IT suppliers worried about customers

IT suppliers are checking the creditworthiness of their customers more carefully and chasing payments more rigorously as their worries over the effect of the recession on users increase, according to research.

A survey of more than 100 European communications, media and technology (CMT) companies by insurance firm Marsh showed that nearly 70 per cent of vendors polled identified customers as the biggest risk to their business – the highest proportion of any industry in the study.

When asked what type of risk is the main concern, the highest priority was credit risk. As a result, more than half of the suppliers that identified customers as their biggest risk said they are dealing with this through more careful credit checking, while a third are being “more rigorous” about meeting payment deadlines.

“The part of the value chain that concerns participants most is undoubtedly customers,” said the report.

"The focus of these concerns is creditworthiness.”

The study also notes that customers are driving harder bargains from their suppliers.

“The potential problems with customers are broader than simply credit risk. As everyone tries to cut spending, average revenues per user or per client are declining.

"At the same time, competition in the industry is fierce, which means that customers have a great deal of choice and a lot of leverage for negotiating favourable deals,” says the report.

“This gives rise to one of the biggest current issues for CMT companies: how to manage contracts with increasingly demanding customers. Customers now often ask for price reductions during the life of the contract, rather than only at renewal. However, they insist rigorously upon their supplier keeping to the terms of the contract.

"If a competitor offers a better deal then the customer may try to get out of the contract, looking for any clause or term that is being infringed.”