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A New Wave of Tech Acquisitions

As the digital economy blurs the boundaries between the technology sector and other sectors, deal-making in the global tech industry is back with a bang and Malta is no exception.

There is a clear appetite for mergers and acquisitions in Malta’s information, communication and technology (ICT) sector. In recent years, the industry has seen both tech and non-tech and global and local companies buying Malta-founded software specialists and industry experts believe this trend will continue, along with growing demand for outsourced software solutions. Malta’s ICT firms realised early on that growth can be achieved by specialisation and moved away from generalised product and service portfolios. Many of them offer specific solutions and tailor-made products and have become market leaders in their respective niches. Big data and high-tech applications today influence almost all economic sectors. While companies involved in fintech and biotech are the more prominent examples of this trend, other sectors are also transitioning to new software-based tools to analyse data and improve operational performance such as healthcare, manufacturing and even agriculture. In this climate, Malta is keen to capitalise on its rich technology ecosystem and is reaching out to global tech innovators. The island’s small size and low costs make it an ideal start-up location – a place to form ideas; programme and design.

 

"We believe in an ICT and data driven future and consider data as the key fundamental layer on which the success of the digital economy depends. That’s why we are working on a national data strategy, a holistic plan for the management of data as an enterprise asset."

Silvio Schembri, Parliamentary Secretary for Financial Services, Digital Economy and Innovation

 

Kick-starting an Industry

Government spending helped spur the initial growth of Malta’s IT sector in the 1990s when the island understood that ICT was crucial to an innovative, diversified economy. ICT was seen both as an enabler in all economic sectors and as an economic pillar in itself. The island’s government at that time became a heavy consumer of ICT products and services and developed an ambitious eGovernment strategy that propelled IT spending across various government departments. Today, the country is a leader in Europe with 100% of government services being available online. The fact that Malta’s government outsourced many of its needs to local companies accelerated the development of the ICT industry as it gave the sector the critical mass to grow. The deployment of state of- the-art telecoms infrastructure has engendered further confidence and encouraged private companies to compete in new markets and attract new business.

 

"Malta’s main assets are the continuous ICT investments in infrastructure and training which are supported by the government’s strategic economic policies, an English-speaking and skilled workforce as well as the country’s proximity to Central and Western Europe. Additionally, a variety of rapidly developing service industries allow vertical specialisation in areas such as finance, iGaming and other IT-enabled services industries."

Savas Manyasli, Founder and Solution Architect of DAIS Software Limited


From iGaming to Fintech

The first companies to take advantage of what Malta offers, such as fiscal benefits, a strategic location in the centre of the Mediterranean and proximity to continental Europe, were iGaming and eCommerce companies. The sector has expanded considerably beyond its humble beginnings, now contributing some 10% to GDP, employing around 10,000 people and boasting a vibrant and dynamic software development industry. Today, several hundred ICT companies operate in Malta. The majority of these are micro enterprises, but many high-profile names have also been attracted, including HP, Microsoft and Cisco. On the back of its thriving International Finance Centre, Malta has also positioned itself as a safe space for fintech. There are already fintech companies based in Malta tackling regulatory and compliance issues, platform and API-driven propositions in areas such as payments and risk management. The island has set out to emulate the success of other globally recognised ICT hubs. Often referred to as a ‘Mediterranean Silicon Valley’, Malta is building up a reputation as a paradise for emerging tech firms, coders and programmers. Nor is it shy to dub itself the Dubai of the Mediterranean, and the construction of SmartCity Malta, an IT and media city developed on the Dubai model, is expected to help drive a very forward-thinking IT business class.

 

"Due to limitations in the local market, IT companies need to internationalise to grow beyond a certain level. We believe that the best opportunity for success internationally is the development of software products aimed at niche markets, which one then takes globally."

John De Giorgio, CEO of Shireburn Software Limited


Sector Specialists

Malta has become one of Europe’s favoured destinations for foreign direct investment within the ICT industry. The island has attracted not only the large global brands, but also smaller, more specialised software developers from the UK, Sweden and Germany to name but a few. Malta’s homegrown ICT companies have also registered notable success. While many started off as service companies, over the past decade they have specialised, diversified and in many cases won contracts abroad. For instance, software developer Megabyte Limited has secured prestigious deals to supply major international airlines with its ARPS route profitability software. Shireburn Software has developed solutions that enable airports and shopping malls to manage and increase concession-based revenue and has won contracts the world over, while ICT company Computime serves international clients mainly from the oil and gas sector and the hospitality industry, and has been involved in infrastructure projects in Libya. Software developer GFI is another Maltese success story. Founded in 1992, the company was acquired by an international consortium and today has offices worldwide, but its headquarters are still in Malta. RS2, today a global provider of card payment solutions and IT consultancy, also operates from Malta besides having offices in many other locations around the world. The company has also invested in offices on Gozo, Malta’s sister island.

Mergers & Acquisitions

M&A activity has been relatively high in Malta’s tech sector. UK company 6PM, a leader in health solutions with headquarters in Malta, acquired Compunet, while the Alert Group, an ICT services company, bought Enterprise Solutions, an IT consultancy and solutions provider specialising in business and commerce systems. Local firm 2X was acquired by international software company Parallels, but the two most notable transactions involved KPMG and Deloitte. Deloitte acquired the Alert Group, while KPMG purchased Crimsonwing, making it the largest professional services firm in Malta.

At the same time, opportunities are opening up to young people with high-tech skills as Malta is positioning itself as a hub for research and development in the IT sector. The island has partnered with Microsoft to create the Microsoft Innovation Centre which places Malta at the forefront of new technologies, such as cloud computing, and provides facilities that help tech start-ups to develop their products and overcome initial hurdles to commercialising ideas. Given the island’s strong presence in areas such as eCommerce and iGaming, many industry professionals believe that more innovative ideas can arise from collaborations and that Malta could become a centre for app development in the near future, attracting, in particular, early-stage companies.

 

"Malta has a very strong IT culture, however shortage of skilled IT people remains a challenge. The authorities are investing more in order to attract more students to the IT sector. In this regard, Microsoft has been one of the biggest partners to Malta’s Government in building a robust ecosystem that encourages more new IT-oriented companies. Microsoft looks at Malta as a country that has embraced technology and made it its driver for economic growth, stability and 21st century education."

Panayiotis Ioannou, Country Manager of Microsoft Malta


Talent Development

Another notable trend is being seen in the outsourcing of IT services. For instance, manufacturing companies seem to favour contracting external providers in Malta and abroad for their ever-growing technology needs. One reason for this is a shortage of software developers and programmers on the Maltese islands. While Malta’s diverse ICT workforce has strongly supported the growth of this industry, the labour supply has not grown as fast as the many industries today relying on tech talent. However, specialist knowledge can easily be sourced from overseas. In addition, degree courses at the University of Malta and at the ICT Institute of the Malta College of Arts & Technology (MCAST) have been expanded considerably in recent years. A number of vendor-driven certifications can also be obtained locally: Microsoft, Oracle and Cisco have all set up IT academies on the island. Salaries are lower than in other Western European IT centres such as the UK or the Scandinavian countries, thus enabling small and medium-sized companies to develop new products at affordable HR costs.

Malta’s strong telecoms industry has also played a key role in the development of the industry. International connectivity is guaranteed by three operators providing international gateway services via fibre-optic cables to mainland Europe. These services provide considerable security to economic sectors, such as iGaming and eCommerce, that rely heavily on 24-hour connections. The island’s telecoms operators offer high internet speeds and are developing next-generation networks. The technology park SmartCity Malta promises to further enhance the supportive environment for IT companies. It is funded by Dubai Holding’s Tecom Investments, which initially invested US$300 million in the project in 2009. The first building in this self-sustained township was inaugurated in October 2010, with completion scheduled for 2021.

 

"Internationalising the IT sector has and will always be the main challenge. Malta’s insular nature and small internal market remain limiting factors for both the development of the critical mass needed to internationalise, as well as the physical boundary of being away from target markets. To further support the IT sectors’ opportunity growth, we need to create a greater cohesive national plan to increase our resource pool coming out of University, MCAST and other key institutions."

Peter Bugeja, General Manager of PTL International Ltd A Testing Ground


Malta’s small size also makes it the ideal test environment for new technologies and ventures in need of a flying start. The island is promoting itself as a base for innovative entrepreneurs, technology- based companies at a start-up stage and firms seeking headquarters for their regional operations. The public and private sectors are showing great interest in collaborating with new tech start-ups on pilot projects and the testing of software, hardware and applications, as well as the nationwide deployment of new technologies. Chinese telecoms giant Huawei has already recognised Malta’s credentials and announced plans to open a joint innovation centre with the University of Malta, as well as to test mobile technology on the island. Companies can also develop and test new products and services on the diverse, yet concentrated local market before exporting their services and solutions to Europe or North Africa. Concurrently, Malta’s close proximity to North Africa and its safe political environment make it a prime location for the establishment of cloud data centres which could service customers in the surrounding countries.

Start -up Attraction

Malta’s IT industry is a versatile and mature cluster that is experiencing an exciting period of consolidation, expansion and recognition. But the island’s leaders recognise that they will need to encourage more entrepreneurs if they are to provide the population with high-quality IT jobs. Investments in early-stage companies will prove invaluable as those organisations expand and grow, creating jobs and contributing to the economy. With Malta’s government as a partner, local, regional and international companies can be assured of a long-term commitment to the industry. A highly developed ICT infrastructure and affordable business costs within a Mediterranean island setting differentiate Malta from other locations competing to attract new IT talent and will help the country to develop a burgeoning start-up scene.

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