Interview with Jeremy Roche - CEO CODA plc

12th March 2007

In a rapidly consolidating marketplace CODA plc, an AIM listed company, stands out as a beacon of stability. The key to its success has been the strength of it international financial applications, its track record in developing a loyal customer base through organic growth and its ability to create innovative solutions focussed on the finance function. These traits combined with well timed acquisitions and measured expansion into other geographies has positioned CODA very well to take advantage of the rapidly changing dynamics of the marketplace. For example, in recent weeks CODA has made headlines by targeting users of SunSystems, the package developed by Systems Union Group, a business bought by the very acquisitive Infor group in 2006.


Jeremy Roche - CEO CODABut Jeremy Roche believes that the recent frenzy of acquisitions is fizzling out. "The quick acquisitions have been done and people will be more selective about what they buy," he says.

"What is disappointing about the recent deals is that not enough consideration has been given to customer needs and acquirers such as Infor have been silent for too long. It may have suited their purposes but I do not believe this is good for customers. They may have as many as one hundred different products – how do you make sense of that? In my opinion Oracle did a better job and has been fairly clear about product road maps, project Fusion and whether they will maintain support for each of their products," adds Roche.

One consequence of the consolidating market is that the number of software houses competing for the same business is reducing. "Systems Union was really the last British specialist financials software supplier with a global presence, so it is a shame to see it swallowed up," says Roche, whose company also benefits from Oracle's acquisition of JD Edwards and PeopleSoft. "When Oracle is invited to bid for a new contract they can only respond once, whereas in the past we faced competition from all three legacy companies," adds Roche.

On the downside the uncertainty created by all of the recent acquisitions is having a dampening effect. "In some cases people are clearly holding off making decisions," comments Roche.

In theory, as a public company, CODA could itself become an acquisition target but Roche dismisses the likelihood of this happening. "For a start our valuation is not distressed and we have demonstrated good profits and revenue growth. Our de-merger from CODASciSys plc unlocked value previously retained in the business which we returned to shareholders. As a result that value isn't there for a consolidator," he says.

"Furthermore CODA's shares are tightly held and unlike Systems Union whom let it be known that they were up for sale, we are definitely not up for sale," he adds.

Besides, it is the rapidly expanding global economy that excites Roche. "Eastern Europe is growing very quickly and of course there are new economies joining the Eurozone that need international accounting software such as ours that is 'localised' for Eastern Europe ."

"We are also seeing opportunities because Western European companies, based in say Germany are expanding into Hungary and other regions and need to move from domestic software to an international package. Similarly, we are seeing companies in the old Eastern bloc expanding beyond their domestic borders, a pattern repeated by Malaysian companies growing into Thailand , China and Vietnam . All of these market dynamics suit us very well," says Roche.

However, one of the factors holding back the tide of progress is the skills shortage in the business software market. "We expected it to be easier to hire skilled resources in Eastern Europe but there are lots of international companies basing their operations in, for example, Estonia and mopping up all of the available resources. The skills shortage is not just confined to the UK ," says Roche.

Unlike some competitors CODA is not making acquisitions for their own sake and Roche is not keen to step outside of CODA's comfort zone. "There is still plenty of scope for expansion in the finance function, adding capability that meets customer needs and building on our core skills in financials, compliance, and performance management."

But sticking to core competencies is not at the expense of innovation. CODA's next major release of financials, codenamed "Neon" promises to be one of its most exciting releases yet. Due out later this year, it promises to greatly expand CODA's offerings in 'expense management' and the 'procure to pay' cycle. "We carried out a lot of research with our customers looking at a variety of procurement processes but found that the majority of tasks were handled outside of the system in manual workarounds and informal processes. Project Neon, ties these elements together into a streamlined approach using email and workflow from within a familiar Microsoft Office environment."

Indeed, CODA's efforts mirror the direction that Microsoft is taking in relation to personal productivity – the "people ready" business. Roche acknowledges the increasingly important role that Microsoft plays is shaping the direction of financial systems. "Microsoft can make investments in research and development that other companies simply cannot afford to make because of their size. The challenge for Microsoft partners is separating the really strategic moves from the rest because they are so big and doing so much. To this end our partnership with them is critical to identifying and confirming the right technology decisions."

"We leverage extensively the Microsoft technology stack in our solutions which means that we can take product to market more quickly and that when we develop applications we know they are going to fit in with the Desktop and the way that users expect applications to work. This undoubtedly makes the solutions more compelling but in the final analysis it is CODA's creativity with the tools, market knowledge and experience that sets us apart."

"We also need to recognise that our solutions have to operate with a number of other platforms. It's a significant investment but we have to keep the 'back-end' of our solutions independent. This might include working with open source solutions as well. There are some very good open source applications available from strong development communities. Developers shouldn't be scared of open source although it isn't always the best approach. For example, sometimes open-source can take twice as long to integrate as an in-house solution."

With the market shake out in full swing, CODA is going through a 'purple patch'. There is a new energy and confidence about the organisation as it expands in Europe and prepares to launch more innovative products for the finance function. But it remains well grounded and focussed. "We see ourselves as specialists but strive to maintain a personal relationship with customers. We want to preserve this as we grow and not create hierarchies in the business. Most of our personnel are customer facing. It reminds them of who pays the bills," quips Roche!