MicroScope - 17 March 2008

A survey of suppliers and corporate clients by Syscap has revealed big differences between the two groups in the effects of the credit crunch In spending plans in 2008 and low budgets will be allocated to software and services.

More than 40 per cent of suppliers told the independent IT finance provider that the credit crunch would affect their spending plans and those of their customers n 2008, with 24 per cent predicting no change and a third undecided.

By contrast, only 17 per cent of corporate clients predicted the credit crunch would affect their spending plans and those of their customers this year. A significant majority of 60 per cent believed it would have no effect.

Despite their optimism that my effects from the credit crunch would be minimal, corporate customers took a markedly different tack from suppliers when it came to the issue of budget allocation in 2008.

The two groups were broadly in agreement on hardware spending, with about a quarter expecting an increase in budget allocation, a similar number predicting a decrease and close to half believing there would be no change.

But suppliers were far more optimistic about the prospects for spending on services and software than corporate clients were. While more than half of suppliers believed there would be an increase in budget allocation for services, only 16 per cent of corporate clients agreed, with 63 per cent expecting it to stay the same.

On the software side, the differences were not as marked, but 40 per cent of suppliers predicted an increase compared with a quarter of corporate clients. As many as 49 per cent of corporate clients expected the budget allocation to be unchanged. Commenting on the survey, Eddie Pacey, European director of credit services at Bell MicroProducts, said he was inclined to side with the suppliers' view of the credit crunch.

"It only really started in November last year," he said. "People are likely to feel the effects in the first two quarters of 2008."

While he warned it was easy to over-play the credit crunch, it would be foolish to ignore it and Pacey expected to an increase in the number of corporate insolvencies in the first two quarters.

"It's a case of being practical," he cautioned. "Make sure you don't over-reach yourself."

Philip White, CEO at Syscap, suggested that successful businesses should be able to flourish in the current situation. "Fortune favours the brave -if you do things well in bad times, you should be able to weather the storm."

He added that at a time when banks were suffering most from the credit crunch because of the effects of the sub-prime crisis in the US, alternative methods of finance would be more important than they had ever been.

Evidence of optimism was also to be found elsewhere, with KPMG revealing its latest take on the credit crunch was that it would not have a negative effect on customers.

In a statement, Scott Cormack, head of markets at KPMG in the UK, said its survey of chief executives found there was little support for a view that the economy was faltering.

Elsewhere, in a statement accompanying its results for the year ended 31 December, Computacenter said that although it was keeping an eye on the credit crunch," to date there is no obvious sign of this materialising".

The reseller reported a rise in revenues of 4.8 per cent to £2.38bn while pre-tax profits climbed by 12.3 per cent to £42.7m

Maclnnes, Billy

MicroScope