Our enthusiasm for the digital services theme is driven by two trends.

Information systems, business processes and business practices in the more emerging countries are inherently less firmly established than in Europe or North America. It is therefore much easier to adapt them and adopt new solutions.

In addition, workers are generally highly skilled, which increases their exportability for many of the companies we cover. This is a particularly salient point as these skills have become the new development drivers for the countries concerned, enabling them to create high value-added products and services.

We believe this kind of development is much healthier and sustainable than the manufacturing of low-cost products that will end up tens of thousands of kilometres away.

India is renowned worldwide for its know-how in this industry and has been for a long time, but Vietnam and Thailand are also worth mentioning.

Japan, a choice investment market.

As we described in our dedicated report from January 2020, Japan has been among our favourite investment markets for several years. The country's ageing population poses a number of major economic and social challenges, so its leaders have made productivity gains (by public and private operators alike) a national cause.

The digital transformation thus strikes many as being the miracle solution to the problem. One might assume that Japan embraced this revolution a long time ago, but the country actually has a long way to go before it can claim to be up to speed.

There are many examples of this, and we describe two very explicit and very practical cases below.

• Most administrative procedures, such as completing a property transaction, still require a manual seal referred to as a “hanko”. This became problematic during the spring 2020 lockdown and now seems outdated given the new social distancing measures being applied.
• We would also mention that guest registration forms in hotels are still filled in manually.

The good news is that the recently formed Suga cabinet has made Japan's digitisation one of its key policies. It has already announced that 90% of hankos could thus be scrapped. It will provide further details on the practical measures that will have to be taken towards the end of the year. The national association of digital companies reckons that this move could potentially save around € 20bn on administrative procedures alone. Purely on the basis of the digital transformation efforts that the Japanese administration is planning, we estimate the market to be worth € 8bn.

The software requirements of Japanese companies amount to close to € 100bn, so the subcontracting market could be worth € 30bn. The potential is therefore enormous.

As far as investing is concerned, be it in Japan or in emerging regions, we would emphasise two of the main features of the companies in which we have invested.

• First of all, they dominate their market in a particular niche segment. This is the case of Pro-Ship, a Japanese company that supplies accounting software to manage a company's tangible assets. It is hard to be more specific than that!
• Secondly, the companies we most appreciate are moderately sized, with market capitalisations of a few hundreds of millions of euros. Such companies tend to be owned to a large extent by their founders or management teams. We are particularly keen on such ownership structures as they guarantee a long-term vision and aligned interests. For instance, the founder of Humanica, a company with a 60% share of Thailand's market for payroll outsourcing solutions, still owns a 38% share of his company's capital.
• Last of all, we often note that companies are patently undervalued, particularly in Japan. Business Brain Showa-Ota (software integration, consulting) trades on 6 times its operating income whereas its European peers are trading on multiples twice as high and its US peers enjoy multiples two to three times higher.

We were already keen on the digitisation of our working and personal environments as an investment theme even before Covid; it now appears to be more topical than ever.