Electing to spend budgets

As the frenzy nears its climax, Sara Yirrell examines whether the uncertainty surrounding the general election has affected IT spending and how the industry is feeling about the result

Increased braying and hee-hawing in the Houses of Parliament, along with copious politicians all over our TV screens and leaflets through the door, means only one thing.

A general election is looming.

We have heard from one side how the economy is growing, unemployment is falling and we have more spare cash than ever before; but according to the other side of the bench, things have never been worse.

We have been inundated with polls, predictions and forecasts over what sort of government we will have.

But the truth is, nobody will actually know until after polling day on 7 May.

However, the chances of one party gaining a majority appear to be pretty slim. Despite the media and political frenzy around the country, millions of ordinary people are just trying to get on with their lives, running businesses or working in the public sector – all trying to survive the best they can in these austere times.

But is all the uncertainty actually affecting everyday business? Have customers, and in particular public sector customers, held off on committing to IT spend until they know their budgets are safe from the axe? Or are they spending as normal?

CRN spoke to a selection of channel companies to find out whether this had been the case, and the response was fairly mixed.

Simon Pettit, corporate director at system builder and VAR Stone Group, said although the election had not actually stopped customers spending, it was more a reflection of how sophisticated they have become.

“We have had a really good Q1 and people have definitely been spending money still,” he said. “I would in fact say that customers have planned better this year and are getting budgets and spending them early – we are definitely not seeing anybody holding on to money.

“If you turn the clock back to 2010 at the start of the coalition government, we knew there were going to be changes, and once the initial shock of austerity measures was overcome, we were actually able to sell more of our services around PCs and notebooks. When customers were cutting back staff we were able to plug the gaps, and people were looking for value in the supply chain. And he said that regardless of the outcome, good suppliers will still have a full pipeline.

“Even if there are more austerity measures to come, it still means work for IT suppliers as they have to sort out licensing issues, help companies consolidate buildings and IT infrastructure. However, if a left-wing government gets in and there is a relaxation in public sector spending, people will stay in situ and there will still be work to do. “In 2010 a number of people reacted badly – they stopped spending and sweated their assets instead, now they are faced with the headache of having to replace aging kit, and migration issues because their existing equipment is not fit for purpose.”

Don’t hold back

Paul Evans, managing director of Redstor, said politicians need to be more straight-talking about IT.

“The current debate from all the parties appears to be centred on appealing to our emotions; how the NHS must be ‘immune’ from any changes or cuts, that you must not tamper with the education of our children, how we must be generous in our commitment to foreign aid, how we must not be defenceless in the face of growing threats. And yet, the politicians never talk about the numbers. The fact that we have a deficit means the total debt continues to rise inexorably to well over £1.4tn and we continue to borrow to pay for a lifestyle the country cannot afford.

“Against this backdrop, it would be nice to hear how politicians propose to transform the way we deliver public services, how we can save money, and the role IT can play in helping the public sector transform the delivery of services for the benefit of the country as a whole. This requires a reasoned debate and an analysis of what type of services we want and can afford and how best to deliver them.

“In the education space, there are countless stories of IT technicians/headteachers having bought 40 iPads because they have the budget and then wondering what applications they should load on them, as opposed to asking, before they purchase, how these devices will improve the educational outcomes of their children and then deciding whether or not they need them.

“I hazard a guess that there would be hardly anyone in the country who has worked in and around the public sector who would not have some idea of how they could do things better if only they understood the numbers and they were explained in simple English that appealed to our intellect, not our emotions.”

Glenn Morrison, managing director of Upgrade Options, was adamant that whichever party wins, it will make no difference to most ordinary businesses. “I would say that I haven’t experienced any holding back,” he said.

“The public sector is probably just carrying on regardless because they know the hatchet is heading their way after the election no matter who wins. The private sector probably doesn’t give two hoots which party is in government anymore as they have all shown that they are in control of nothing and so it’s every business for themselves.

“We have all been awaiting growth for so long that there’s only one way it’s going to happen and that’s by getting ever smarter, leaner and more proactive and making it happen. The market remains substantial so it’s simply a matter of beating the competition to what there is. I don’t think that any serious business is waiting on the word from Westminster unless they are in a party-politically sensitive sector or think they have an absolute need to be in or out of the EU.”

Exchange factor

Albie Attias, e-commerce director at King of Servers, said the election had not made much of a difference to his business. “We’re not seeing any discernible impact on business at the moment, with sales, quotations and general enquiries all up YoY,” he said.

“My thoughts, based on speaking to many companies in the SME space on a daily basis, is that political uncertainty has little bearing on their buying decisions and that these are very much driven by need. We expect that the imminent end of life for Windows Server 2003, for example, will result in a wave of companies upgrading their hardware in line with their migration to more current platforms.”

Alex Phillips, director of strategy at Northamber, said his firm was seeing some hesitancy when it came to spending budgets. “We are seeing a lot of uncertainty about the impact of the general election on IT spend, with some public bodies holding off spend just in case and others ensuring they maximise their spend. Exactly where the truth lies will only really be obvious over the next few weeks as we see the volume of budget spend. Over our 35 years of experience with public sector we have seen both extremes play out but it is usually something in the middle, and we feel well positioned for either outcome.”

And distributor Hammer said foreign exchange rates were more of a concern than the election outcome.

Matthew Croucher, finance director at Hammer, said: “We have not noticed a change in the pattern of orders due to the impending election; however, foreign exchange rates are already being affected [and] this will probably become more turbulent as May draws nearer.”

Tom Mulvaney, managing director at third-party support firm Networks First, said the public sector is more hesitant over spend than the private sector. “In the public sector, there is a little more feverishness from people looking to spend or commit to spending their budgets for this fiscal year. There are certainly some vendors who expected a bumper March, resulting from public sector activity to spend money, for fear of someone taking it from them after the election.

“I can’t see the same pattern happening in the private sector. However, progressively over the past 12 months there has been a significant growth in the demand for professional services which is partly because of the strengthening of the economy and possibly because of the upcoming election. There is so much uncertainty surrounding the outcome of the election, with no clear leader in the polls, that many people are being more pragmatic about their spending. The general view is that we’ll deal with whatever the election brings and just keep on moving forward with projects and IT spending.”

Nicky Stewart, commercial director of Skyscape Cloud Services, said there is normally a spending surge before an election. ‘Typically, in the run-up to a general election, there is a surge in buying as government wraps up loose ends, and ensures business and contractual continuity before the general election is called, and purdah descends,” he said.

“While there is a great deal of uncertainty about the outcome of the general election, both the main parties have a broadly similar agenda for the digital market. Regardless of who forms a government, it is expected that there will be further pressure on the public purse, and therefore headcount reductions. This will drive buyers towards more cost-efficient services, that deliver excellence for the citizen – so there will be great opportunity for suppliers who can step up to the mark in that respect.”

So it appears that despite the national media hype and the endless speculation over which political combination will be in power, customers have actually become wiser and are planning their IT spending better than ever before.

For a channel that is also becoming more sophisticated and proactive, this can only be a good thing.