Traditional services and software suppliers should shed their older staff as they will not be able to hack the change into an e-services economy, leading IT analyst Richard Holway told suppliers last week.
Predicting a continuing bleak outlook for the sector, with falling revenues and negative profits growth this year, Holway called on 400 senior suppliers attending his annual presentation to the Computing Services & Software Association to bite the bullet.
"The hopes of this industry are anchored in e-services, which will move from 7% growth in 1999 to 30% in 2003," he said. "The profile of projects is changing and won't use the traditional skills.
"It is difficult to make a 50-year-old Cobol programmer into a Web programmer overnight. Services and software industry companies have the wrong skills set and should lay off those with the current skills set.
"Decisions have to be made quickly to succeed," Holway added, saying that it would be a mistake to retrain older staff. "I expect these companies to go through expensive retraining exercises only to find that they cannot turn 50-year-olds into Web programmers," he said.
Holway said average profits for IT services and software companies in 2000 had dived from a peak of 62% growth in 1998 to just 15% growth last year. The 130 stock exchange-quoted companies fared worse, dropping to 5% growth last year. Holway expects profits for the sector to be in negative growth this year.
He also predicted a continuation of the takeover frenzy, with several large mergers of suppliers over the next 12 months.