2006 Annual Report
Contents
Invitation to the Annual General Meeting of Shareholders
Fiscal Year 2006
and Financial Report Dates 1
President’s Review 2
Business Concept, Targets,
and Strategies 4
Markets and Clients 6
Operations 8
Assignments 11
Employees and Structural Capital 14
The Know IT Share 16
Financial Review 18
Board of Directors 19
Senior Management 20
Corporate Governance 21
Directors’ Report 23
Consolidated Income Statement 25 Consolidated Balance Sheet 26 Consolidated Cash Flow Analysis 28 Statement of Changes in Equity
- Group 29
Income Statement -
Parent Company 30
Balance Sheet - Parent Company 31 Cash Flow Analysis
- Parent Company 33
Statement of Changes in Equity
- Parent Company 34
Supplementary Disclosures
and Notes 35
Proposal for Distribution
of Earnings 49
Auditors’ Report 50
Glossary 51
Definitions 52
Addresses
Front cover: Markus Nilsson and Anna Nauclér , Know IT Innograte AB, Stockholm. Back cover: Lars Boström and Henrik Andersson, Know IT Innograte AB, Stockholm.
Date
The Annual General Meeting of shareholders will be held at 4 p.m. on Tuesday, April 25, 2007. Registration for the meeting starts at 3:30 p.m.
Location
Know IT AB’s office, Klarabergsgatan 60, Stockholm
Participation
To be entitled to vote at the annual meeting, shareholders must - be entered in the register of shareholders
- have notified the company
Registration in the Register of Shareholders
Shareholders must be registered in the register of shareholders maintained by the Swedish Securities Register Center (VPC) no later than Thursday, April 19, 2007. Shareholders whose shares are nominee registered must temporarily re-register their shares in their own names with VPC. Sharehold- ers who want to re-register must inform the nominee in good time prior to April 19, 2007.
Notification
Shareholders must notify Know IT that they intend to participate at the meeting by 4 p.m. on Monday, April 23, 2007, at the following address:
Know IT AB (publ)
Box 3383, 103 68 Stockholm or by telephone +46 (0)8-700 66 00 or e-mail: info@knowit.se.
Notice of participation must include the shareholder’s name, address, personal identification number, and number of shares registered.
Representatives
Shareholders represented by proxies shall issue an original dated power of attorney for the proxy. If the Power of Attorney is issued by a legal entity, then a certified copy of the legal entity’s certificate of registration must also be enclosed.
The Power of Attorney and certificate of registration must be sent by letter, in good time before the meeting, to the address listed above.
Nomination Committee
In accordance with the resolution at the annual shareholders’ meeting on April 25, 2006, Know IT shall have a Nomination Committee consisting of one representative for each of the three largest shareholders.
The nomination committee for the 2007 Annual General Meeting consists of Stellan Atterkvist, orin Invest, Gunnar Lindberg, LF Småbolagsfonden, and Mats olsson, Retrib S.A.R.L. Mats olsson is chairman of the nomination committee.
Prior to the 2007 Annual General Meeting the Nomination Committee is to propose the number of Board members to be elected by the Annual General Meeting; directors’ fees; remuneration for committee work; Board composition; Chairman of the Board; Chairman of the Annual General Meeting;
and selection of auditors and auditors’ fees (if applicable).
Shareholders who wish to submit proposals to the nomination committee may do so by e-mail to valberedning@knowit.se.
Johan Schmidt
Fredrik Abrahamsson
Know IT Göteborg AB
The best year in Know IT’s history
l net sales jumped 42 percent to SEK 760.8m (535.2).
l operating profit before amortization of intangible assets was SEK 68.9m (45.6).
l operating profit after taxes was SEK 53.4m (32.2); taxes were SEK 22.1m (14.2).
l Earnings per share were SEK 4.23 (2.73); diluted SEK 4.19 (2.72).
l Current operations generated a positive cash flow of SEK 33.2m (37.5).
l number of employees, converted to full-time equivalents, increased by 18 percent to 702 (593).
l As at December 31, 2006 all of Know IT AB’s loss carryforwards were fully utilized.
l In January Know IT strengthened its position in simulation and monitoring of production processes through the acquisition of Arosys in Västerås with six employees.
l Know IT gained a foothold in Småland through the acquisition of Epireal AB and its five employees in Växjö.
l In June employees subscribed to 521,000 options, including 151,000 subscribed by subsidiaries and intended for sale to new employees, in the option program approved by the Annual General Meeting. The price per option was SEK 3.21. If the options are fully exercised, the dilution effect will be about 4.5 percent.
l In August Know IT strengthened its position in the growing Business Intelligence and Data warehouse field by acquiring Innograte AB in Stockholm with 20 employees.
l In october Know IT strengthened its delivery capacity in the telecom market in southern Sweden by taking over Teleca’s operation with 29 employees in Ronneby.
l In December Know IT acquired the company Medinit AB in Stockholm with ten employees. Medinit offers services in IT management and quality.
0 100 200 300 400 500 600 700 800 SEK m
2002 2003 2004 2005 2006
0 10 20 30 40 50 60 70 80 SEK m
2006 2005 2004 2003 2002
0 1 2 3 4 5 6 7 8 9 10 %
2006 2005 2004 2003 2002
Operating margin
Operating profit before amortization of intangible assets
Net sales
Financial report dates
Interim Report for January 1 – March 31, 2007:
wednesday April 25, 2007.
Interim Report for January 1 - June 30, 2007:
Friday July 13, 2007.
Interim Report for January 1 - September 30, 2007:
Monday october 22, 2007.
Distribution policy. The printed version is distributed to all registered shareholders who did not actively refuse information from the company. Know IT does not have interim reports and yearend reports printed, but printouts are distributed upon request.
2 president’s review
Anders nilsson
Fabulous performance for Know IT
By purposefully tailoring our offering to meet market demand and by becoming established in new local markets where we see robust demand, Know IT once again improved both earnings and margins in 2006.
Strong local presence
By acquiring Epireal in Växjö and taking over Teleca’s operation in Ronneby we have further fortified our position in southern Sweden.
we now have over 200 employees in Skåne, Blekinge, and Småland, representing a growth rate of almost 100 percent. we are also con- tinuing to develop our offering through our acquisitions. In Västerås we strengthened our focus on simulation and systems for monito- ring and streamlining production processes through the acquisition of Arosys.
In Stockholm we supplemented our Business Intelligence offering through the acquisition of Innograte. During the year we assumed the position of one of the leading consulting companies in Business Intelligence, with over 100 specialists in the area.
During the autumn we supplemented our offering for industries with regulatory standards by acquiring Medinit, a firm that offers consultancy services in IT management and quality services.
Organic growth more important
Speculations about structural transactions and acquisitions in the IT consulting industry will probably continue during 2007. My assess- ment is that the prices that our sales associates now request will limit the number of possible deals. A critical factor for the growth of IT consulting companies will therefore be the ability to retain and recruit employees. we are working on creating a good work environment with growth opportunities for our employees. In 2006 Arbetsmiljöforum selected us as one of the top three workplaces in Sweden. I am proud of this accomplishment, but this honor is also accompanied by obligations. In 2007 we will continue to work on becoming an even better place to work.
Commitment results in quality
one important factor for success is to demonstrate superior quality and commitment in every project and solution. At Know IT we have continued working on our quality system by producing a system administration model. we already have our own system develop- ment method. Good work procedures are important, but they are not enough; it is even more important to have consultants who feel a strong commitment to the client and the clients’ assignment
Know IT has never been stronger than we are today. Our performance over the past few
years has been outstanding and in 2006 the IT consulting market continued to improve.
and thus for their own growth and for Know IT as an enterprise.
our consultants are like this and we can summarize the Know IT spirit by saying that we provide the IT expertise of a big company with the soul of a small company and the commitment of the indi- vidual consultant.
Good historical performance
In terms of earnings, 2006 was the best year in Know IT’s history.
our operating profit before amortization of intangible assets was SEK 68.9 million, compared with the previous year’s excellent performance of SEK 45.6 million. Profit after financial items was SEK 75.4 million, compared with SEK 46.4 million in 2005. Sales of SEK 760.8 million were also the highest in Know IT’s history.
The number of employees, converted to full-time equivalents, clim- bed to 702, up 18 percent since the beginning of the preceding year.
I am extremely pleased that in 2006 we increased our operating margin once again, this time to just over nine percent. However, I would like to point out that in my opinion, profitability in the indu- stry is inadequate since it does not allow for a reasonable profit level in a slack economy. we will continue to work with a combina- tion of measures to increase our operating margin by a few more percentage points.
Growth with profitability
Know IT’s performance in 2006 shows once again that it is possible to grow with good profitability and our aim is to retain this balance in 2007. we have maintained the strong financial position that Know IT is known for, with an equity ratio of 48.4 percent.
our challenge for 2007 will be to maintain this pace with respect to the profitability of our assignments and to continue to grow faster than the market. It is particularly important in the good times we are currently enjoying to create conditions for long-term sustain- able success. This work takes place on many levels.
we will continue to develop our common fundamental values that generate conditions for local entrepreneurship, a challenging alliance among all employees in our subsidiaries. In the future we will continue to focus on continuous development of our customers’
business and of our employees.
This approach enables us to take clear steps toward our vision:
Know IT shall be the obvious choice for clients, employees, and investors.
Profitability
I usually point out that Know IT will be profitable. Profitable for our customers, improving their competitiveness and their business.
Profitable for our employees, who develop their skills and maintain good balance in their lives. Profitable for our owners, who receive a good return on their investment in Know IT. I am therefore pleased to note that we are proposing to increase our dividend for the fourth consecutive year.
I am convinced that we will continue to be profitable in 2007.
March 2007 Anders nilsson President and CEO
president’s review 3
4 business concept, objectives, and strategies
We endeavor to attract employees, clients, and investors who share our vision of entrepre- neurship, collaboration, and development. These values are the foundation of our operation and the basis of our vision and business concept.
The obvious choice
our vision is based on the values on which our method of con- ducting business is founded. we shape our business based on our history, our core values, and our vision .
Vision
we believe that all consulting operations are small scale in nature, which creates premises for successful entrepreneurship: that the best solutions are created through cooperation in which everyone contributes their skills and expertise; that obviously, our consultants are on the leading edge in their specialties and therefore must continuously develop. This vision forms the foundation of our existence and we will be the obvious choice for those who share it.
our vision is to be the obvious choice for clients, employees, and investors.
Business Concept
we deliver the IT expertise of a big company with the soul of a small company and the commitment of the individual consultant.
We develop our clients’ business and strengthen their competiti- veness by providing skilled strategic consulting services and by crea- ting tailored processes and IT solutions. we assume long-term respon- sibility through administrative assignments and support functions.
our clients are mainly organizations and enterprises that have IT systems with stringent requirements for accessibility from several different interfaces.
Values and culture
our fundamental values, rooted in our history and our corporate culture, guide us as we shape the future. our values are the foun- dation of the way we work.
Entrepreneurship – Since its inception in 1990, Know IT’s business activities have developed from a culture of entrepreneurship. There- fore entrepreneurship is important to us, from the individual con- sultant’s daily involvement to how the Board of Directors assesses and decides on strategic issues. Entrepreneurship can be seen in a decentralized organization with a balanced delegation of power and responsibility, small-scale approach, and confidence that duties are best handled in close mutual understanding with our customers.
Cooperation – There is a tradition of cooperation between us and our customers, among our different companies and units, and among our employees. we have a theory that knowledge grows,
the more people who are exposed to it, and our working methods are based on many close contacts internally, with our partners, and our customers. By working together in various projects we can offer our aggregate expertise to all of our customers.
Development – Development is a process that generates added value.
Development and change are a part of our daily existence. Histo- rically, we have shown that we are well prepared for changes and can quickly adapt to new conditions. our consultants are known
Erik Engstrand
Ingrid Kärrsgård
Know IT
Göteborg AB
business concept, objectives, and strategies 5
for their technical expertise, which they continuously develop in demanding client assignments through skills networks and training programs. Together we develop our customers’ businesses and contribute to their success.
Financial Targets l Margin target
Margin, measured as operating profit before amortization of intan- gible assets (EBITA) as a percentage of net sales, should on average amount to at least eight percent over the next three years.
l Growth
Average sales growth should amount to at least fifteen percent annually over the next three years. Growth can be achieved both organically and through acquisitions.
Strategies
To achieve these targets, Know IT has chosen the following strategies:
l Keep operations close to our clients
All consulting is small-scale in character. Therefore Know IT has chosen to establish operations close to its clients. Today Know IT can be found in 17 cities in Sweden, as well as in oslo, enabling the Company to offer a strong local presence. Clients have a local contact person and local resources at their disposal for their pro- jects to achieve maximum quality and delivery reliability.
l Create conditions in which strong business skills thrive
Know IT’s decentralized organization allows each company to develop its business based on local market conditions. with clear goals plus incentive for profitability and growth, we create a driving force for success among our employees who work with business close to our customers, thereby establishing the right conditions for a culture of entrepreneurship.
l Offer expertise in new fields of technology
Based on experiences from the assignments and projects we carry out and the exchanges we have with analyst companies, we conti nuously develop our expertise, our offering and our selection of services to meet our customers’ needs. We often know about and have access to new technology through our partnerships with pro- viders of developmental tools. when new technology has a proven track record as a commercial solution we offer it to our clients.
l Continue to safeguard our independence
we remain independent of suppliers and strive to maintain balance among several different partners. Maintaining our independent sta- tus benefits our clients, allowing us to offer them the best solution for the situation. we have also opted not to develop our own stan- dard products in order to focus on the best solution for the customer.
l Continuously foster employee expertise
To offer our clients the best possible expertise and to create a wor- king environment where employees can grow, Know IT strives to continuously improve our employees’ skill sets, including through certification of consultants in important areas of expertise, as well as in quality systems and methods.
l To conduct quality assurance measures and standardize our proce- dures and processes
Know IT applies a systematic quality system with a focus on sales of our core processes, system development, project management, and system administration. our quality system makes the business efficient and provides our customers with clear added value.
Know IT builds all processes on proven standard and recognized models.
Marcus Andersson
Lena nilsson
Know IT Göteborg offers positions in strategic consulting services, system develop-
ment, and infrastructure. Demand for the company’s services has been robust
and the future continues to be positive. Last year the company grew almost 100
percent, from 20 to 40 employees, and plans include more hiring.
6 market and clients
In general, the market for IT consultancy services in 2006 was very good with robust demand, though local variations occurred.
Local presence in a good market
The Stockholm market, which for several years showed slack demand, developed extremely well throughout 2006. The Sundsvall market, previously affected by the tendency for large purchasers of consul- tancy services to exercise restraint, has recovered. In general the market has been extremely strong.
Despite increasing demand, fees only increased marginally because most deals are extensions of ongoing client assignments and new deals are often call-offs from frame agreements. As these frame agreements are renegotiated and new projects are initiated, fees are expected to rise more in 2007 than in 2006.
Market Trends 2006
During the year Know IT identified several trends in the markets in which it is active.
General agreements
General agreements continue to be of great significance. These agreements have a restraining effect on fees, but provide a stable inflow of project inquiries. About 60 percent of Know IT’s sales consist of frame agreement deals. These agreements are a way for clients to reduce procurement costs by purchasing projects from a limited number of quality-assured preferred providers.
Support function projects
Demand for support function projects continued to be strong dur- ing the year. one of the driving forces is that clients are focusing on their core business to a greater degree and outsourcing various types of support functions. Support services are often long-term, which means that in addition to system development, IT consul- tancies also accept responsibility for development and administra- tion of applications, quality of information, and integration with other systems.
Integration
During the past year Know-IT has seen growing demand for solu- tions that integrate IT resources in the operation. The Company also notes a clear trend and increased demand for support for pro- cesses, often involving an “orchestration” of services to provide support for critical processes and information flows. The effects of one successful initiative in this segment, Business Process Management (BPM), are often considerable: smooth distribution and further refinement of information in the company’s critical processes with monitoring of the business status are important
objectives. Development of process support is a natural evolution after the efforts in the field of integration in recent years. Integration and development of services in a service-oriented architecture (SoA) continue to be important tools for achieving the positive effects that are in demand.
Mobile solutions
Mobility is currently high on the IT manager’s list of priorities.
Many companies have provided their employees with e-mail and calendar software in their mobile phones, and now it is time to ensure that the necessary information required for daily work is accessible. By tailoring mobile applications that are integrated with operations systems and business systems, clients can achieve maximum efficiency and cost savings. Know IT sees increased interest in innovative cutting-edge technology solutions, such as payment solutions and identification.
Business Intelligence
During the year demand for Business Intelligence solutions has increased. These solutions make it possible to take advantage of existing data to achieve a reporting and analysis environment in which information can be synthesized into a basis for decision- making. one important driving force is the growing demand for information management, which in part follows from implementa- tion of various regulatory requirements.
Testing and quality issues
During the year we have noted continued strong interest in testing and quality issues in the system development phase. Major quality gains can be achieved in projects by involving testing already at the requirements management stage, leading to more effective procedures. Rather than making an error and then correcting it, the project organization does things right from the start.
The end result is improved on-time delivery, reduced develop- ment costs and, most of all, decreased testing costs.
IT management and quality
our clients want improved oversight of IT and IS services based on
the needs of the operation. one trend is to start with established
standardized industry frameworks (e.g., ITIL, CoBIT, GAMP) and
create functioning processes and procedures that are well estab-
lished in the operations. In the past we mainly saw this interest in
firms with clear external quality compliance standards, but demand
market and clients 7
is now growing in many other industries. Standardization is com- mon for hardware and software, and we now see strong demand for standardizing and improving services.
Know IT in the market
Know IT is primarily active in the Swedish market. By striving to work closely with its clients Know IT builds its business based on local deals and because of its size, Know IT can deliver the IT expertise of a big company with the soul of a small company and the commitment of the individual consultant.
During 2006 Know IT continued to strengthen its local presence by acquiring businesses locally in Växjö and Ronneby. During the year we also strengthened our operations in Västerås and Stockholm.
with a local presence in 17 cities in Sweden as well as in oslo, Norway, Know IT’s geographic coverage is one of the best among all IT consultancies in Sweden.
Growth
In 2006 we increased our market share and strengthened our posi- tion among medium-sized consulting firms.
Demand is influenced by clients and competitors in the local markets. Know IT endeavors to mainly offer locally active con- sultants. However, if special skills are required in large projects, Know IT can supplement with resources from its other companies.
General agreements
Frame agreements continued to play a major role in Know IT’s performance in 2006. we have over 50 frame agreements that cover about 650 parties authorized to place orders and about 60 percent of Know IT’s sales consist of frame agreement deals. Clients with which Know IT signed or extended frame agreements during 2006 include AstraZeneca, the Swedish national Financial Management Authority, Holmen Paper, the City of Gothenburg, Ladok, Väster- norrland County Council, nCC, TeliaSonera, and SAS AB.
Competitors
we meet various competitors in the different cities where we are active. our competitors, such as wM-Data, Sogeti, Sigma, Acando- Frontec and HiQ, often offer broad geographic coverage, just as we do. Local competition usually involves small consultancies that work in niches in an industry segment or offer a technological skill and are generally active on individual local markets.
off-shore and near-shore rivals mainly offer services with lower added value and are therefore not considered to be a serious threat to Know IT. The services we offer have a higher added value and our competitors are primarily other large IT consultants established in Sweden.
Customer structure
Know IT’s customer structure comprises large and medium-sized companies and organizations. The emphasis is on the public sector, telecom, and industry, as well as banking, finance, and insurance.
Top ten clients in alphabetical order AstraZeneca
Ericsson IKEA
Karolinska University Hospital PRI Pensionstjänst
SEB
Sony Ericsson TeliaSonera Volvo Cars
Swedish national Road Administration During the fiscal year the ten biggest clients accounted for about 47 percent of sales. no single client accounted for more than 14 percent of sales.
Net sales per industry
Invoicing to clients by size
Energy 3%
Retail trade 6%
Pharmaceutical 1%
Banking, finance, and insurance 13%
Media and gaming 1%
Telecom 30%
other 4%
Public sector 27%
< SEK 1m 13%
≥ SEK 1m - 2m 12%
≥ SEK 2m - 3m 8%
≥ SEK 5m - 10m 16%
> SEK 10m 39%
≥ SEK 3m - 5m 12%
Industry 15%
8 operations
We continued to develop and adapt Know IT’s operations to the market in 2006. We expan- ded our operations in Business Intelligence and are today one of Scandinavia’s leading consulting companies in the area with 100 specialists.
Comprehensive approach
Know IT’s client offerings can be divided into three main groups:
strategic consulting services, which account for about 20 percent of Know IT’s sales, system development, which accounts for about 50 percent, and administration and development, which generated the remaining 30 percent.
In 2006 we expanded and strengthened operations by both recruiting new specialists and acquiring companies with skills that complement ours. Through the acquisitions of Arosys, Innograte, Teleca’s Ronneby operation, and Medinit we acquired new expertise in simulation, business intelligence, embedded systems, and IT management and quality.
We apply a comprehensive approach to develop our clients’
business and strengthen their competitiveness by providing exper- tise and developing customized processes and IT solutions to assist with:
l Strategic consultations, including a specialty in procurement.
l System development in several areas of technology, both to strengthen skills and as total solutions.
l Administration and development of existing systems.
Strategic consultation
with our extensive operational and technological expertise, we offer strategic consulting and operational development services based on the interface between the clients’ core operations and IT.
one effect of our focus on consultations is that we can get invol- ved in our clients’ business development projects earlier, which increases the accuracy of our IT solutions.
Businesses and organizations often have great potential for improving internal operations. with our experience of business development projects, we know that changes can be effected that increase benefit in the operation. we can achieve major improve- ments by modifying central processes and designing customized IT support services.
we work with the client to identify problem areas and proces- ses that may have potential for improvement. The projects are staffed by teams that combine knowledge of operations with the relevant technical expertise.
Our services include:
l Change management with responsibility for achieving the value of change projects through earned value management.
l Development and follow-up of IT strategies that support the client’s business objectives.
l Process development where we help the client analyze work flows to create the most efficient IT solution possible.
l Utility analyses linked to effect management as a tool for management toward expected effects in operational projects.
l Technology-driven business development where we help clients to combine technology and business know-how more effectively.
l Purchasing of IT systems, where we draft and negotiate agre- ements that provide complete traceability, from the request for tenders to follow-up of deliveries and projects.
l Quality assurance of clients’ critical projects.
l Technical assessment - we analyze and determine the conse- quences of alternative technical solutions.
l Technical operational development with a focus on embedded systems.
l Support during acquisition, design, and implementation of IT solutions or development of existing IT support for human resources and payroll administration.
l Process and organizational services linked to management and support of all types of IT-based HRM solutions.
Systems development
In systems development we offer extensive expertise in several technology platforms and methods and can staff all roles from architecture and system design to testing and installation.
Clients are extremely interested in system development projects based on standard products. It is therefore important for us as an independent provider to maintain established alliances with vendors in order to ensure our delivery capacity without jeopardizing our independence.
Our expertise in systems development includes the following methods and technologies:
l Systems development based on products and developmental tools from Microsoft, oracle, BEA, IBM, SAS Software, open Source, etc.
l Embedded Communications in real time systems.
l Database managers such as oracle, SQL Server, and DB2.
l Testing, supervision of testing, and test design using tools from sources such as Mercury.
l Integration using tools from sources such as Microsoft (BizTalk) and Tibco.
l Internal portals and external websites based on sources such as
EpiServer and SharePoint Server.
operations 9
l Infrastructure.
l Project Management.
l IT architecture.
l Data modeling.
l Interface design with a focus on usability.
Administration, maintenance and development
we strive to achieve long-term customer relations and to help our clients’ IT solutions develop at the same pace as their operations.
A good IT solution has built-in flexibility that enables continuous development, thereby allowing new technology to generate optimal benefit for the customer. we see administration and development
—both functional and technological—as important elements of our business.
Administration Process
At the end of development projects, after the client approves deli- very, the IT solution or system is transferred to an administration organization that was appointed while the project was in progress, consisting of two different, usually separate, components referred to as functional administration and technical administration.
Functional administration
Functional administration is a concept that includes all activities that ensure that the solution—the IT system or area of operation for which the solution is built—provides the functions that were ordered. Functional administration also encompasses ensuring that the system works according to agreed specifications for:
l Functional maintenance.
l Help desk including emergency phone support.
l Functional development within the administrative framework or plan.
l Functional administration usually means that the administration organization also acts as a client and stipulates requirements in the implementation of new development projects.
Technical administration
Technical administration is a concept that includes all direct physical procedures in the solution’s hardware and software to ensure function and performance, including production of technical docu- mentation, technology support, and reporting.
Growth areas
we have developed our offering, which can be provided by local Know IT companies or by specialists from other units, based on our core competencies and our clients’ needs.
noteworthy growth areas during the year include Business intelligence, IT management and quality, testing and quality assu- rance, and integration.
Business Intelligence
In 2006 Know IT further secured its foothold as a major supplier of Business Intelligence and Data warehouse services in the Swedish and norwegian markets. This growing market attracts many new players with new initiatives that we find exciting and inspiring and our business in this area has been stable since the early 1990s.
In addition to our extensive practical experience, we are known for providing the entire chain of services, including sophisticated analyst services, which we see as becoming increasingly important for total providers of Business Intelligence services.
Know IT offers services in BI strategy, modeling, warehouse architecture, integration, mentoring, ETL design/development, front-end environments, and administrative undertakings.
IT management and quality
Know IT has extensive experience in Compliance and Governance, which was fortified in conjunction with the acquisition of Medinit AB.
Framework and controlling regulations are often both complex and extensive, requiring systems that cover oversight, procedures, controls, security and auditing. The entire area can become unne- cessarily complicated. our specialists have years of experience.
we know how to accomplish this so that efficiency measures can be implemented and quality costs kept low.
Sven Lindblad
Peter Henning
Richard Allgårdh
Know IT Compliance
& Governance AB, Stockholm
10 operations
Testing and quality assurance
Quality assurance begins during the requirement phase of systems development. A successfully implemented requirement phase is essential to ensure that the IT system meets the client’s needs.
Requirements are documented to enable the developer to develop them after the developer and the tester verify that requirements were met. Carefully planning and carrying out tests increases the chance of succeeding with both the systems development project and the implementation of standardized systems. This approach ensures superior quality and leads to major cost savings in both the short and long term. Know IT is currently one of the leading suppliers in testing and quality assurance with concepts for load tests and automated functional tests.
Integration
During 2006 Know IT observed continued strong demand for exper- tise in integration. Know IT meets market demand by continuing to invest in the Integration Factory, a concept that gathers Know IT’s knowledge about integration in “best practices,” complete compo- nents, check lists and templates. This approach gives our clients quality-assured and robust integration solutions that support their processes and needs.
Embedded systems and simulation
Know IT has strengthened its position in embedded systems and simulation by acquiring and hiring additional expertise during 2006.
our extremely experienced consultants offer technical operational development and systems development. our clients mainly include companies that develop software and electronics for embedded systems.
we have substantial experience developing technical information systems, with a focus on motor vehicles, telecom, space, energy, and the military.
Mobile solutions
over the past decade Know IT has focused on developing mobile solutions for clients with employees who work in the field and need mobile IT support. The solutions are often integrated with the client’s own business system or equivalent, or with the client’s clients and partners. Examples of solutions include support for personnel on trains, boats, and cars, and even people who work clearing land mines. Investment costs for this type of application can often be recovered because the technology has matured and hardware prices have dropped.
Quality and standardization
Know IT’s quality system is defined based on our clients’ expecta- tions and maintained with small carefully considered initiatives.
we endeavor to achieve the most effective quality system possible.
whatever we do, we focus on our customers and their needs.
we achieve quality because everyone works consistently, with each element of the process undergoing stringent management and quality control measures.
All of our work is based on the client’s needs and carried out so that the client achieves the appropriate level of quality. In many projects and assignments we use methods and processes chosen by the client. In projects that we run under our own management we use Pejl
®and RUP
®, both of which have been adapted to Know IT’s operations and Know IT’s working methods.
Torbjörn Karlsson
Torbjörn Andersson
Anders Lindekrantz Jan Lönnback
Per Karlström
Know IT Mälardalen
i Västerås AB
assignments 11
Saab Space has its corporate headquarters in Göteborg, a division in Linköping and subsidiaries in Austria and the United States.
The company has about 510 employees.
Since the 1970s, Saab Space has developed and delivered error- tolerant computer systems to Europe’s major rocket programs, Ariane 4 and Ariane 5. The company has also produced about fifty computers for various satellite programs. not a single computer has failed. now control data for a smaller rocket called VEGA are also under development.
VEGA – a new European Space Rocket
Although the trend has long been to make bigger and heavier satellites, there is still a need for smaller rockets to economically launch satellites that weigh between 300 and 2,000 kilograms in polar and low-earth orbits. These satellites are mainly used for scientific experiments and earth observation missions. Europe has therefore decided to develop the VEGA rocket, named for the sec- ond brightest star in the northern hemisphere. VEGA will make it possible to reach space faster, more easily, and less expensively.
Development of VEGA began in 1998. The first launch was ini- tially planned for 2007, but will be postponed. The launch will take place from Europe’s spaceport in French Guiana where the launch site is being prepared for the launch of VEGA.
VEGA computers – high reliability in 20 minutes
A rocket carries out its assignment in about 20 minutes. During this short time, the onboard computer conducts a large quantity of calculations, tests, and control orders, and it provides reports.
At the same time it must withstand powerful vibrations from the strong engines, radiation from particles captured by the earth’s magnetic field, without breaking or making any errors.
Since there is only one control computer in VEGA, the rocket cannot easily switch from one computer to another during the mission if anything goes wrong; all hope rests on this one computer.
This places enormous demands on how this computer is designed
Quality assurance of software for extreme environments
and manufactured. The quality of the computer must be very high and special analyses must be carried out on both hardware and software to ensure that it works flawlessly even in abnormal situa- tions, in order to succeed with the short mission.
Know IT Technowledge – a cog in VEGA’s quality assurance Know IT Technowledge personnel include staff with extensive experi- ence in production of equipment for use in space. These individuals have been responsible for project management, verification, design, and construction of machinery and software in space projects.
In the VEGA project, Know IT and its expertise have been responsible for quality assurance for the software that Saab Space produces. over the years the European Space Agency (ESA) has developed a large body of regulations for producing space vehicles that must be followed, while satisfying requirements for increased speed and lower costs. Know IT has helped to formulate a project development process for VEGA that meets both ESA’s requirements for quality and Saab Space’s requirements for profitability. Subse- quently Know IT helped ensure compliance with all applicable re- quirements during the software development process. In the VEGA project Know IT was also responsible for special analyses of the software that ESA calls Reliability Availability Maintainability and Safety (RAMS).
Part of this job was to adapt ESA’s requirements for RAMS to Saab Space’s working methods. Here Know IT could also take advantage of its experience with similar work in other sectors, such as the aerospace and nuclear energy industries.
Saab Space is an independent manufacturer of space equipment. Its main products are computers, microwave electronics and an- tennae for space vehicles, as well as adapters and separation systems for space rockets.
Copyright ESA - J. HUART
12 assignments
Demanding regulations are nothing new for a global pharmaceuti- cal manufacturer; they are an absolute necessity to ensure its
“license to operate” on the pharmaceutical market. The most well known public authorities in Sweden are the Medical Products Agency and the U.S. Food and Drug Administration (FDA), which place extremely stringent requirements on procedures, using quality systems such as Good Manufacturing Practices (GMP), with rules aimed at protecting public health.
As a result of improprieties in the accounts of several US com- panies, in 2002 the U.S. Congress passed legislation to improve economic control. The purpose was to protect the financial interests of shareholders and employees.
AstraZeneca
For AstraZeneca, Sarbanes-oxley (SoX) entailed new, but extremely similar requirements that covered other parts of the operation.
AstraZeneca’s IT
efficiently integrates Sarbanes-Oxley in standard procedures
The operation already had an extensive quality system with associ- ated procedures, including IT support for the entire operation and therefore, many of its processes and applications, including con- trols for change management, troubleshooting, incident handling, development management, backup/restore etc. These processes could advantageously be shaped under the provisions of frame- works such as ITIL, with additional controls for SoX. Implementa- tion of new regulations involves many challenges; for example, there is risk of:
l building redundant quality procedures to handle new require- ments, when other regulations already manage similar require- ments.
l over-interpreting the new quality standards.
l implementing inefficient administrative procedures to ensure necessary controls.
l inadequate knowledge for implementing requirements in pro- cesses and among personnel.
In a global program, AstraZeneca has ensured the necessary activ- ities, in order to ensure required participation in management, a common interpretation of controls, and local quality assurance measures that are inherent to its work. In order to ensure compli- ance with requirements, risks and processes must be identified.
They are assessed in relation too fulfillment of requirements (design effectiveness) and execution (operating effectiveness). Both internal and external auditors monitor compliance with these requirements.
One key to the project’s success is the years of experience with respect to quality management as well as the support throughout the operation with respect to this task. It is crucial to achieve these conditions when the program is taken over by the regular organization.
Know IT Compliance & Governance helped to complete a successful Sarbanes-Oxley project during 2006 at AstraZeneca.
AstraZeneca Corporate Image Bank
assignments 13
If the company chooses to be responsible for pension payments, this is recognized as a liability in the company’s balance sheet.
PRI Pensionstjänst AB (PRI) calculates this pension liability and provides the company with information for financial reporting pur- poses. The total pension liability of PRI’s approximately 1,350 client companies amounts to about SEK 105 billion. PRI is also commis- sioned by the company to pay the stipulated pensions. The com- panies pay the funds for the pension payments in advance to PRI.
PRI pays out about SEK 3.5 billion annually in pension payments.
Ensym project
The Ensym project was initiated when PRI decided to replace and renew its existing and obsolete application systems. Ensym’s task was to formulate an application system, which together with several other systems would serve as PRI’s main IT support. It is therefore of business-critical importance for PRI that the Ensym system work in the operation, that it calculate correctly, and that all external systems work as they should.
The two-year development project involves about twenty people and a total budget of about SEK 65 million.
PRI runs the Ensym project, but the Know IT staff is responsible for project management, requirements, testing, database, and sys- tem architecture. Some of the developers also come from Know IT.
The development process is a lightweight version of RUP, supple- mented with certain agile technologies such as test-driven devel- opment, prototyping, and frequent application models with auto- mated unit test cases.
To ensure the high demands on the system and that it works in the operation, great importance has been placed on quality assurance procedures. Requirements have been captured incre- mentally, jointly with representatives from the operation and written down iteratively in requirement points and use cases. In addition, requirements have been carefully reviewed by both the development and testing organization before delivery to analysis and design.
PRI Pensionstjänst reduces risk with early test
Great emphasis has also been placed on involving operations at an early phase in the tests of each delivered release starting with the very earliest development releases. In this way we have been able to catch errors in interpretations and assumptions at an early stage, saving considerable development time.
Since the system is dependent on several external systems, great emphasis has been placed on system integration tests and Know IT’s consultants have also actively worked with reducing risks during the course of the project and helped ensure that plan- ning and execution of system integration proceeded as smoothly as possible until the critical synchronized delivery on october 1, 2007.
ITP retirement pension for privately employ- ed administrators can be financed in two ways – either the company covers the future pension payments or the company pays premiums for a pension insurance plan.
Sjöberg Bild
14 employees and structural capital
In 2006 the competition for skilled employees increased substantially. Know IT deems that one of the more critical factors for success for consulting companies in 2007 is the ability to retain and attract personnel. In 2006 the number of employees at Know IT continued to grow.
Dedicated specialists
over the past year Know IT has increased the number of employees by 109. organic growth has been good and accounts for 43 full- time positions, while acquisitions during the year provided 66 full- time equivalents.
By tradition, Know IT has hired employees with academic degrees and at least five years of industry experience. Know IT consultants are highly skilled and have extensive experience of the IT industry and our clients’ businesses. By accepting long-term assignments we can thoroughly learn how our clients’ work. Taken together, the consultants have an average of 12 years of industry experience. More than 92 percent of our consultants have university or other post-secondary school education.
However, in 2006 Know IT conducted a trainee program for the first time. The program is a pilot project in which ten recent university graduates participated. The experiment was successful and all participants were offered permanent positions. Know IT plans to carry out a broader program in 2007. Know IT endeavors to achieve a more even gender distribution, but like most compa- nies in the IT sector, the Company mainly has male employees;
22 percent of employees are female.
Employee survey
To better understand employee attitudes and opinions about Know IT as an employer, the Company conducts employee surveys.
A survey was conducted in 2005 and a new survey will be carried out in the spring of 2007.
Development of structural capital
By organizing the Company’s working models and methods, the operation becomes more efficient and less dependent on individual employees. Structural capital provides clients with long-term added value.
To be an attractive supplier, consultants must continuously develop their skills and procedures for maintaining the highest standards must be continuously reviewed. Know It consultants earn certification, participate in specialized networks, and attend seminars and training programs to promote personal development.
Another important component of continuously delivering practical client benefit and services with superior quality is the development of each consultant through the assignments in which they partici- pate. Each assignment helps to develop our collective expertise and experience.
In 2006, for the first time Know IT conducted a trainee program, which was very successful. After completion of the consultant training program with experienced mentors, all trainees were offered permanent positions at Know IT.
Pia Fenelius Mats
Forsell Ulrika Greven
Know IT Stockholm AB
employees and structural capital 15
0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 Number
Men Women Year
< 25 26-30 31-35 36-40 41-45 46-50 51-55 > 56
Over 87 percent of Know IT’s employee are over the age of thirty. A total of 78 percent of the employees are men and 22 percent are women. The average age of our male employees is 39; the corresponding figure for our female employees is 37. The average age of all employees is 39.
we also use relationship-based quality assessment of completed consulting services, where the client, consultant, and Know IT business manager analyze the consultant’s performance in each assignment.
General agreements are another important element in our structural capital. we have approximately 50 general agreements with various companies, organizations, and authorities, with over 600 units authorized to place orders. Frame agreements are a way for clients to ensure the quality of suppliers and for Know IT to achieve a stable inflow of inquiries for assignments.
our partnerships with various providers of standardized tools are also part of our structural capital. In our endeavor to be an independent provider we seek a balance between various providers.
our partnerships are important for acquiring knowledge and access to the latest technology.
Quality and standardization
In 2006 we continued to develop our systematic quality system with a focus on our core processes, system development, project management, and system administration
Know IT’s quality system is defined based on our clients’ expec- tations and maintained with small carefully considered initiatives.
we endeavor to achieve the most effective quality system possible.
whatever we do, we focus on our customers and their needs.
we achieve quality because everyone works consistently, with each element of the process undergoing stringent management and quality control measures.
we will market and deliver services, solutions and systems of such quality that they deserve and win the full confidence of our clients. Quality shall be a key reason for clients choosing us as supplier.
All of our work is based on the client’s needs and carried out so that the client achieves the appropriate level of quality. In many projects and assignments we use methods and processes chosen by the client. In projects that we run under our own management we use Pejl
®and RUP
®, which have both been adapted to Know IT’s operations and Know IT’s working methods.
Breakdown of employees
number of employees Consultants other employees
operating units 631 64
Parent Company – 7
Total employees 631 71
Know IT has 702 employees. The other employees work in sales, business, admi- nistration, and group-wide functions.
Age structure
A total of 92 percent of Know IT’s consultants have post- secondary school education and 83 percent have a uni- versity education. Systems sciences and engineering are the most common academic backgrounds found among the consultants.
Upper secondary school 8%
other specialized training 9%
other university education 34%
MSc in Engineering 24%
MSc in Business Administration and Economics 3%
Systems scientists 22%
Level of education, consultants
16 the share
Listing procedures changed on the Stockholm Stock Exchange in 2006 and as of October, Know IT is now listed on the Nordic Exchange in Stockholm on the Small Cap list under IT companies.
Stable development
Share capital
As at December 31, 2006, Know IT’s share capital was SEK 11.5m, represented by 11,544,214 shares at a par value of SEK 1 each.
All shares carry the same number of votes and rights to dividends.
A new share issue for 161,460 shares was initiated but was not completed at the turn of the year.
Market listing
Market Listing Know IT’s share was listed on SBI (Stockholms Börs- information), currently nGM (nordic Growth Market), on novem- ber 11, 1997. The share has been listed on the o list of the Stock- holm Exchange (Stockholmsbörsen) since March 11, 1999. As of January 1, 2006 the shares were listed on the Stockholm Stock Exchange’s Attract 40 list. Since October 2, 2006, when the Stock- holm Stock Exchange reorganized its listing of issuers, Know IT has been listed on the nordic Exchange in Stockholm on the Small Cap list under the information technology industry. At the end of the fiscal year the share price was SEK 63.00 (56.75), equivalent to a total market capitalization of SEK 727.3m (651.1). The highest price paid during the fiscal year, SEK 64.00, was registered on December 29, 2006, while the lowest price, SEK 37.90, was registered on June 13, 2006. During the financial year 11.9 (12.1) million Know IT shares were traded on Stockholmsbörsen, equivalent to 47,901 (47,696) shares per trading session. The number of shares traded is equivalent to 102.9 (105.6) percent of the total number of shares at yearend. The share was traded on each of the year’s 248 trading days. As of December 31, 2006, the total number of share- holders was 5,182 (5,540).
Dividend Policy
Know IT’s dividend policy is to distribute the capital that it does not need for planned expansion of the operations. For fiscal 2006 the Board of Directors recommends a dividend of SEK 2.35 (2.00) per share.
Analysts who monitor Know IT
Den Danske Bank: Peter Trigarzky, tel +45-33-44 04 49 Enskilda Securities: Lars Sveder, tel +46 (0)8-52 229 500 Handelsbanken: Stefan wård, tel +46 (0)8-70 15 18 Redeye: Magnus Dagel, tel +46 (0)8-545 013 43
Distribution of holdings
number number
Shareholder % Votes %
1-1,000 4,316 83.3 1,376,755 11.9
1,001-5,000 676 13.0 1,618,756 14.0
5,001-10,000 83 1.6 618,224 5.4
10,001-20,000 46 0.9 655,874 5.7
20,001-50,000 37 0.7 1,226,450 10.6
50,001-100,000 10 0.2 717,593 6.2
100,001-500,000 11 0.2 3,043,483 26.4
500,001-1,000,000 3 < 0.1 2,287,079 19.8
Summa 5,182 100.0 11,544,214 100.0
Ten largest shareholders
Percentage of
share capital
Shareholder no. of shares and votes
JP Morgan Chase Bank 922,159 8.0
Jan nordlund Holding AB 777,000 6.7
Morgan Stanley & Co Int Ltd 587,920 5.1
Seitola, Pekka incl company 487,500 4.2
Goldman Sachs International Ltd 427,200 3.7 Länsförsäkringar Småbolagsfond 397,300 3.4
Clearstream Banking S.A. 368,175 3.2
Banque Carnegie Luxembourg S.A. 336,500 2.9
Tanglin 275,000 2.4
Atterkvist, Stellan incl company 215,000 1.9
Total ten owners 4,793,754 41.5
other 6,750,460 58.5
Total 11,544,214 100.0
Distribution of shareholdings
Financial and institutional organizations 11%
Private owners 34%
Aid and interest groups 2%
non-financial firms 17%
Foreign owners 36%
the share 17
Share capital development over five years
Change in Total
Change in Total no. Quota value, share capital share capital,
Year Activity number of shares of shares SEK SEK m SEK m
2002 opening balance 9,973,563 5 49.9
2005 Reduction
1)9,973,563 1 –39.9 10.0
2005 new share issue
2)1,000,000 10,973,563 1 1.0 11.0
2005 new share issue
3)500,000 11,473,563 1 0.5 11.5
2006 new share issue
4)70,651 11,544,214 1 0.1 11.6
2006 new share issue
5) 6)161,460 11,705,674 1 0.1 11.7
1) Reduction of share capital according to resolution of Annual General Meeting 3) new share issue, acquisition of Real M Holding AB.
on April 19, 2005. The nominal value (quota value) of the share decreased from 4) new share issue, acquisition of Innograte AB.
SEK 5 to SEK 1. 5) new share issue, acquisition of Medinit AB.
2) new share issue, acquisition of Create Group Holding AB. 6) Issue not registered as at Dec. 31, 2006.
Data per share
2006 2005 2004 2003 2002
number of shares on balance sheet date, 000s, basic 11,705 11,474 9,974 9,974 9,974 number of shares on balance sheet date, 000s, diluted 12,628 11,979 9,974 9,974 9,974
Average number of shares, 000s, basic 11,517 10,557 9,974 9,974 9,974
Average number of shares, 000s, diluted 11,620 10,595 9,974 9,974 9,974
Earnings per share, SEK, basic 4.23 2.73 3.76 0.35 –0.18
Earnings per share, SEK, diluted 4.19 2.72 3.76 0.35 –0.18
Equity per share, SEK, basic 20.62 17.61 12.09 9.07 8.72
Equity per share (SEK) diluted 22.71 18.57 12.09 9.07 8.72
Adjusted equity per share, SEK, basic 20.62 17.61 12.09 9.07 8.72
Adjusted equity per share, SEK, diluted 22.71 18.57 12.09 9.07 8.72
Cash flow per share, SEK, basic –0.47 2.18 2.09 0.11 1.03
Earnings per share, SEK, diluted –0.46 2.13 2.09 0.11 1.03
Dividend per share, SEK 2.35
1)2.00 1.50 0.75 –
Share price, SEK 63.00 56.75 25.90 13.40 5.5
P/E ratio 14.9 20.8 6.9 38.3 neg.
1) Recommended dividend.
1 000
500 1 500 2 000 2 500 3 000
2002 2003 2004 2005 2006
Share SIX IT SIX General index
Shares traded, 1,000s (including post-reported transactions) per month. (c) FINDATA DIREKT
10 20 30 40 50 60 70
2
SEK No. of
shares
