How safe are your suppliers?

In recent months we have seen the collapse of the major government services provider Carillion and the following disruption caused significant problems on a number of public services and the micro economies built around Carillion’s supply chain.

The size and consequence of this disruption immediately triggered the questioning and investigation of the finances of other major public contractors such as Interserve who are now in a constant battle to prove their business is well run and can actually survive the position they find themselves in.

The sheer scale of debt these companies operate or did operate with seems unimaginable. This proves the changing world of company security. In the past it may have been considered a safer prospect to join an enormous company for a number of reasons and an element of job security may have been one of them. Lately after seeing swathes of redundancies from established big companies as well as high profile collapses it is becoming clearer that newer, more efficient and disruptive companies are not just the most exciting places to work but probably the safest too.

It’s also worth looking at the effect this will have on government contracts going forward, for the past 20 years government favoured the so called security of letting the biggest companies run the majority of their most lucrative contracts and while the appalling record of failures has done a lot to ensure selective engagement with specialists such as Agile, the new threat of biggest doesn’t mean safest now also has to be considered. Companies that have grown naturally through efficiency and simply being good at delivering are now in a good position to take over some of the larger contracts both government and challenged commercial sectors offer which would have normally gone to a selection of (in many cases) very inefficient systems integrators.

Many investors have turned to dumping their shares in Capita and Interserve, which have spiralled them into multi-year lows and yet more pain. Additionally both are having problems with rising costs on their legacy contacts along with facing their weak financial position. It’s clear there are hurdles ahead and this isn’t a problem with a quick-fix. All in all, the risk/reward ratio isn’t appealing and the struggles look set to stay.

In simple terms bigger suppliers have more costs, more expenses and more chance of something going wrong. This could easily lead to more debt and more problems. Smaller companies have less costs, less expenses and less chance of something going wrong. This leads to less debt and less problems.

Isn’t the solution simple? Be Agile and choose Agile.

Get in touch with us today and be rest assured, you’ll have made the safe and right choice.