7

15

20

08 | BENCHMARK ONE | FINANCIAL ENVIRONMENT

SMALLER Companies 1–35 EMPLOYEES

figure 17

Turnover for 94% of smaller businesses was in the region of £0–£5M. However there is a marked contrast with the bulk of businesses either in the lowest (£0–£250K) or highest bands (£1M–£5M).

FOUNDERS C APITAL & RE TAINED PROFITS

FUNDING MODEL

MIX OF BUSINESS ANGEL / BANK / LOAN FUNDING

Funding for nearly three quarters of smaller businesses is generated from founders’ capital and retained profits.

Mainly Venture C apital OTHER

74 10 5

1%

£10M–£15M

35% £1M–£5M

14%

£250K–£500K

11

5%

£5M–£10M

11%

£500K–£1M

34% £0–£250K

figure 18

Subs tantially be t ter

Cash Flow Compared to Last Year

Some what be t ter Lit tle change Some what more difficult Subs tantially more difficult

Smaller businesses reported little change in their cashflow when compared to 2014.

40% reported improvements while just 6% reported substantial difficulties. founders’ capital and retained profits.

21

20

39

14

6

21

SMALLER COMPANIES | SALES | BENCHMARK ONE | 08

figure 19

50% + INCRE ASE

2015 sales levels compared with 2014

20–50% INCRE ASE 10–20% INCRE ASE 0–10% INCRE ASE

In 2015 63% of smaller businesses reported an increase in sales from 2014. The sales levels are slightly down from the previous year with an increase in those reporting sales staying the same.

Those reporting a decrease in sales at 17% is similar to last year.

S TAY THE SAME 0–10% DECRE ASE 10–20% DECRE ASE 20–50% DECRE ASE 50% + DECRE ASE

22

20 16 13

12

0 4

figure 20

ACTUALS COMPARED TO BUDGET In 2015 actuals compared to budget stayed close to the predicted levels for 38% of smaller companies with increases reported by 37% and a decrease by 25%

9

7 18

SLIGHT INCRE ASE S TAY MUCH THE SAME SIGNIFIC ANT DECRE ASE

20 17

SIGNIFIC ANT INCRE ASE

SLIGHT DECRE ASE

4

38

22

09 | BENCHMARK TWO

MEDIUM-SIZED Companies 36–500 EMPLOYEES figure 21

MEDIUM-SIZED BUSINESSES SUPPLY

29% 16% 16% 11% 9%

software SOLUTIONS & SERVICES software products INFRASTRUCTURE & NETWORK MANAGEMENT SERVICES TO TECHNOLOGY APPLICATION DEVELOPMENT

33%

Reflections on 2015 Medium-sized businesses enjoyed an exceptional 2015 reporting better sales and profit figures than either large or small businesses with improved figures on 2014. 82% reported an increase in sales, 47% increased their profit margins and 85% have an optimistic outlook for 2016.

82 INCREASED SALES 47 PROFIT MARGINS 85 OPTIMISM figure 22

INTErNATIONAL SALES Most larger business (83%) reported that they are already selling internationally and only 11% have no intention to export.

OF MEDIUM-SIZED BUSINESSES WERE FORMED IN OR AFTER

ALREADY EXPORTING

2000

PLANNING TO EXPORT NO PLANS TO EXPORT

70

49 18 12

22

29 2015 2014

23

MEDIUM-SIZED COMPANIES | BENCHMARK TWO | 09

RECRUIT MORE S TAFF S TAY THE SAME DECRE ASE IN PERSONNEL figure 23

PEOPLE & SKILLS 85% of medium-sized businesses expect to increase employee levels, slightly down from the 97% in 2015.

Most of these companies, 74%, expect to take on up to 20 additional staff with only 9% expecting employee levels to decrease.

85% of respondents are likely to recruit graduates and 29% are likely to take on modern apprentices.

figure 24

3

SALES OUTLOOK FOR 2016

21 46 21 0 0

91% of medium-sized businesses expect their sales to increase over the next 12 months, with 9% forecasting a decrease in sales. This is slightly down on last year but greater than the industry average of 80%.

6 3 0 50% + INCRE ASE

0–10% DECRE ASE

20–50% INCRE ASE

10–20% DECRE ASE

10–20% INCRE ASE

20–50% DECRE ASE

0–10% INCRE ASE

50% + DECRE ASE

S TAY THE SAME

91

0

9

24

09 | BENCHMARK TWO | FINANCIAL ENVIRONMENT

MEDIUM-SIZED Companies 36–500 EMPLOYEES FOUNDERS C APITAL & RE TAINED PROFITS

All medium-sized businesses have a turnover greater than £1M and 36% have a turnover of £20M or more.

figure 25

MIX OF BUSINESS ANGEL / BANK / LOAN FUNDING

FUNDING MODEL

Mainly Venture C apital UNLIS TED PLC QUOTED COMPANY

Funding for medium-sized businesses is largely generated from founders capital and retained profits (41%) followed by venture capital at 17%.

ALTERNATIVE INVES TMENT (AIM) CROWDFUNDING OTHER

41 14 17 2 12

100%

7 0 7

£1M+

figure 26

Subs tantially be t ter

Cash Flow Compared to Last Year

36% £20M+

Some what be t ter Lit tle change Some what more difficult Subs tantially more difficult

Medium-sized businesses also reported little change in their cashflow when compared to 2014. 27% reported improvements while just 2% reported substantial difficulties.

10

17

46

25

2

25

MEDIUM-SIZED COMPANIES | SALES | BENCHMARK TWO | 09

figure 27

50% + INCRE ASE

2015 sales levels compared with 2014

20–50% INCRE ASE 10–20% INCRE ASE

41

0–10% INCRE ASE S TAY THE SAME 0–10% DECRE ASE

In 2015 82% of medium-sized businesses reported an increase in sales from 2014 with only 9% reporting a decrease in sales.

For medium-sized business the figures are better than last year and much better than the industry as a whole.

10–20% DECRE ASE 20–50% DECRE ASE 50% + DECRE ASE

20

12 9

9

3 3 3

figure 28

ACTUALS COMPARED TO BUDGET In 2015 actuals compared to budget increased for 33% of medium-sized companies with sales on target reported by 29% and a decrease for 38%.

SIGNIFIC ANT INCRE ASE

27 26

6

12

SLIGHT INCRE ASE S TAY MUCH THE SAME SLIGHT DECRE ASE SIGNIFIC ANT DECRE ASE

29

0

26

10 | BENCHMARK THREE

LARGER Companies 501–1000+ EMPLOYEES figure 29

LARGER BUSINESSES SUPPLY

88% OF LARGER BUSINESSES SUPPLY SOFTWARE SOLUTIONS (MAINLY)

Reflections on 2015 Larger businesses reported another good year in 2015. 64% reported an increase in sales and only 18% reported a decrease. 42% reported their actual 2015 performance was better than forecast budget, 36% increased their profit margins. Though only 47% have an optimistic outlook for 2016, 76% expect sales to increase.

64

HOWEVER LARGER COMPANIES ARE ALSO INVLOLVED IN

ALL ASPECTS

INCREASED SALES 36 PROFIT MARGINS

OF THE TECHNOLOGY INDUSTRY

47 OPTIMISM

76% OF LARGER BUSINESSES WERE FORMED BEFORE

1988

figure 30

INTErNATIONAL SALES Most larger business (83%) reported that they are already selling internationally and only 11% have no intention to export.

88 86

ALREADY EXPORTING

WITH ONLY

10%

SINCE

2000

PLANNING TO EXPORT 0 6 UNLIKELY TO EXPORT

6

14

2015 2014

27

LARGER COMPANIES | BENCHMARK THREE | 10

RECRUIT MORE S TAFF S TAY THE SAME DECRE ASE IN PERSONNEL

figure 31

PEOPLE & SKILLS There is a mixed message on employee levels with 20% likely to decrease staff by at least 50 and 15% increasing by staff by at least 50 with an even spread between the two extremes. Of those expecting to decrease staff, over 10% were in the oil and gas sector. Overall 39% of larger business expect to increase employment levels and 43% expect them to decrease.

Large businesses are more likely than other businesses to take on modern apprentices with 50% of respondents reporting they are likely to take them on, though 78% are likely to recruit graduates.

figure 32

7

SALES OUTLOOK FOR 2016

10 14 45 7 7

Larger companies are steady in their outlook with the majority, 45%, predicting a modest increase in sales.

10 0 0 50% + INCRE ASE

0–10% DECRE ASE

20–50% INCRE ASE

10–20% DECRE ASE

10–20% INCRE ASE

20–50% DECRE ASE

0–10% INCRE ASE

50% + DECRE ASE

S TAY THE SAME

76% of larger businesses expect their sales to increase over the next 12 months, whilst 7% anticipate they will stay the same and 17% forecast a decrease in sales.

These figures are slightly down on the figures reported last year.

76

7

17

28

10 | BENCHMARK THREE | FINANCIAL ENVIRONMENT

LARGER Companies 501–1000+ EMPLOYEES FOUNDERS C APITAL & RE TAINED PROFITS

90% of larger businesses have a turnover of £100M or more and 36% have a turnover of £20M or more. 61% are typically funded as an established quoted company.

figure 33

MIX OF BUSINESS ANGEL / BANK / LOAN FUNDING

FUNDING MODEL

Mainly Venture C apital UNLIS TED PLC QUOTED COMPANY

Larger businesses (61%) are typically funded as an established quoted company.

ALTERNATIVE INVES TMENT (AIM) CROWDFUNDING OTHER

5 0 8 8

90%

12

61

0 0 18

£100M+

figure 34

36% £20M+

Subs tantially be t ter

Cash Flow Compared to Last Year

Some what be t ter Lit tle change Some what more difficult Subs tantially more difficult

46% of larger businesses reported that cash flow was more difficult last year when compared to 2014 while only 18% reported an improvement.

20%

ESTABLISHED QUOTED CO.

5

13

36

23

23

29

LARGER COMPANIES | SALES | BENCHMARK THREE | 10

figure 35

2015 sales levels compared with 2014

50% + INCRE ASE 20–50% INCRE ASE 10–20% INCRE ASE

43

0–10% INCRE ASE S TAY THE SAME 0–10% DECRE ASE

Sales in larger businesses are holding steady with 64% reporting an increase in sales from 2014 but 18% reported a decrease in sales. For larger business the detailed figures reveal that the increases were mainly marginal and hence not as good as last year.

9

10–20% DECRE ASE 20–50% DECRE ASE 50% + DECRE ASE

18

12

o 0 figure 36

ACTUALS COMPARED TO BUDGET In 2015 actuals compared to budget increased slightly for 42% of larger companies with the status quo reported by 33% and a decrease by 24%.

SLIGHT INCRE ASE S TAY MUCH THE SAME SLIGHT DECRE ASE SIGNIFIC ANT DECRE ASE

9

33

12

12 42

0 9

30

12 11 | EMPLOYMENT & SKILLS figure 37

50% + INCRE ASE

Change in Employee numbers over the next 12 months

40

20–50% INCRE ASE 10–20% INCRE ASE 0–10% INCRE ASE S TAY THE SAME 0–10% DECRE ASE

66% of respondents stated they intend to increase employee numbers. This is down from the peak level of 83% in 2015, with 15%* of respondents planning to reduce staff numbers. However overall the figures show a net increase in staffing with more companies recruiting at each band than those decreasing staff, underlining the sector’s continuing strength.

10–20% DECRE ASE 20–50% DECRE ASE 50% + DECRE ASE

4

16

19

6

*This statistic includes responses from a number of Oil & Gas companies’ IT departments.

1

2

4

8

figure 38

LOCATION OF TALENT Predictions on the location for new talent show that companies expect 60% of new staff to come from Scotland, 19% the rest of the UK with 21% from either Europe or the rest of the world.

SCOTL AND RES T OF THE UK EUROPE RES T OF THE WORLD

12

60 19 9

31

EMPLOYMENT & SKILLS | 1113 figure 39

DEFINITELY WILL RECRUIT

RECRUITMENT OF GRADUATES Demand for the recruitment of graduates remains strong with 74% of all businesses reporting they are definitely or quite likely to recruit graduates in 2016.

QUITE LIKELY UNLIKELY VERY UNLIKELY

When businesses were asked what level of experience their business needs to aid growth, ‘graduates’ was the most popular response with 67% reporting there was some or a high requirement. This is down slightly on 2015 but the need for graduates from Scottish universities remains a priority.

NOT APPLIC ABLE

44

15

30

4

7

5 24 31

14

26

figure 40

RECRUITMENT OF MODERN APPRENTICES There is less demand for the recruitment of modern apprentices with 29% reporting they are definitely or quite likely to recruit them in 2015. 57% said they were unlikely or very unlikely to recruit modern apprentices. Larger companies are more likely to recruit a modern apprentice.

DEFINITELY WILL RECRUIT QUITE LIKELY UNLIKELY VERY UNLIKELY NOT APPLIC ABLE

32

12 11 | EMPLOYMENT & SKILLS

“Recruit the very best people you can and then empower them to help in all aspects of the business”

figure 41

MOST IN DEMAND SKILLSETS

PETER MOWFORTH | INDEZ

Software and web development remain the most in demand skills with 70% of respondents indicating they will have a requirement for people with software and web development experience in 2016.

There is also strong demand for commercial and business support skills, required by 69% of businesses. The key skill here is sales with two thirds of all respondents highlighting demand, and 23% seeking a range of marketing expertise. Project management is a close third with 65% of respondents seeking these skills.

8 30 SOFTWARE & WEB DEVELOPMENT

33

COMMERCIAL & BUSINESS SUPPORT

55

For smaller businesses commercial and business support at 75% is the most in demand skillset with software and web development second at 68%, and both project management and executive management skills at 54%.

9

53

NO REQUIREMENT

14

31

Medium-sized businesses report very strong demand for software & web development skills (88%) followed by project management skills (77%) and commercial and business support skills (65%).

SOME REQUIREMENT

PROJECT MANAGEMENT

57

Amongst larger companies the greatest demand is for project management skills (75%) followed by software & web development (66%) and infrastructure support & management (60%) and commercial & business support skills (62%).

HIGH REQUIREMENT

35

37

INFRASTRUCTURE SUPPORT & MANAGEMENT 38

52

6

EXECUTIVE MANAGEMENT

42

33

WHAT PEOPLE SAY | 1213

TECHNICAL SKILLS Breaking down the technical skills requirements software developers and web designers, both front and back-end, continue to be the key roles mentioned, but there is increasing specific mention of mobile, security, and data analysis and data management skills.

As regards technical skills there is a wider range of specific languages being sought than in previous years ranging from staples such as .net, Java and c# to python, JavaScript and SharePoint. There is strong demand for java and .net skills, and increasing demand, compared to previous years, for JavaScript/Angular, iOS and android expertise.

COMMERCIAL SKILLS Businesses report that the most in demand commercial skill is sales (65%). All aspects of marketing (including social media and digital marketing) is also in high demand (23%) along with Business and Project management skills (19%).

HOW DO YOU RANK US? When businesses were asked to rank ScotlandIS priorities, market trend information received the highest number of top rankings. However, networking events received the highest mark overall, with Special Interest Groups/technical meet ups also being seen as important.

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12 13 | CONCLUDING REMARKS

GENERAL OVERVIEW Results from this survey are positive and 2016 looks set to be another good year for the technology industry as 81% of businesses expect an increase in sales over the next 12 months. This level of positivity is translated into a forecast increase in employee numbers. 66% expect to increase the number of employees they recruit over the next 12 months and of these 74% likely to recruit graduates.

Businesses are again reporting barriers to recruiting and retaining staff as the main impact on their business. Also mentioned were concerns for the year ahead including the downturn in oil prices and the lack of stability in the political sphere, with elections, the EU referendum and legislative changes.

ADVICE FROM FELLOW BUSINESSES To conclude we asked respondents to give advice to fellow members.

Popular themes included:

35

ADVICE FROM FELLOW BUSINESSES | 1413

NETWORKS “Act in concert with others, work collaboratively as a sector.”

“Develop a healthy network of supporters, people with energy and positive attitudes and reach out to keep yourself going.”

“Talk to those who have already been there.”

TAKE RISKS “Be bold & embrace the more agile way our industry wants to operate.”

“Move fast and take risks, technology is changing quicker than ever.”

“Don’t be afraid to experiment and try out new things.”

SKILLS “Use a mix of graduates, experience and apprenticeships – spend quality time recruiting.”

“Invest in training – stay ahead of the game.”

FOCUS “Work hard and smart, don’t chase everything but focus on areas where you can make a difference and deliver real value.”

“Don’t be frightened to specialise.”

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