ICL customers ponder impact of redundancies

A string of blue chip organisations, government departments and big retailers are waiting anxiously to discover how they will be...

A string of blue chip organisations, government departments and big retailers are waiting anxiously to discover how they will be affected by ICL's announcement that it is shedding almost 15% of its UK workforce.

Marks & Spencer, BT Cellnet, the Department of Trade and Industry, Lloyds TSB and Logica are just some ICL customers. Many have large outsourcing contracts with the company.

ICL, once the leading light of the UK computing industry, is looking to make 1,500 job cuts by March 2002. The company hopes most job losses will be voluntary.

The redundancies are the latest in a series of cost-cutting measures forced on the company since it cancelled a planned stock market floatation last year.

Earlier this year ICL slashed the number of temporary and contract staff it employed, implemented recruitment freezes, encouraged staff to work from home and sold its government applications unit.

ICL customers contacted by CW360.com were determined to ensure their businesses would not be hit by the job losses. But many thought the IT services company could lose additional business as a result of the cuts.

One customer, a technical specialist with Britannic Assurance, was confident that the redundancies would have little impact on his organisation so long as ICL stuck to the terms of the licensing agreement.

However, he admitted his organisation was undecided as to whether to offer further business to ICL. "We are thinking about extending a contract in the Unix area and looking at either IBM or ICL. If the redundancies affect support staff, then we might go to IBM," he said.

Graham Fisher, senior analyst with Bloor Research, told CW360.com: "There are obviously some areas of the business that are sluggish," he said. "The fact that they haven't got rid of their reselling arm might suggest that they perceive it as being strategic to the business. However, it is also a depressed market and who is going to buy it? By going for redundancies, ICL could be looking for a quick fix solution."

One public sector IT director told CW360.com that his organisation had ditched its outsourcing contract with ICL because the competition was much cheaper.

"The main problem we have with ICL at the moment is that its staff are demoralised because they know they've lost the contract," he said.

But other users seem less concerned. The Highland Council signed a 10-year, £48m outsourcing contract with ICL in July 1998, with a clause to deploy a major modernisation scheme. A representative said: "The Council does not anticipate any detrimental impact on the service provided by ICL as a result of the company's rationalisation programme."

Another IT director in a major services company said his company had a lot of in-house expertise, with minimal dependency on the outsourcer. But, he said, he was confident that the service level agreements (SLAs) with ICL would stand any test.

"An SLA is an SLA," said Fisher. "Vendors still have a commitment to provide a certain level of service to their customers.

"For ICL's customers to continue to receive the same level of service [they received pre-redundancies] depends on how clever ICL is in its service management and where it makes cuts."

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