Morning. So what I see, everybody found a chair. Good morning, ladies and gentlemen. I'd like to welcome you to our annual Capital Markets Day here in Frankfurt, and a warm welcome to our virtual participants as well. This year, we decided to give you some, let's say, operational insights regarding a topic that, as all of you know, is highly relevant for Bechtle's performance and success. And it became even more relevant over the last two to three years. It's our public business.
According to the format of last Capital Markets Day, we want to focus on this strategic issue less from a usual pure financial reporting point of view, but more from an operational perspective. Following this, we decided on this short agenda for today, which should give you, hopefully, a better understanding of how we run this specific part of our business and what is key to be successful in that part of our business.
Yeah, thank you very much. Warm welcome from my side as well to all those who are present here in Frankfurt in person, to all those who attend virtually. I'm very happy that we're here today with our colleagues, Marijke Kasius and Manuel Liesenfeld. Marijke, Vice President of the Netherlands. Manuel Liesenfeld, Head of our Public Sector Division, who will give you, as Thomas just mentioned, this deeper view in our public sector business. So the very short agenda will be that I start with a short overview of what's happening right now, current trading at Bechtle, how we performed over the last months. I think that some of you are interested in how we performed in the third quarter, and I will give you some details about that.
Then we have the presentation of Marijke and Manuel, and after that, we have the Q&A session where we love to have questions about the topic of today, international public sector business. But surely Thomas and myself are open to answer all other questions related to Bechtle, related to current trading, strategic things, and so on as well. After Q&A, we would love to invite you to a short lunch, and we will still be there for some informal discussions as well. For the Q&A session, for those who are in person here in Frankfurt, you just raise your hand. And for those who are virtually in the meeting, you raise virtually your hand as well so I can see it, and I try to have you, let's say, more or less in the row how you raised your hand.
Coming back to what I mentioned already, the current trading, I remind you that we have seen in the first half of the year, and that is more or less the same for the third quarter, a mixed picture. We have, throughout the whole year, to struggle with the reluctance of our SMB customers, mainly in Germany and in France. These are our two major markets, and if our most important customer segment, the SMBs, is affected in these two markets, it's hard to compensate for that. You could see that by the figures for the first half of the year. And as I mentioned, there is no real change in the mood and in the investment behavior of our SMB customers. You can take that as good news. No change means it's not getting worse, or you can take that as bad news.
It's not getting better as well. If you look at the Public Sector segment a little bit more closely, we had a hard start into the year, mainly driven by our German Public Sector customers. We had, if you remember, very long discussions about the federal budget here in Germany. It only passed through the parliament in January. Therefore, Public Sector business in the first quarter was sluggish. We have seen, on a lower level, some improvements in the second quarter, and we have seen further, still on a low level, improvements in the third quarter. I have to mention, if we discuss Public Sector in the third quarter, I have to mention that we had, in the previous year, in August, a very large VMware deal with a Public Sector client. If we adjust for this very large deal, we see this positive trend.
If we just look at the pure figures, August is in minus because, as mentioned, we compare with a really very, very high comparable. But if we look at, say, the absolute figures as well, we see increasing investments from our public sector customers in Germany and all over Europe as well. We have seen, and I think we mentioned that already when we released the figures for the second quarter, we have seen a pretty strong July. We have seen, and that is not a surprise right now, a weaker August. We can't give you a precise picture of September already. We are still waiting for the final figures for the consolidation. But as I mentioned, there is no real change in the trends that we see.
That is what you can or should expect for September and for whole Q3 as well. Looking ahead, in the discussions we had with the capital market in the last weeks, we had very often the situation that we have been questioned if we are not still too bullish, too optimistic. That is pretty new for Bechtle because normally we are known to be too conservative.
Really?
But this time, it seems that we are a little bit more bullish. Yes, we are aware that our new guidance still is ambitious. We are aware that our new guidance implicates for growth in the second half of the year, 2% revenue growth, 4% earnings growth. And we are aware that 2024 will be a year that is, let's say, more back-end loaded. If we see the improvements in the public sector business going on in the fourth quarter, if we see something like a budget flush, mainly coming from the public sector in the fourth quarter, we are confident that we will reach our guidance.
That is one of the assumptions we made in July when we had the new guidance that we will see throughout the year, during the year, from quarter to quarter, improvements in our public sector business. It was never part of our new guidance to see on a broad range improvements from the SMB field, and as I mentioned, we still don't expect that to happen in this year. If we broaden a little bit the view, if you look ahead, we are a little bit more optimistic towards 2025. Even if the macroeconomic circumstances that are a burden right now will stay the same, our customers will have to invest next year. I think all of you are aware that Microsoft will end the support of Windows 10 in October next year.
There's a figure from Microsoft that in Germany, some nine million devices must be replaced because you can't run Windows 11 on them. Worldwide, it seems that there are 20, no, sorry, 250 million devices that need to be replaced, so we will see a push from the migration to Windows 11. We will see at least some of our customers coming back to investments in the replacement cycle. If this will happen starting with 2025, or if our customers wait until the very last day, which will mean that they wait until the third quarter, which then could lead to some problems in the supply chain, that's something we don't know. We Bechtle address that very clearly to the customers, and the OEM do the same thing, telling them right now availabilities are pretty good.
If you wait until August or September, things might have changed. So it would be a good decision to invest earlier. So hopefully some of customers might make the decision already in the fourth quarter. But as I mentioned, we don't expect that. We don't have that in our plan for the guidance of the full year. So this, as I mentioned shortly and briefly, is the overview over the current trading, our forecast for this year. And I wouldn't call it a forecast for next year, but some points for next year. I can mention NIS2 as well, but security even without NIS2 is a faster growing part of our business.
So if we look at our figures and if we discuss why the business at Bechtle today is more sluggish, it's really not a structural problem. It's more a problem with macroeconomics, and it's related with our SMB customers, and it's related with the replacement cycle with investments in PCs. That's the situation right now. So that's it from my side, from my part. Thank you very much. And now I give over to my colleagues, Marijke and Manuel.
Thank you.
Thank you, Martin.
Welcome and nice to meet you all. I'm Marijke Kasius. I'm Vice President of the Netherlands, and I've joined Bechtle two and a half years ago by the acquisition of PQR. That was the first system house outside of the DACH region. Before that, I was six years CEO of PQR. I've always worked in IT, especially in the customer satisfaction departments.
Good morning, everyone. My name is Manuel Liesenfeld, Senior Director of the Public Sector Division. The Public Sector Division is a team of about 100 people supporting all the Bechtle entities, and I will elaborate a little bit more on that. Public Sector is basically following all my life. I have my studies, first public administration in Germany, followed by a master's degree in public sector administration on a European level. Yeah, and grateful to elaborate on how resilient the business model with public sector business is at Bechtle today, and first of all, we'd like to start with why. Good reasons why this has such an importance at Bechtle. I think one of them is that we see, especially in times of crisis, there is no bankruptcy in the public sector.
It's very unlikely that we miss turnover from the public sector customers. Also, in times of crisis, higher investments are asked, and we have exclusive right, especially in those framework business, after the award of framework contracts. Normally, framework contracts last up to four years. This is an automated slide, apparently, and I need to click back. And when you've got this exclusive award for framework for around about four years, then of course you can work very trustfully with your public sector customer for a certain time. And it's very unlikely, unless you fail badly, that this framework contract will be canceled before the official end. And all of that has led to predictable and sustainable growth in the public sector area. And we have some figures with us to show the positive tendency from the last years.
That's why the organization, I think you all are familiar with the business model of Bechtle, with a strong focus on the decentralized Bechtle entities, and for the public sector, like I already mentioned, the public sector division is like a link in between. We have the central team, which is where we host a dedicated professional tender desk, and this tender desk is able to respond to tenders, I think, in 12 different European languages as we speak. We have pre-sales experts supporting our local colleagues in the different countries with expertise, also cross-border, that we try to make the most out of the learnings we've made already for the last 20 years. It's also our aim in a decentralized business model to have common standards.
That's why we have established for the public sector and the approach and how to work on public tenders, processes, templates, which are the same for whatever country we are talking about, and that also gives, of course, for our colleagues locally in the country access to this network, which is centrally hosted.
We also have like the decentralized way of our strategy, decentralized way of that, and these have their own entities with their own P&L, their own strategy. That gives them the opportunity also to have local experience and local customer satisfaction. That means that the solutions can also be tailor-made because they're so much closer to their business and their way of thinking, but it all together leads to like the European way we act is more like the central way because we have everything to offer in our different entities, the whole chain with the devices and the workplace on one hand, the project, and then the services on top of it, and we can give it as one big opportunity to the market and to the public tenders.
Yeah, and in the end, for our customers and for our partners, it should look like a homogeneous approach on the public sector. I think, also to our vendor partners, we can give good messages in terms of that we know the pipeline for the next 12, 18 months, also where we have commitments with partners which projects we would like to do together. It's a resilient business model after all because of the system of checks and balances, which is included. Framework business on the one side is one thing that helped with big projects to scale public sector business, but we also do not forget about the transactional part, which is also in there. Also everything which is commercially driven is benefiting, I think, from the reputation of Bechtle as a trusted expert.
When we look in the organization, a typical tender lifecycle process, how we approach it, is that we try to engage with our customers in a pre-competitive dialogue when it's legally also safe to talk with customers, six or even better, one and a half years prior to the publication of a tender. Because as soon as a tender gets published, the official process starts. The communication with the customer is not allowed. It's only via bidder questions in writing, and everything needs to be transparent.
For these six weeks of tender preparation, we have then our tender experts. Those people do nothing else than tenders. And that's what I also did for the first years of my life at Bechtle. And I can say this is always a very challenging time because you need to meet all formal requirements. You need to be on top of the timeline, and you need, of course, normally you have one chance to submit and then hopefully win.
There's a knockout criteria. When you don't enter the right formula, you will be out no matter what.
Yeah. And then hopefully in the case of awarding, the execution will be handled locally, and the pre-sales team, the central one, will focus on the next project to come and to win. When we look at the mission statement of the Public Sector Division within the Bechtle Group, first of all, I think what made it so successful is the clear focus that we try to understand Public Sector also within the different segments. There is federal government, there are municipalities, but there's also education and healthcare, which differs also from a portfolio and requirement point of view. We are more and more also going towards leading the market in certain areas. I will give later on a few examples what are the trending topics in Public Sector where we pre-invested also in the future business there.
In the end, I think it's strong collaborators, and we have a very low fluctuation rate in the central team. That helps us a lot to benefit from the experience from long-standing employees who have worked on those tender procedures maybe for the second or third time. With every learning, we get better on that part. Now to show what Public Sector is within the Bechtle Group, you can see here the chart and the very positive tendencies throughout the last 10 years. There's always a need for digitalization in the public sector. For example, with the education market, which was a new area in Germany, for instance, with the DigitalPakt, where there was a lot of money funding available.
This will come now into recurring business because once you bought a device for your school, you cannot use it forever. It will be new markets. We're also successful in partnering with our ecosystem in there, and we want to offer future-oriented solutions. I've highlighted again four points from my point of view in the last 12 years I'm with Bechtle. 2013 was the time when we expanded outside of Germany to new countries, and one of the first countries, and today also one of the most successful countries besides Germany, is the Netherlands.
Here we also started with the expansion into the European institutions business, into Belgium, and successively because it's European public procurement rules, it's a comparable market, and the blueprint essentially works in all the countries. In 2017 was a milestone in terms of recognition of the importance of public sector because this was the first billion within the Bechtle Group with public sector business only. This was followed round about somewhere in 2020, 2021, also thanks to the corona boost, which was there in the public sector with the second billion. When you look at it today, we are EUR 3 billion public sector, which represents 40% of the Bechtle turnover in total.
Yeah, and one of the things to add there, when you see at 2022, that was also the moment that PQR joined the Bechtle group, and we have a lot of public tendering, like the police, the Ministry of Defense, and really big public customers and a really big share in the public market. We could grow even more together.
This is a slide where we'd like to summarize how we define public sector, first of all. So everything from federal government to municipality, European institutions, national, healthcare, education, higher education, associations, energy, also churches and welfare. In the end, everything, every institution which needs to tender and every institution where public money is involved, also utility sector customers like Deutsche Bahn are in the scope of our public sector definition. I think it's important to highlight because some of our vendor partners have different definitions, but this is how we see the market. 40% of the total turnover I've already mentioned, and this is not done alone by a central team, but of course, we have 3,000 dedicated public sector salespeople in the organization, and this is a huge community.
And that's also, I think, the ambition and part of the success to have these very dedicated account managers out there which address the public sector needs because it's a different language public sector customers speak sometimes. And of course, the lifecycle in the public sector procurement procedure is way longer than typically what you could gain in the industry part. What helps us as a brand is that we can claim to be we are in Europe. Everything we do is European-based. That's, I think, very important for public sector customers. Our ambition is to be the digitization partner for the public sector. Next week in Berlin is the Smart Country Convention. This is the biggest public sector event with a representation of Bechtle and our trending topics for public sector only.
One of the key drivers and something where also politicians are very concerned about is the question of digital sovereignty. This is also a topic we've invested a lot into. Our multi-vendor approach, our sovereign made in Europe approach is very helpful in those negotiations with our public sector customers. Yeah, 14 Bechtle public sector countries are benefiting from the central service. Of course, we have some high runner countries in there and some countries where we have still huge market potential lying ahead of us. One of those high runner countries.
Let me take you to the Netherlands, and we Dutchies always think that we have like a really big country, but it's also good to look at the data because our five entities are only divided by 232 km, and for us, that's really a long drive, and we try to avoid it all the time. It will take us like four hours, so on scale, it's like a very long distance, but I know when we see it in the bigger part and like the comparison with Germany, it's totally different, but yeah, we like to see it that way in the Netherlands, well, we have different brands, and that's coming back to the decentralization, so PQR has its own name because it's a managed services, and it's a very established brand in the Netherlands.
When you look at Bechtle, ARP, and PQR, they're all, and not added up, but by different entities, have 30 years of experience in the Netherlands of being in the market. It's a known name. It's a common name. It stands for stability. It stands for continuity. It's really important to have different brands to be part of the whole business and the whole company. When we look at the revenue, it's like 760. Yeah, you can go. Yeah. No, that's fine. EUR 760 million. Within that scale, and that scale is also for France, we made a structural change, like a change in how we see it. We stated it makes sense to state a VP Netherlands and a VP France to be responsible over the country. That gives us the opportunity to a couple of things.
One of the things is improve efficiency. So yes, we have the decentralized model, and no, we're not changing it. But on the other hand, we have the possibility to also do the centralized way. Why should you have, for example, five recruiters in different entities that are hunting for the same people in a small country like the Netherlands? It makes no sense. So when you take that central, you can have more efficiency, and you don't touch the decentralized way of the entities themselves. Same for legal, for example. It doesn't make sense to have five legal people that are aware of their company and not working together. So in that way, we can add a lot more of efficiencies in our countries. The other thing is one voice to partners.
What we have seen is that because of the decentralized way, our biggest vendors like Microsoft, Dell, HP, Lenovo, and all those bigger vendors really like to see the entities as standalone because they don't want to give all the rebates to the bigger part, but when we add up all the entities, which is possible because we're a fiscal unity, they have to admit that we really have the skill, and we can use all the partner benefits, so we have now, by stating a VP, one voice to the vendors as well. The other thing is one portfolio. I mentioned it before, but we have so much in-house. We have the laptops, the workspace on one hand, the project security, the backups.
We have the managed services, so we can give to the customer the whole chain, not only one part and one part. When we work together and have one voice to the customer, we can give them one portfolio, and that really helps us in the public market, in the tendering, but also in the commercial segment to work together. Working together is not always easy, so in the end, we have to find a way. We have to find a way how to share rebates, how to share margin, and those kinds of stuff, but when we're working for the same goal, it's definitely possible.
Coming to the part, the etiquette in public sector business. I mentioned it already. It's different. They speak a different language. And I think it's important that we take care of not making mistakes by behaving not correctly because this will be always, I think, publicly seen. That's why also in the pre-sales, what we call pre-competitive dialogue, when we focus on our consulting part, it's not influencing customers that they can in the end only tender one solution. It's the public entity's obligation to tender in a way that there is fair competition. And I think if the competition is fair, Bechtle is also able to win a big part of that. So that's why we always stay within the boundaries and respect the guidance of the public sector customers.
We are compliant. We're also in the tender procedures. We strictly follow the code of conduct of our customers. We also see normally no reason to argue with customers based on their decision. I think we need to be a fair partner, to be a transparent and loyal and long-standing partner of the public sector, and showing this competence rather than looking for quick wins. And that we can advise from mouse to data center, what I always say. This is very unique that we have this under one roof. What makes us a trusted expert as well, I think, is our big portfolio. We are multi-vendor in everything. We are not tied or linked to a certain solution or to a certain vendor.
And when you can approach customers with an open agenda and only having the best intention for the customers in mind, I think then you can also gain this trusted status and keep it. That's what we fight for to stand for in the public sector. To end this first part with a resume, in my humble opinion, the interaction between the central and decentral performance unit is a great success story. I think that what the figures can prove, but it's also a key differentiator in the European market. I don't see many other companies out there which have a similar strong central tender team in combination with dedicated sales forces very, very close to our end customers. We go to contribution of the European expansion.
Yeah, and go into the Netherlands a little deeper because in 2022, Bechtle acquired PQR as the first system house outside of the DACH region. After that, in the following year, PQR acquired two more companies to establish in the managed services. And that gives the opportunity to be resilient, have a resilient model. And that word resilient, we speak a lot about it. It's a really nice word to show that on one side, you have the transactional and you have the recurring, and both rely on each other, so in the transactional, you have the services on top of it, and when you already have the services, you can also sell the transactional part, so both of them are keeping it in balance, and one arm slows down, the other will go up.
When the other market is slowing down, then so there is always a balance, and you have a more resilient model. That's why we have so much thought about that. The high IT maturity in the Netherlands really helps in adopting. When we look at the market in the Netherlands, we see that there is a high adoption of AI, of innovation. We also see that our biggest vendors see the Netherlands as like a tryout. They always try new stuff in the Netherlands to see how it goes because early adopters are always the ones you need for finding out if your new product will go further. That also helps in having a blueprint to the rest of the countries and to contribute in what's new in the market and be on top of the new things in the market. When we look at the future.
Sorry, too fast.
Yeah, too fast.
On my way.
The future outlook, we see in the Netherlands still an economic growth. So we still see people selling, buying, projects are in the market, and especially in the public market because there is an appetite for being safe, being as well in security and have the right things on top right now. There's also an outsourcing wave, and that has to do with that feeling of security. Of course, security is not always be on top of everything, but when you have legacy hardware or legacy operations, then you have to do something. And we see a very big outsourcing wave in the Netherlands following that. When we look at the public tenders in the Netherlands, there are a couple of big differences between the Dutch market and the German market.
So one of the things is the way that the tenders are validated. You have points. That point relates to different parts. When we look at quality and added value, it can be like a huge part of the solutions. It's sometimes like 60% of quality and added value and 40% of price. Sometimes price isn't even that important when your quality and added value is so much higher. That's a completely different playing field than only going for the lowest price. That also comes to something different, and that's sustainability and quality driven. You also get points for sustainability records like EcoVadis and all those kinds of legislation parts. When you don't have that, you don't get the points, and you can't make it up by money.
You can't make it up by the lowest price. You have to enter a tender by adding the highest certifications, the highest level of like all those sustainability records. In the Netherlands, we have a lot. We have like eight important, and we placed only two here, but there are a lot of things that you have to rely on before you can enter the tenders. That also means that for new parties to enter that market, it's really hard and that the competitor field is becoming lower. It also means that we really have to invest in sustainability. One other thing, and that's the last thing I point out in the differences, is Social Return. You will see it there.
Social Return in the Netherlands means that of the project you have win, the contract value, 5%-8%, you have to return to society. There is an administration for that, and it means like you have to fill in forms that you are eating in a restaurant that has a sustainability quantity, or you have to have people cleaning your coffee machine with a distance to the market, and when you don't do it, you get a fine, so they definitely see it, so it's kind of a different playing field than we have in Germany.
Some other European countries. Nevertheless, I would like to underline what you said about the Netherlands as an indicator of what's going to happen in other public sector markets, especially on the part of sustainability. It's true. Five years ago, we've seen already tenders of a big city in the Netherlands, the biggest city probably, which tendered up to 30% on quality criteria for the evaluation of total only on sustainability. Things like last mile green delivery, circular.
Economy.
Economy. Thank you. Recycling, refurbishment, all those things were in there. I took this tender and discussed it with one of our biggest customers in Germany in the public sector, and they were intrigued by the ideas the Dutch people had already five years ago. They also took over some of the requirements into their tender process. What qualifies Bechtle to be there, and why do we also promote this? Of course, we are also interested in fighting climate change, but we also, of course, want to make use of our advantages that we have invested in those certifications, in those supply chains updates and everything.
That means it helps us in the long term, maybe in the midterm, that we are better positioned thanks to our size and thanks to our cross-border collaboration to have some advantages in this part. Today, just another anecdote, we're delivering with these big German customers with electronic cargo bikes, notebooks to the end customers. This is, of course, a nice add-on also for traffic in big cities. In general, you all know there's the European Green Deal. There's the Supply Chain Act. Germany committed on climate neutrality until 2045. It will get more importance in public tendering, and I think we are very well prepared. It's an obligation.
It's a responsibility of the public sector representing more or less 25% of the GDP in all European countries to be the front runner for those topics. We integrate with our central sustainability team all those things into our go-to-market. We try to comply upfront with all the minimum requirements which are there, the certifications, but there are also product certifications.
So, also our vendors are challenged on that level, and we need to qualify or disqualify certain vendors which are not complying with those standards. References we need, and the energy consumption is also something in IT, especially with the AI marching up, will have a way higher impact in the future. So energy sufficient devices are key. And the next slide, I will not go into the details.
It's just an overview on the things we are working on. It's best, of course, to save resources, not to have them wasted at all. On the reporting, we are really good. The product choice, also in combination with the central logistics and services, is a big topic. The logistics coming from factory, does it come by plane? Does it come by train? Does it come by boat? Most of the goods are still coming from China.
Those are things to consider in the total CO2 footprint. And my example, which I already mentioned, the last mile green delivery with electric vehicles. And then, of course, circular economy always and will play a role in our strategy. For the consulting part, not our core strengths yet, but embedded in a partner ecosystem, we have a lot of partners who can consult customers in the public sector, how they can reduce also in the IT part their CO2 footprint. So much about a topic which will, I guess, more focus topic for the future. Let's look at what are the challenges for our public sector customers today from our point of view. There will be a huge lack of personnel until 2030.
Almost 30% of the current staff will retire, and the public sector got an issue with attracting young people. It's the salary model. It's the more hierarchical structure of the public sector in most of the institutions, and they compete, of course, with the total market. We all know that the birth rate in Germany is 1.3. I don't know if it's much better in the Netherlands, but it will not change. Demographic change is already there, and we will see the outbreaks in the public sector market even more. That leads, on the other hand, that we see more and more consolidation, not only in Germany, in all the European countries. Not every municipality is tendering on their own.
They go and merge their IT needs under the roof of buying centrals. In Germany, there's one example called ProVitako, but also govdigital. Those kinds of structures, they combine the buying power of hundreds of German municipalities in one public procurement tender. That means for us, as a big company, it's, of course, important to win this. It saves us, if we win, a lot of work, which we normally would do locally. It also increases the risk. If you don't win this framework contract and it ends up with a competitor, then you're closed out from the market for a certain time.
Yeah, we see that the same in the Netherlands, right? That we used to have different lots in a tender, and you can enter for two lots of five. And now you can enter five lots at once. More to win, but also more to lose. So there is a risk in that.
Indeed. But I think also thanks to our size and our proximity to customers and end customers and knowing that those purchasing centrals will play a crucial role in the future, we are prepared. Budgets in public sector. In Germany, for instance, it was never an issue to have budgets for digitalization. It was rather an issue there was not enough people executing framework contracts and launching projects. Now we see the tendency vice versa. There are cuttings, and there's a lot of uncertainty in the public sector. But public sector in general, I think if we see the gap, it's still a market where we can only win market shares in the future, also with new technologies.
On the other hand, when we look at the lack of personnel, I think the key is the consolidation and then the rollout of the projects. We've seen it with the DigitalPakt in Germany. There were, after three, four years, still hundred thousands, billions, millions of money from the central budget available, and were not asked by the municipalities/the schools, and the same we have with the Onlinezugangsgesetz. I think there was more money available than was in the end demanded.
The good thing about the consolidation is that we have everything under one roof. We don't need a consortium to fill in the different lots. We have it in our own companies, and that makes also an advantage to the competitors.
Yeah. Our message to our customers is that digitalization is part of the solution because with the new technologies and AI support, I think they can also benefit in terms of doing less with less people the same things as they would do today, which leads us to the trends in the Public Sector. I would like to start with Smart City. Smart City in Germany, but also in Europe, I think it's a buzzword which is going around for the last 15 years, if not even longer. However, there are central fundings in Germany for Smart City projects. Each municipality, each mayor has a plan. How can I do? What could I do to make it more livable in where I am?
This is something where I think we invested a lot because it's also linked to e-government solutions, and everything will become smarter from smart watering, which is then increasing the efficiency in using water resources to the traffic jams to avoid with the smart traffic system. All those things are under the Smart City umbrella, and this is where we have an end-to-end portfolio in the meantime with a lot of startups included, which would never get to big cities like Frankfurt, for instance, but under the umbrella of Bechtle and their local Bechtle entity, we bring them along. Smart City is also in the Netherlands, actually a big topic, isn't it?
Yeah, it's definitely a big topic, and you see it. It's not asked by the specifics, but it's also underneath. So it's the solution for what they're not asking, and it's everywhere.
Cybersecurity, needless to tell, it's one of the biggest threats we've got in IT today. One example, what we do there with the country of North Rhine-Westphalia, we've been awarded a framework contract where all the municipalities can get a penetration test, what we call BHART, and they can, within four, five, six days, they have a result, where are my possible threats? And then they can work on this with different solutions and also in cybersecurity retire some of the solutions they have in place because it's a very volatile and fast market. And a solution from today, and we've seen it with CrowdStrike, might not be a guarantee that you're safe for all times.
No. And in the Netherlands, you have also a common cybersecurity tender, and it has been won last year by Bechtle to provide every municipality in the Netherlands cybersecurity. It's with three other parties, so like 33% must be doable.
Yeah. Low code, no code, thanks to the Onlinezugangsgesetz in Germany to have digital applications for citizens. This has become a bigger topic, and we have Bechtle entities in-house in Germany, which can also serve across the whole country, but also explicitly when there's English language possible. Partner ecosystems, I've mentioned it. We strive to be main contractor for everything what we do, but we were not shy to include business partners in the execution, but only trusted partners with a certain public sector skill and reputation, and I think we as a platform, we have progressed in this quite well.
Yeah, even without borders, cross borders. So we also won last year a big tender in Switzerland with Germany and the Netherlands working together.
Yeah, voilà. Managed service, I think you can tell more about it, why this is important for public sector.
Yeah, so as I said before about the outsourcing wave, it's for municipalities and the public market sometimes a little frightening to give away the key of your whole IT department. But it's not doable to do it in-house anymore. So with the managed services department, we take all the possibilities, all the responsibilities, the security, and everything out of the hands of the public market, but also the commercial market, so that companies can focus on what their business is like, and the IT is just underneath it and working. And that gives also a relief to the municipalities, to the customers, that the IT is working.
No presentation in 2024 without mentioning artificial intelligence. It will play a role in every vertical in the public sector. We see it already that especially federal government and Länder's customers, they are implementing artificial intelligence in their internal processes. I think with Planet AI, we have acquired in Rostock a very capable company which really meets a lot of needs of public sector customers. You've got on the one hand a huge amount of paper still. You need to digitize it, but then you also need to do something with the digital data you've got. And with our solution, IDA, I think this is a USP we've got right now with Planet, which we are trying to implement with big customers in the public sector.
What we sometimes see is that there is a hesitation to start a project by customers because they don't know for sure what AI will bring. So when they say yes right now, in a month or two months or half a year, it can be changing. It can be changed because the market is going so fast. So what we try to tell to the customers is that when they cross that line and set their signature and come into the project, we will help them to guide them through that way of the coming years in which AI will grow faster, and we can be on top of the market and take them with us instead of they're just putting their signature and then waiting until things change. We can help them if that changes. And I think that makes a huge difference.
Multicloud is a way to be sovereign because you avoid a so-called vendor lock-in. Everyone knows as soon as you're in a certain cloud, and it's no matter if it's AWS or Microsoft Azure, and you only have this one cloud, and you might create a lot of on-premises data into just one cloud, then you're kind of stuck. Our response is with Bechtle Clouds to have a multi-vendor approach on this so that customers can balance and distribute workloads, which are cloud-based, into different clouds. There are sovereign clouds, German-based clouds like IONOS or STACKIT in there, but there's also the hyperscalers in there.
This is at the moment meeting a lot of the requirements of the public sector needs because you don't want to miss out on the innovation coming from the hyperscalers, but you don't want to put everything of your critical data into a super hyperscaler cloud. There's a lot of tendering ongoing at the moment, which is specifically on multi-cloud tenders. Budgets have never been an issue normally in Central Europe. Nevertheless, we see a tendency that budgets are getting tight, and they are looking for more flexibility. At the moment, it's not a huge part of the public sector business that we look at X as a service, devices as a service, software as a service for sure because the manufacturer is driving it, but a laptop as a service, for instance, not yet.
Nevertheless, learning from the commercial part of Bechtle, we would be prepared if there would be a tender in the future for X as a service. And last but not least, solutions. I think customers are also in the public sector not looking anymore for just deliver me the goods. I will handle it somehow. Lack of personnel again is asking that there's more solution attached to the devices we deliver without having it fully outsourced or fully managed by Bechtle. And the number of applications in the software business is increasing a lot. We see that each euro of hardware comes with a multiplier in software. So this is something where we also in the public sector address customers to streamline their software needs under one project, under one umbrella, and we are the multi-software delivery partner for them.
Yeah. And in a summary of this slide, we can provide everything under one roof within the Bechtle Group. But the good thing, the good change that we see right now is that lock-in part that customers used to be very frightened of, like, oh, we do the software at a different party and the hardware at a different party because otherwise we have lock-in, that's not that visible anymore. They think it's okay to have, well, like one throat to choke. We have one party. We deliver it all. And in the tender, it's like four years, six years. It's like a period of time. They don't have all the discussions between the suppliers, between the subcontractors. You have one party that can do it all.
Just to underline it with some references and publications which have been sent by Bechtle. For instance, in the middle column, we have this data and AI analytics services framework contract, which we've won in the land of Baden-Württemberg. This is where we consult the Landesregierung on their needs for AI because, like Marijke already mentioned, they don't know what to do with it. There are certain things which are all Copilot, which you might also, some of you use already, but there's way more, and they want to understand how can I implement it resourcefully, but also with data protection in mind in my own system. Left and right, you see the Bechtle Smart City portfolio, the end-to-end, and on the right side is another nice example for multi-country framework contract, which is a pan-European cloud framework contract.
And we made one central response and took all our Bechtle entities as the execution entities under the umbrella. So that means if there is a higher education customer in the Netherlands, he's served by the Netherlands, and if there's one in Spain, it's served by the Bechtle entity in Spain. So we always make use of the local connection, being living in the country, speaking natively the language. So when you would ask me today, what is the market potential? It's a very basic graph, but I think it's telling more than a thousand words. Technically, we have endless possibilities in the digitization also for the public sector.
The real life, and I don't know when you went the last time to your public administration, looks a little bit different. It's not end-to-end digitized. Otherwise, there wouldn't even be a need that we go there. We have a reality gap in a certain context. What is Bechtle doing to close this? First of all, we are addressing on all levels the new technology. So that means from a purchaser to the IT coordinator to the mayor to a CEO of a utility company, we try to give them an overview on the technical possibilities.
Yeah, and the second thing is supporting our customers in the resilient model and choosing the right way in stepping in right now. We can help them out with AI, with all the changes, and we have everything under one roof.
Yeah. And in the end, and it's also important for public sector. Public sector customer needs to be reliable themselves, and what they need is reliable partners. And we are in this business for 40 years as Bechtle with a strong focus on public sector for the last 20 years, and this is something we want to reflect that we're equally reliable. We are no high runners. We are not making a big show, but we want to be there when they need us.
Yes. And coming to that, well, we have a lot of market potential, and we're looking forward for the future.
Thank you.
Thank you. When there are questions, we're here.