Happy days are here again! After the delayed pick-up in work after
the Y2K lockdown, it looks like the UK software and services market
is recovering strongly if latest results from the Terence Chapman
Group are anything to go by.
Ian MitchellCity briefing
Happy days are here again! After the delayed pick-up in work
after the Y2K lockdown, it looks like the UK software and services
market is recovering strongly if latest results from the Terence
Chapman Group are anything to go by.
TCA Consulting provides IT services and software to the
financial services industry - a sector particularly badly hit by
businesses refusing to make changes to their systems ahead of the
millennium and the leap year. Consequently, many services companies
operating in the sector, including TCA Consulting, issued profits
warnings as their costs remained static but their revenues dwindled
as customers postponed projects.
Ordinarily, in such circumstances, companies would cut their
cost base and go into hibernation until market conditions returned.
But services companies faced a real dilemma as their major costs
are staff, and reducing them would have meant firing staff who are
traditionally difficult to find and retain. So most decided to take
the hit on the chin and wait for customers to lift the ban on new
projects, praying that the lockdown would not last long enough to
derail their business.
For TCA at least those prayers have been answered. During the
dark days from September 1999 to February 2000 its utilisation rate
- the percentage of consultants being charged out on projects - was
49% at an average charge out of £1,000 per day. March was similar,
but April has gone through the roof, with utilisation rates up to
75% and rates up to £1,300 per day. A £9m contract to supply ABN
Amro to prepare systems for a new pan-European online retail
brokerage, announced on 3 May, is an example of the type of deal
which has been waiting in the wings for customers to lift their
self-imposed embargoes.
TCA Consulting says that current utilisation rates are
unsustainable, given requirements for training and so on, and it is
looking to hire more consultants.
The company is to be applauded for providing data about its
utilisation and charge-out rates, making it one of the very few
companies prepared to do so. The figures, backed up by other
anecdotal evidence, suggests the lockdown is behind us. Despite
some gloomy predictions from analysts, an April/May pick-up in
activity in IT projects looks likely to be the most widespread
outcome.
This reinforces my message (Computer Weekly, 16 December
1999) that users who wait too long to begin work on projects will
find it hard to get the consultants they want, and harder still at
a price they are comfortable with.
The rest of 2000 will be incredibly busy for IT services
organisations and they will be able to cherry-pick the projects
they want to work on.
Ian Mitchellis
an IT analyst with stockbroker Beeson Gregory. His opinions should
not be construed as investment advice.