Covid-19: Kiwi IT services providers flock to claim government wage subsidy

Covid-19: Kiwi IT services providers flock to claim government wage subsidy

With clients unable to trade during the lockdown, a knock-on effect is denting revenues

The Covid-19 coronavirus

The Covid-19 coronavirus

Credit: Centre for Disease Control/ Alissa Eckert, MS; Dan Higgins, MAM

A growing cohort of New Zealand's leading IT services companies are making use of the government's wage subsidy scheme in a sign the virus shutdown is causing pain for local tech businesses.

To qualify for the subsidy, companies need to show they have experienced a minimum 30 per cent decline in actual or predicted revenue over the period of a month, when compared with the same month last year, and that decline is related to Covid-19.

The subsidy aims to lessen the economic carnage of Covid-19 by keeping employees in place, attached to their employers and ready to recommence business once the lockdown ends.

The government last week released an online tool to allow searches for recipients of the subsidy.

Reseller News searches on the database revealed a predictably large number of retail channel partners that have claimed the subsidy, from the very large such as Harvey Norman and Smith's City, to numerous small local PC and mobile sales and service outlets.

However, they have now been joined by managed and cloud service providers and IT training, recruitment and contracting companies.

The Instillery, which claimed $1.1 million in subsidies in relation to 156 employees, told Reseller News it was seeing secondary knock-on impact from the most affected industries such as tourism and retail, as well as a slow-down in project work across the board as businesses sought to hold onto their cash.

"The subsidy has been useful in providing certainty to ourselves, and therefore from us to our team," chief operating officer Michael Russell said.

"It has allowed us to keep 100 per cent of our full time NZ team and pay them at 100 per cent, excluding contractors and our staff offshore."

Russell said he expected the IT industry would play a significant role in the restart of the economy. 

"Based on the enquiries we have had, it will be a very busy time for the tech services industry as people look to spend again and refactor their business to leverage digital to create resilience.

"We are preparing for what we will need to do to support the regeneration of kiwi business, and how we can offer services in creative ways in a difficult investment environment."

By doing this, Russell said, it will also allow The Instillery to lessen the impact of events like these in the future.

"We envisage this will be a catalyst for a new wave of emerging technology," he said.

For Palmerston North-based Advantage, the biggest issue was the number of its clients that had indicated they were not able to pay their bills due to the fact they are unable to trade. 

This was combined with the cancellation of a number of significant opportunities the company anticipated over the next few months.

"Several major contracts have been deferred or cancelled, and our sales staff are finding it very hard to get any traction with clients as you can expect," managing director Brad Pearpoint said.

Advantage's security business, however, was still very strong.

This was limited to existing clients or those in crisis due to attacks or breaches because organisations were unwilling to commit to new security services while they are unsure of their future, "at least until they are hacked", Pearpoint said.

"IT is something that can get ignored for a short while – longer term the technical debt will catch up but it’s certainly something that people will try to sweat for longer."

Pearpoint said the subsidy would ensure Advantage remained solvent through the period while keeping all staff employed and fully paid.

Advantage claimed $130,732 in relation to 19 employees.

Consegna, which claimed $222,218 in relation to 32 employees, said its primary focus in making the claim was to look after its team.

"We have taken independent financial guidance on the subsidy and as the government assistance will be used for salary subsidy, this will enable Consegna to keep trading and helping our clients through these uncertain times," managing director John Taylor said.

Greg Sharp, managing director of managed service provider Base 2 which claimed $196,829 in relation to 28 employees, said the subsidy was, rightly, easy to obtain with expectations of April and May trading to be slower.

"MSPs have accessed the subsidy to pass on to employees," Sharp said. "Base 2 has retained all staff at 100 per cent of salaries."

Other MSPs to claim include IT360 and Switch.

Reseller News also sought comment from tech recruiter and contractor management firm Absolute IT, which claimed $323,362 in relation to 46 employees, but general manager Tracey Johnson declined to comment.

A similar business, Comspek International, claimed $116,673 in relation to 17 employees,

Industry trainer Auldhouse also featured among the claimants ($126,532 in relation to 18 employees) as did partners, such as Google cloud specialist Practiv.

Fusion5, which claimed $1.37 million in relation to 196 employees, lodged the biggest tech industry claim Reseller News has seen so far.

Some distributors also feature (Exeed, Synnex and Sektor for example) but not industry giants such as Datacom or Spark-owned CCL or global players such as NTT, DXC, IBM or Fujitsu -- at least so far.

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Tags advantageFujitsuNTTMSPsAbsolute ITfusion5The InstilleryBase 2PractivConsegnaComspek



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