Profits slump could see increase in stiffing



Bill Goodwin

IT directors were urged to keep a vigilant eye on their software and services suppliers this week following a spate of...



Bill Goodwin

IT directors were urged to keep a vigilant eye on their software and services suppliers this week following a spate of profits warnings by major IT companies.

Tuesday's statement from Dutch software company Baan - that it lost more than previously reported last year and that it was not viable unless the stalled takeover with Invensys goes ahead - highlighted the problem.

Baan's announcement followed profits warnings from software suppliers Informix, Lynx Group and even global services company EDS.

There is no suggestion that these firms have penalised their clients: however there is a growing fear that difficult trading conditions will prompt some suppliers to attempt to recoup profits from customers.

Profit growth for the top 2,000 IT software and services companies has nose-dived from 62% in 1998 to 15% last year, and is expected to drop further, the influential Holway Report has revealed.

And with suppliers coming under financial pressure, IT departments will need to keep a close eye on their contracts and service agreements, IT professionals warned.

John Perkins, chief executive of the National Computing Centre, urged users to be on the lookout for attempts by suppliers to use loopholes in contracts to squeeze more money from them.

Users should also monitor the quality of service they are receiving from suppliers and service companies that may be tempted to cut back, he said.

"Over the next two quarters a number of companies will try some quite severe stiffing," said Philip Virgo, secretary general of parliamentary group Eurim.

David Roberts, executive director of tif, the Technical Infrastructure Forum, said IT directors should continue to be wary. But he added that greater awareness among IT directors meant stiffing was less likely.

IT analyst Richard Holway said that while it was inevitable that some suppliers would attempt to squeeze more money from users, for many it could prove counterproductive. "For everybody who screws a customer now, there will be another half dozen who will be waiting in the wings to take him to lunch," he said.

Read more on Business applications

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.

-ADS BY GOOGLE

SearchCIO

SearchSecurity

SearchNetworking

SearchDataCenter

SearchDataManagement

Close