Ever wonder what your CIO or head of I.T. does at the office? For those that operate outside the discipline, it’s often a mystery. Imagine the frustration amongst IT figureheads of having to explain to the CEO/CFO how the company needs to fork over boat loads of company profits to procure some intangible thing like cloud/server space. For this reason, the concept of ‘Technology Business Management’ (TBM) has come about as a way for CIOs and CEO/CFO to find common ground
The discipline maximizes benefit arising from I.T. expenditure by increasing transparency and mapping the net benefit that arises from additional spend. This allows for the CEO/CFOs to get a better understanding of how much the I.T. spend attributes to net profits and where additional focus needs to be made.
As Information Technology as a discipline has matured over the years, many businesses are becoming more conscious of how exactly Information Technology is affecting the business on a day to day basis as well as the associated costs. This results in an increase in demand for software solutions catering to TBM and there is one company that recognized this as early as 2007, enter Apptio.
Apptio was founded in 2007 and is one of the pioneers in the TBM space having founded the non-profit organization Technology Business Management Council. September 23rd, the company’s IPO will see 6 million shares sold to the public at a price range between $13-$15. Since 2013, the company has seen steep growth in revenue, having jumped from $73m in 2013 to $129m in 2015. While still unprofitable, the idea is to ramp up scale allowing margins to increase thus resulting in a profit. As always, we here at TrendVesting are interested in the profit potential for investor portfolios part of which is dependent on Apptio’s ability to turn a profit and part to do with brand recognition. We’ll take to Google to identify what the trend looks like and whether it’s worth investing in.
With revenues coming primarily from the domestic marketplace, we isolated for search interest in the United States to identify if brand recognition is growing or if there are any signs of topping out.
We note a spike in searches in August 2016 which can be directly attributable to the company’s IPO. Overall, search interest for the term ‘Apptio’ has been on a steady incline since 2007 suggesting brand recognition is improving, however there are a number of dark spots that would suggest passing on the Apptio IPO:
- Negative Shareholder Equity of approximately $151m
- Net losses increasing as revenues continue to grow.
- Revenue growth rate decreased materially since 2013.
- Items such as Total Cost of Revenue and Total Expenses grow at a rate equal to or greater than revenue growth.
While our research here primarily surrounds brand recognition as depicted through Google Trends, we acknowledge that making an investment decision solely on this information would not be prudent. Any investment should be supported by sound economic fundamentals which in the case of Apptio, we believe misses the mark. As promising as the trend looks, this will be an IPO that we pass up on.