South African investors can gain exposure to global growth trends through JSE-listed companies with international operations, such as Bytes Technology, says the author.
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South African investors can gain exposure to global growth trends through JSE-listed companies with international operations. One such opportunity is Bytes Technology Group, a UK-based IT services company benefiting from the accelerating shift toward digital transformation, cloud computing, cybersecurity, and artificial intelligence.
What does Bytes Technology Group do?
Bytes operates as a value-added reseller, acting as an intermediary between technology vendors and customers. The company primarily focuses on software, which contributes 90% of its gross profit:
- including cloud-based and cybersecurity solutions.Bytes operates through two divisions:
- Bytes Software Services, primarily serving the mid-market UK private sector
- Phoenix Software, exclusively catering to the UK public sector
Bytes maintains strategic partnerships with over 800 global technology vendors, including Microsoft, AWS, Adobe, VMware, and Check Point. Its strong relationship with Microsoft is a key growth driver, as Microsoft products account for around half of Bytes' gross profit. Microsoft’s future product priorities that include cloud migration, cybersecurity and AI are very positive for Bytes’ growth outlook.By leveraging its expertise and extensive vendor network, Bytes plays a crucial role in supporting mid-sized businesses through their digital transformation journeys.
Financial Performance and Growth Drivers
Founded in 1982, Bytes was acquired by Altron in 1998 before being demerged and separately listed on the JSE and London Stock Exchange in December 2020. Since its unbundling, Bytes has delivered consistent double-digit growth in gross invoiced income and gross profit, fuelled by corporate investments in digital transformation and IT modernisation.
Key growth drivers include:
- Cloud adoption: Microsoft estimates demand for cloud-based solutions for small and midsize customers will grow at 20% over the next four years
- Cybersecurity demand: Rising cyber threats have made security solutions a critical investment for businesses worldwide.
- AI adoption: Irrespective of which vendor ultimately wins the AI race, Bytes is well positioned to benefit. While Bytes is not an AI developer or at the cutting edge of the technology, it is at the forefront of actual enterprise adoption of the technology (e.g.: adoption of Microsoft Copilot).
Market Uncertainty Creates an Opportunity
In early 2024, investor sentiment toward Bytes was affected by the sudden resignation of CEO Neil Murphy. Several changes to Microsoft’s rebate structure for resellers that became effective in January 2025 have also weighed on investor sentiment. While these factors have introduced short-term uncertainty, they may also present an attractive entry point for long-term investors, as Bytes’ fundamental growth drivers remain strong.
Conclusion
Bytes Technology Group offers South African investors exposure to global technology trends through its JSE listing. With strong vendor partnerships, particularly with Microsoft, and a focus on high-demand areas like cloud computing, cybersecurity, and AI adoption, Bytes remains well-positioned for long-term growth.
Tim Olls is analyst at Laurium Capital and part of the PPS Stable Growth Fund investment team.
BUSINESS REPORT