Downturn not all it`s cracked up to be

When CS Holdings (CSH) announced its acquisition of Getronics earlier this week, it made me wonder if this could not be the start (or re-start) of a trend. The global IT market is abysmal, and many international companies will be looking at withdrawing their troops from little Third World countries like ours, and replacing them with local partners.

Over the past couple of years, the likes of SGI, Baan and Olicom have dipped off the local radar screens, scaling back or shutting down their local operations. That was during the good times. Now that things have gone horribly, horribly wrong in the IT sector, more of this pruning is to be expected.

The ethos is different from company to company. Some believe that - as the rest pull out, leaving the field wide open - keeping their smaller operations going during a downturn can result in greater market share in those countries. When the cycle reverses, they will have staked their ground and proven their loyalty to customers. Others feel they need to concentrate on their home ground, and the meagre profits offered by SA and other small markets do not justify the lack of focus that dispersing operations can bring.

I could not say which approach is the correct one - it depends on each company`s strategy, market position, and, sadly, share price. But with companies going one way or another, the opportunities for local IT abound.

As CSH proved, a pullout opens up opportunities to score a global partner, and increase local market share. Getronics has a brilliant customer list locally, which CSH has inherited. It has also inherited partnerships with Dell, Microsoft and Cisco - Getronics` big buddies. At R18 million (after subtracting Getronics` asset value from the R43 million Getronics cost CSH), this seems like a good deal.

With fewer players, I believe the market will lose some of its volatility, and return to rational business practices.

Jason Norwood-Young, Technology Editor, ITWeb

International companies that stick it out during the hard times will certainly benefit the customer. The market at the moment is overcrowded, and while this can lead to short-term benefits through price wars and very beneficial deals, the long-term effects of an overcrowded market can include the stunting of our local industry, as well as customers paying back those savings down the line.

With fewer players, I believe the market will lose some of its volatility, and return to rational business practices.

I don`t believe the downturn is all it`s cracked up to be. There are positive aspects to it, and smart businesses will adapt quickly to make a market downturn a company upturn.