News that Commander had hit the skids was no surprise to many in the industry, but I was still a little shocked when the receivers were finally called in.
The listed integrator’s poor financial record over the past 12 months, along with a crippling $380 million debt to the banks, was never going to be easy to recover from, but what has amazed me is how Commander’s management team has continually cut off its nose to spite its face.
The company has gone from ambitious acquisitions and too many fingers in too many pies to over-zealous staff cuts across all teams, an abrupt exit from its significant hardware reseller business, constant reshuffling of debt and a failure to sell-off non-core assets. Why didn’t the company offload its PC assembly arm, Ipex, for example? Or its software licensing business before Data#3 nabbed the staff, or the Affinity recruitment division when the going got tough?
For over a year now, Commander has struggled to meet bank repayments while juggling very valid supplier and customer concerns.
It’s not all the current management team’s fault – a tightening economic market and global credit crunch is not making banks any more lenient or forgiving to those with big debts. And CEO and managing director, Amanda Lacaze, has made valiant attempts to convince the market of Commander’s turnaround plan since she took over from Adrian Coote in December.
I think most would agree Commander’s hostile and expensive takeover of Volante in 2006 was the catalyst for its current struggle with debts, customer management and overall, its identity.
One question raised by a couple of industry representatives over the past week is what affect Commander’s demise will have on the value of other integrators in the IT space. Commander’s receivers, McGrathNicol, are now looking to sell the business – something the management team failed to do late last year when it opened itself up to suitors. You can bet this time around the receivers won’t be so choosy about what parts of the business to sell-off or the price. As one competitor told me, the receivers will need to show a greater sense of urgency than the current management team if they plan to keep Commander afloat and retain a semblance of its original value.
So what impact will this have on the value of other IT integrators and outsourcers? Or indeed, estimations of their own worth?
For several months Telstra has reportedly been in negotiations with Fujitsu to sell its integration business, Kaz. From what we hear this deal fell through – at least for now – because Fujitsu wouldn’t meet Telstra’s asking price. With Commander left in tatters, could Telstra lower its estimations of Kaz’s value?
On the customer front, another thing I’m interested to find out is what will happen to Commander’s managed services accounts. Many of these significant meal tickets, such as Foster’s, were based around HP infrastructure. While the receivers are adamant they can keep things running while they find a buyer for the business, I doubt customers or suppliers like HP would be instilled with the same level of confidence and would imagine most, if not all, are now looking to alternative arrangements.
For someone like HP or Nortel (Commander’s biggest vendor partners), this could trigger a re-evaluation of channel strategies and see customer accounts taken direct. Commander was once HP’s biggest reseller, but since the integrator cut back its hardware resale business in February, ARN has heard a significant chunk of those procurement deals have not rematerialised. This was despite HP’s best efforts to transition customers from Commander to other suppliers.
Do you think HP will now risk losing those lucrative managed services accounts? I think not.