Survivor of tech bubble and the crash keeps ahead in the cloud

ELEVEN years isn’t remarkably long in corporate reckoning, but in the context of Scottish technology companies, any that survive this duration as a quoted firm have to be regarded as downright venerable.

Such is the story of iomart, whose founder and chief executive Angus MacSween says he is at long last beginning to see the fruits of what has been a far lengthier labour than he ever anticipated. Having endured market crashes, investor apathy and two major business overhauls, the AIM-listed company is now generating the solid and predictable revenues that have pushed its market capitalisation to roughly £97 million.

“I am in year 11 of a three-year plan,” MacSween, 54, says with a wry grin. “The original plan had been to build a £100m company and then get out.”

Though finally within touching distance of this goal, the Gaelic-speaker says he is in no rush to exit. There are acquisitions to be made and organic growth for the taking in the highly-prized market for cloud computing services, the territory where iomart staked its claim during its last reincarnation at the beginning of 2007.

The Glasgow-headquartered company employs more than 200 people operating some 10,000 servers across the UK, with a further small scattering in the United States and the Far East. These provide critical hosting and cloud services such as content management, data storage, e-mail, and disaster recovery to clients including BT, London School of Economics, Stagecoach, Learndirect and Shine TV.

Demand for these services is rising as companies increasingly move large chunks of their IT infrastructure off-site, a trend that saw iomart’s revenues jump by more than one-third during the year to 31 March. Profits during this period soared by more than 600 per cent to £2.8m.

Those figures beat expectations and prompted upgrades on iomart’s stock, which in turn helped the firm secure the title of Scottish Digital IT Company of the Year 2011. “It is like anything, I suppose – when times are good, you enjoy it,” MacSween says as he stretches comfortably in his office at the West of Scotland Science Park. “We are going through a good patch right now.”

The trade winds have not always been so favourable. On leaving the Royal Navy after a five-year commission, MacSween spent 15 years in the telecoms industry before founding iomart in 1998 as a licensed provider of ISP services. The name is an anglicisation of the Gaelic word for enterprise, homage to MacSween’s birthplace of Stornoway, on Lewis.

Riding high on the technology boom at the turn of the millennium, shares in iomart began trading in London on 19 April, 2000. Seven days later, the tech-laden Nasdaq market in the US began the slide that shattered the global dotcom bubble.

“Our share price fell from 90p to 3p in a space of about three months,” MacSween recalls. “Everyone was disillusioned, and as a company we were pretty much ignored for about three or four years after that.”

What attention the fledgling firm did receive was not welcome. As the share price languished, fund managers began pressing for liquidation, which would release the cash that was worth substantially more than iomart’s market capitalisation.

MacSween, who still owns 20 per cent of the firm, resisted these overtures and continued reshaping iomart as the internet evolved. What began as a straightforward telco providing broadband through its brand Madasafish became a mini-collective of hosting, business directory and similar services. However, it became apparent a different tack was required.

“The iomart we have here today started life in late 2006, early 2007, when we decided we needed to focus on one thing and do it well,” MacSween says.

The company sold its Ufindus service to BT for £20m, allowing it in turn to fund the £9m acquisition of RapidSwitch, with data centres in Glasgow, London, Nottingham and Leicester. A fifth centre was opened in Maidenhead in 2009, all providing what MacSween simply describes as “uptime and peace of mind to our customers”.

“There is no magic to the cloud, it is just another evolving term for how you deliver services,” he says.

Though dismissive of the hype, MacSween is bullish on the prospects for cloud computing. Just as no-one would dream of hiring their own postman to deliver a letter, companies no longer see the sense in maintaining all of their computing needs in stand-alone, on-site premises. This has driven a series of acquisitions, including the November 2010 purchase of Titan Internet of Essex, followed by the £1.25m deal for Liverpool domain name and hosting company Switch Media. The company’s newest division, Westcoastcloud, specialises in e-mail, storage and security services for smaller businesses.

With no debt, cash resources of about £5m and banking facilities of £10m minimum, iomart will continue on the acquisition trail. MacSween says iomart is continually reviewing takeover targets.

“Like I said before, this trend is unstoppable now, and it is only in its infancy,” he says.