Elevating digital technology within and outside of Storskogen

The Digital Services vertical includes nine business units that can be broadly divided into consulting companies and product-based companies in various digital niches – all driven and impacted by increasing digitalisation and automation. As one of the newer verticals within the Services business area it is the smallest. However, it has experienced solid growth, with sales increasing by 11 percent to SEK 715 million in 2023 compared to the previous year. Profitability and demand are quite solid, despite fluctuations in the overall economy, with an average EBITA margin above 20 percent.

Typically, the vertical’s customers are large corporations – some with a global footprint such as Electrolux, a client of the business unit Bombayworks, and Swedish Match, working with IVEO. However, there are indications that small and medium-sized businesses have the potential to be an increasingly important group of partners in the future.

Small and medium-sized businesses lagging in digitalisation
During the global pandemic, the need for small and medium-sized businesses to adapt digital technologies was highlighted in a multitude of areas, such as a need to improve market reach – domestic and international. According to a fact sheet by the European Parliament, small and medium-sized business in the European Union mainly operate on a national level, indicating expansion opportunities through cross-border trading mediated by digitalisation.

Riding on strong long-term trends
Beyond market reach and internationalisation, the integration of digital technologies has the potential to transform business models, enhance operational efficiency and productivity, and improve data-driven decision making, customer experience and innovation. These are all areas where the business units in the vertical are active.

Business model transformation
The business unit IDATA serves as an example of successful digital transformation. Historically, the company has been active in the distribution of physical mail. With the support of Storskogen and through new management, digital send-outs now account for more than 50 percent of total volume, thus enabling clients to adopt a more paper-free and environmentally friendly approach. To support further transformation IDATA has implemented a full scrum team as there is an increased focus on digital products going forward.

Operational efficiency and productivity
Digital tools and platforms can streamline operations, reduce manual labour and minimise errors, thus boosting productivity. Netred and Agio are business units that exemplify this by offering tailored solutions and adaptions of standard platforms including enterprise resource planning, ERP and system customisation for industry as well as public sector. Buildercom is another example, providing software-as-a-service (SaaS) solutions, helping property owners to manage properties more efficiently.

Market reach and customer engagement
Companies like IVEO, Bombayworks and Xodbox, with their expertise in digital marketing and e-commerce platforms, help businesses enhance their online presence, attract customers from different regions, and provide seamless shopping experiences.

Data-driven decision making
The business unit Viametrics serves as an example of a business unit riding on the data driven trend. As the Nordic leader in automated people-counting solutions, Viametrics is becoming a vital partner for physical retailers measuring consumer presence in shops through its platform and local sensors. The solutions can also measure the use of office space – a trend that has accelerate as companies have adopted a more flexible use of their office space post-pandemic. Another specialist in data management is Swedwise, helping companies to process and handle their data in a more efficient way through digitalisation and automation.

Autonomous businesses with potential to achieve synergies
The Digital Services vertical also has the potential to accelerate digitalisation across all Storskogen business areas. Both IVEO and Bombayworks have, for instance, provided their services in digital marketing and have implemented several e-commerce solutions for other Storskogen companies. There are also instances where e-commerce solutions designed for one company have been leveraged and utilised by similar companies within the Group, and there is potential for more such opportunities in the future. Another example of a business unit that has supplied its services to other Storskogen businesses is Agio, which has provided digital due diligence of solutions to be implemented in the business group.

Storskogen very much believes in preserving the autonomy of each company to enable them to develop their businesses independently. However, the examples above illustrate potential sales synergies within the Group which are likely to grow as the portfolio expands.

Outlook
The vertical reported a solid performance in 2023 and the companies have navigated well under tough macro conditions, and for the near term I believe that the vertical will continue to do well. The long-term performance of the vertical will continue to ride on the trend of demand for digital services. Finally, I look forward to continuing to support the business units in Digital Services to ensure their long-term growth and competitiveness, as well as finding new ways to collaborate with the wider Storskogen family.

Oskar Bjursten,
Investment Director
Services

Oskar Bjursten is Investment Director within the Services business area. He has previously held positions as CEO for companies such as Payson and Zimpler and has had senior positions and roles in UC AB, DIBS, Booli and Nasdaq OMX.