Time to act as Energis troubles deepen

Analyst group Giga has advised customers of troubled telecoms and IT services providers Energis to consult their lawyers and...

Analyst group Giga has advised customers of troubled telecoms and IT services providers Energis to consult their lawyers and start looking for alternative suppliers.

Energis last week announced the sale of its non-UK assets in a bid to raise cash after warning that it was at risk of breaching agreements with its bankers.

The company's spectacular fall - which mirrors the problems of US and European alternative telecoms carriers such as Global Crossing and Viatel - is causing headaches among its UK corporate clients.

Energis, which was spun out from the National Grid in 1997, has a string of major clients including the BBC and Post Office Pathway system, the electronic network connecting all the UK's Post Office branches.

Other clients anxiously looking at the future include Lloyd's, for whom Energis provides a major metropolitan network for 140 companies within the London insurance market.

High street retailer Boots uses Energis to provide the backbone for its loyalty card and stock control systems, which links more than 1,300 locations nationwide.

NAFIS, the first single national system for storing, retrieving and sharing fingerprint records, runs on an Energis LANConnect solution; the troubled telecoms company also runs call centres for Eurostar.

Mike Dodd, vice-president at analyst organisation Giga, told CW360.com that Energis customers should act now rather than wait for problems to emerge.

"Check your contracts. Get on to the supplier at the highest level possible and find out what is going on and look for alternatives," he said.

Dodd said the strength of an organisation's initial contract was crucial in coping with a troubled supplier.

"You have to check your contracts now, " said Dodd. "Do you have a get out clause? Can you invoke force majeure clauses? You need to consult your lawyers to make sure you get the maximum flexibility from whatever contract you have negotiated."

Dodd said organisations that were pro-active could maintain some of the initiative. "The last thing companies in a situation like that facing Energis need now is to lose customers," he added.

Dodd held out some hope for organisations fearing for the quality of service should Energis be taken over by one of the speculative investors now studying the group. "The best chance a new owner has of getting value from their purchase is to keep the business going. You can't do that if your customers are leaving."

Freeserve, Energis's biggest customer, has already given notice on its £100m a year contract. The company has the option to terminate the relationship in 2003.

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