The IT sector – thriving or diving?

The world of IT is not always straightforward. Some headlines suggest the sector is booming, with organisations’ investment in ‘all-things-tech’ continually on the rise, demand for digital skills hotter than it has ever been and innovation continuing apace. But elsewhere, there are hints of the environment encountering problems, with Leeds-based Firstnet Solutions one of the industry’s most recent casualties.

With this well-known IT supplier located only a few miles from our own HQ, it struck a particular chord with us to hear that Firstnet had entered into administration, and we hope that jobs can be found for their workforce as soon as possible. Nobody wants to hear of the collapse of any company, let alone one that has previously contributed so much to the IT industry.

So, what does this news signify for the rest of the channel?

“Unfortunately, whilst fast-changing business environments are rich in potential for suppliers and customers alike, there can be occasions when some firms don’t survive,” believes Vapour Cloud’s CEO Tim Mercer.

Speaking to CRN.co.uk for example, David Cusworth, a director of Firstnet, spoke honestly about the cashflow challenges his business had encountered. He and his co-director Angie Cusworth are reported to have ploughed thousands of their own money into the firm in an attempt to keep it afloat. But constricted cashflow had catastrophic consequences for the company, when suppliers refused to offer extended credit terms beyond 30 days but many large clients continued to demand 60 day terms. It’s a very disheartening story to read in our industry, after the organisation was doing so well and the owners clearly battled to keep Firstnet – and its colleagues – in business.”

But Firstnet is not the only brand to have hit the headlines. Only a few days ago, news broke that reseller LDD IT – another local firm – had also gone into administration. It is understood that a buyer is now being sought for this company, which is reported to have achieved turnover of £12m at its peak.

Tim continues:

“Here, the story is very different, and unfortunate personal circumstances are said to be the reason behind the position that LDD now finds itself in. Fingers crossed that because this is being marketed as an ‘ongoing concern’, the story of this family business can continue.

“It just goes to show the breadth of the pressures facing companies in our sector. Other organisations often over commit to what they can deliver to clients, professing to provide products and services that don’t truly lie within their remit. Some recognise the growth potential in the market and set unrealistic expansion targets as a result, which can place too much pressure on the team and cashflow.

These are just some of the reasons why IT brands encounter problems, or worse still insolvency. However, this isn’t to say the world of IT on the whole is taking a dive, stresses Tim.

“Despite the apparent ‘doom and gloom’, I would say our sector is thriving,” he elaborates. “We’ve never been busier, in terms of contract wins, project delivery, product innovation and colleague recruitment, but every element of our growth is carefully considered to ensure the right actions take place at the right time.

“The market does impose pressures that are sometimes difficult to navigate. But they are navigable, with the right financial backing, management team and channel relationships.”

Posted by Katie Mallinson
on April 25, 2018

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