IT firms caught in downdraft

By ADAM GIFFORD

Some of New Zealand's largest IT and outsourcing companies are trying to determine where they stand following the collapse of Ansett Australia and the crisis at Air New Zealand.

A reason for merging Air New Zealand and Ansett was the savings that could be made from unifying their systems.

A key to that was the work of New Zealand IT services firm gen-i, which had a three-year, $50 million-plus contract, to manage the desktop environment within the two airlines.

Another element was the contract which IBM Global Services Australia and New Zealand had to manage the airlines' mainframes and mid-range servers.

The airlines had also signed up with German software company SAP to provide an electronic procurement system.

Air New Zealand's general manager of IT Andrew David said the situation was extremely challenging.

"We're working our way through [the outsourcing issues].

"We are working our way through staff implications and working through contractual licensing issues and we are gradually getting there," he said.

Gen-i's chief executive, Garth Biggs, said that Air New Zealand was a significant customer and "we will continue to do whatever they would like us to do with them".

"As we speak we are continuing to provide services."

In March gen-i was named the preferred supplier to manage the complete desktop environment for the merged airlines.

At the time the agreement was claimed to be the largest outsourcing contract ever given to a New Zealand technology company.

With Ansett's 7000 desktops and Air New Zealand's 4500, the revenue from the contract was thought to be worth over $50 million, spread over three years.

It was expected to save the airlines up to $100 million by almost halving their desktop costs.

Mr Biggs said gen-i would push ahead with its plans to expand in Australia.

"We have business in Australia outside of the airline industry and we are continuing to pursue our aspirations there."

Gen-i has 16 staff in Australia, mostly in Melbourne. It intends to open a Sydney office next month.

Mr Biggs said one of his biggest concerns was the anti-New Zealand sentiment that was being whipped-up across the Tasman by elements in the media and some politicians.

IBM's contract to manage Ansett's mainframe and mid-range servers, signed in 1997, was estimated to be worth $A100 million ($122.5 million) over 10 years. IBM New Zealand runs Air New Zealand's mainframe and its mid-range Unix servers.

IBM Australia spokeswoman Frier Bentley said the company was talking to Ansett's administrator.

"The administrator will be determining what is happening.

"It's currently business as usual. We have a service agreement with them."

IBM and gen-i would rank as unsecured creditors if Ansett was wound up.

SAP New Zealand manager Viv Gurrey said SAP was continuing to support its customer.

As well as the procurement system now going in, SAP supplies the software that runs Air New Zealand's maintenance and engineering operations.

She denied a report that SAP had secured a contract to supply financial, payroll and human resources software to the two airlines following the completion of their proposed merger.