Big-name vendors hit by hard economic woes

The world is holding its breath in anticipattion of how much damage the global economic crisis will have on everyday life.

In the IT industry the financial downturn has already hit major vendors, with some ‘restructuring’ divisions and lowering revenue forecasts. But integrators down on the frontline will be instrumental to both vendors and customers.

In November, Sun said it would lay off between 5000 and 6000 employees, approximately 15 to 18 percent of its workforce, under a restructuring plan. The vendor said the restructuring would reduce annual costs by US$700 million to US$800 million.

That’s pretty big.

The vendor said in a statement that the restructuring was part of “a series of changes designed to align its cost model with the global economic climate and accelerate the introduction of compelling open source innovations.”

Only a month before Sun’s announcement, rumours were rife that Motorola would also slash workers. If the rumours prove to be true it would be in addition to the 3500 jobs cut in January, and 4000 in May.

The mobile phone vendor also reported sales of US$8.1 billion, a drop of roughly seven percent against the same period a year ago. According to Motorola, this drop was mostly attributed to a decline in lower sales
of mobile devices.

Networking giant Cisco has cancelled a major sales conference in an effort to trim US$1 billion in costs and expenses. Instead, the vendor plans to go virtual with its Global Sales Meeting (GSM), an annual conference that brings together thousands of its internal sales staff.


As part of that effort, John Chambers, chairman and CEO for Cisco will also realign resources, implement a hiring freeze and further cut corporate business travel.

The cost-cutting endeavour came after Cisco posted earnings of US$2.2 billion, down slightly from the same quarter a year ago. Cisco said it expected revenue to drop as much as 10 percent year-on-year in the second fiscal quarter.

While big-name vendors struggle with the economic crisis, local integrators
are seeing a surge in their business – www.crn.com/?128280

Local voice integrator and Avaya channel partner, NSC told CRN it has grown its staff numbers from 135 employees to 156 in the past 12 months.

Craig Neil, managing director at NSC said, “I have been reading a lot of things in the press lately, all about the doom and gloom, but we are experiencing growth and hitting our target numbers.

“What helped us was following a managed service approach and being
able to save money and remove risk for our customers.”

According to Neil, the cards are on the table for resellers who haven’t already started the transition into a managed services model.

In my view, he’s hit the nail on the head. As big-name vendors slash jobs, they are going to rely more and more on channel partners to do the work of their redundant salespeople.

These vendors need more sales and the only way they can get their products through to an end-user will be through the channel.

At a time when resellers have to compete with mass merchant retailers such as JB Hi-Fi, Dick Smith, Harvey Norman and Myer – just to name a few – those who turned their business away from simple box shifting, might stand a greater chance of surviving any downturn.

For some companies, outsourcing IT is a cheaper alternative to having an internal IT department.

Perhaps they are too small or they don’t want the hassle of overheads, seeking out value-added resellers will be necessary in ensuring their IT infrastructure will last long enough so they don’t have to invest in new technology – unless absolutely necessary.

The world of IT will survive economic hardships, big-name vendors will cut jobs, others will acquire or be acquired, life looks like it will pretty much go on for the integrator, managed service provider and value-added resellers.

bigname by economic finance hard hit vendors woes