Goals and strategies
Vitec has a growth-oriented strategy and continuously seeks additional acquisitions . The historical growth rate has been approximately 25 % per year on average. The Board of directors has set a target to achieve an operating margin of 15 % and continue to work with a focus on continuous growth.
Narrow niches - industry-specific software
Vitec's strategy is to operate in narrow and specialized software niches where we can offer industry-specific software to meet customer needs more efficiently than general business solutions. The industries in selected niches will have significant commercial potential. In our niches, we strive to achieve strong market positions. In this way, we create high entry barriers for other interested companies who may wish to enter the same market.
Strong market positions
In many of our chosen niches, we have started with having a leading market position in Sweden. In the she selected segments this gives us significant scale advantages over smaller competitors. In a few niches , we also have a strong position in a Nordic perspective, while sales outside the Nordic region gradually has been extended.
Business model with a high proportion of recurring revenue
Our business model is largely based on recurring revenue contracts . The earlier model for software companies was to a greater extent based on license sales of new software. This is now often replaced by contractual relationships in which we continuously offer both software as well as operating environments to new customers. The new business model , SaaS (Software as a Service) makes it cheaper and easier for the customer. SaaS is characterized by low investment costs and the costs of development, operation , maintenance, upgrades and support is included in the customer agreement. The service is provided over the internet and the customer only pays for the time and to the extent that the software was used. For Vitec this provides a stable and growing revenue because most customers continuously renew their contracts. The change is gradual and is facilitated by the Internet is becoming more accessible and cost effective. Today, the repetitive contract revenues about 70 % of Vitec's total revenue volume . A major advantage of our business model is that it provides greater transparency about future revenues and increased predictability and lower risk in forecasting the future.
High entry barriers
Our featured business niches are characterized by a very high degree of specialization. This means that we as the supplier is required to provide competent professional services, software applications that are developed for the specific needs of these customers. This combination of high standards of specialization , along with the market segments is not considered large enough by the dominant providers of general business, make it high barriers to entry for potential competitors who wish to enter the Vitec business niches.
Growth strategy with acquisitions
Vitec has a growth strategy where growth will be organic but also through acquisitions. Based on a solid understanding of the development and sale of software to identify and realize we profitability potential acquisition candidates.
The acquisitions are today conducted in The Nordic countries and in the niches where we are already active, but can also occur in new niches even if they are usually required to have a sufficient size. We are also looking for acquisition outside Sweden, where we have identified that our main niches exhibit a similar provider structure as in Sweden. Thanks to carefully selected acquisition targets with identified potential profitability, the return on equity has not been lower than 15 % in any year since 2003. Of the average growth rate of 25 % approx. 15 % has been coming from acquisitions.