Margin squeeze fells Christchurch stalwart
- 18 August, 2005 22:00
INCREASING competition and falling hardware margins rendered Christchurch-based Biz IT unprofitable after 26 years in operation.
The company entered voluntary liquidation in July after unsuccessful attempts to sell the business.
Biz IT started life as box builder Comaint Systems in 1979, but changed its name in March 2003.
Owner John Kennett says despite changing dramatically, Biz IT could not be transformed quickly enough to keep up with the fast-moving market.
“The whole industry has changed. Obviously margins in hardware had an impact. We could not move quickly enough into a services model to keep enough money coming in the door. That was the fundamental challenge at the end of the day,” he says.
Kennet anticipates all creditors will be paid, and adds that most of its 12 staff have found new jobs.
“Considering the circumstances it is a reasonable outcome, but it is unfortunate and not the ideal situation,” he says.
Other hardware-focused companies can learn an important lesson from Biz IT’s fate, says Kennett. “It is getting tighter all the time and you have to have the infrastructure to provide services to be able to compete,” he says.
Small operators with between five and 20 staff are the most vulnerable, he says.
“One-man-bands do not have the overheads and the larger, 20- or 30-staff organisations have the economies of scale. The five-to-20-staff space is a tough game at the moment, unless you service a specific part of the market and are generating plenty of service work out of it.”
Kennett has already moved onto a new venture called Business Software, focusing on mid-ranged accounting applications such as SAP Business One and Profax’s Accredo.
“I’ve been doing that for about 20 years so I have a huge amount of experience. I was doing that within Biz IT, but now I am focused on it totally,” he says.
Meanwhile, Biz IT’s closure has left Portables Plus without a South Island presence.
Biz IT used to be the South Island agent of the mobile computing chain, which has branches in Auckland and Wellington.
But Portables Plus managing director Calum Haslop is not overly concerned about the demise of the relationship, saying it was a loose arrangement he inherited when he bought Portables Plus in 2004.
“We did not get a lot from it and I don’t think Biz IT did either,” he says.
Portables Plus aims to re-establish a South Island presence next year either by setting up its own branch there or through a joint venture.