The icy fingers of international recession dug into the flesh of the Australian IT industry last week when US business and technology consultancy Sapient, finding that its shift to e-commerce consulting has not been as happy as it would like, closed its Sydney office and retrenched the 70 staff it had employed in Australia.
The drastic move came as Sapient launched itself into a reorganisation that attempts to save about $US65 million over the next year. A total of about 720 staff will be laid off as the company trims its numbers by about 20 per cent, with a subsequent first quarter restructuring charge of about $US40 million "which will consist of severance and related expenses from the reduction in workforce, and other charges related to the Sydney office closing", a company statement noted.
The company's announcement specifically noted that the staff reduction "affects operations in the United States and Australia only". Outside the US Sapient has offices in Dusseldorf, London, Milan, Munich, New Delhi, and Tokyo, and claims to be growing at a record rate in Europe.
The Australian operation was set up about three years ago and after a fairly dramatic change of focus has been operating with a strong e-commerce focus for about 12 months. In the US the switch to e-commerce activities had initially seemed positive as Sapient had consistently delivered growth that was firmly in line with analysts' expectations. However, the company has suddenly realised that it will lose money in the first quarter of 2001 when revenue of $US136 million will be some 20 per cent lower than analysts' forecasts.
"We noted earlier that we didn't get off to the start we'd hoped for in January," explained CFO Edward Goldfinger. "As you can imagine from the actions we're taking today, February was even worse than January and we're not expecting it to get better in March."
Nor are we.