Retrenchments rattle the IT sector

Retrenchments rattle the IT sector

In separate announcements, two channel companies have shed staff in a bid to cut costs, due to falling investment in the IT sector.

ASX-listed e-commerce and distribution group IT&e and systems integrator Com Tech Communications have retrenched staff as a sluggish quarter for new economy investment has left both companies reviewing their business models.

Last week IT&e shed 11 head office and administration staff. Dean Wilson, executive director of IT&e, said the retrenchments were from "newly created positions", a "cost-cutting" exercise brought about as a result of its falling share price.

"Those positions were created by our recently departed CEO and we just don't need those people," Wilson said. "Over half of the staff had been with the company less than six weeks.

"We have operational offices in Sydney, Perth, Adelaide and Brisbane, as well as the head office in Melbourne. The staff that have been let go were not from our sales or services staff, they were all from head office and administration."

With IT&e having listed earlier his year, Wilson said there is a whole new wave of challenges which the group is coming to grips with. He said analysts had recently incorrectly bundled IT&e in with a whole group of dot-com companies that are suffering at the hands of investors due to diminishing cash stocks.

"You are damned if you do and damned if you don't," Wilson said. "We were criticised for having too much inventory and too many outstanding debts. Our share price suffered as a result.

"What [the analysts] didn't mention is that the inventory we held was a large amount of Apple stock purchased at a discount, and our largest debtor was the Commonwealth Bank (CBA). Apple stock is always going to sell through, while the CBA is what I would call a blue-chip debtor."

Similarly, Com Tech online general manager David Bowie told ARN a drop in new economy-generated business had forced the company to shed 21 employees.

The retrenchments have seen Com Tech's online division cut from 241 to 220 staff, in a move to consolidate the group's skills base.

The employees were given their marching orders, as Com Tech turns its eyes towards high-level "bricks and mortar", restricting its coverage of the smaller "new economy" customers.

Bowie said Com Tech's integration services have been sought out by these new markets as they found themselves cashed up earlier this year. "As the money invested in the new economy begins to dry up, so to has the amount they can invest in integration," he said. "We are really returning to our traditional markets, the larger corporate players."

The skills consolidation will coincide with a focus on the integration of e-commerce application modules rather than software development. Most of the retrenched staff were software developers with a hands-on technical skills base.

"We plan to work with our vendor partners to roll out solutions rather than focussing on the development side," Bowie said.

Bowie believes a time which is traditionally slow has been exacerbated by constriction in demand. This is symptomatic of an overall slow down in the over-hyped new economy that found itself cashed up during the first half of this year.

"This is definitely the last of the retrenchments we will see for a while," Bowie said.

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