Science: Are they only in IT for the lifestyle?: Many small computer firms shun a 'thrusting' pursuit of the profit motive. And they are often the best performers, reports Lynne Curry
Monday 26 July 1993
Such are the priorities of the 'lifestyle' executives in charge of up to half the country's small information technology companies, as they work alongside more 'thrusting' organisations with a clear profit motive.
The existence of these executives has been uncovered in a survey of the needs of small IT companies commissioned by the Worshipful Company of Information Technologists (WCIT) and carried out by the City University Business School in London. The researchers, Anne Leeming and Nigel Courtney, stumbled across them as they trawled through a sample of the estimated 4,500 IT firms in the UK with fewer than 50 employees.
They found a market diverse in operations - manufacturers, PC dealers, value-added resellers, systems integrators, consultants and software producers - but divided into two styles, depending on the beliefs and aspirations of the person in charge.
Not only did the lifestyle companies display a marked departure from the breathless shove of the Eighties, but they also seemed to have a better chance of survival. Their average age was eight years, compared with five for the 'thrusting' organisations. Although 62 per cent of the top performers were thrusting companies, 67 per cent of of those that achieved very high sales per employee had a cautious long-term strategy; and 54 per cent of those planning rapid expansion were among the poorest performers.
Four out of five companies interested in employing venture capital exhibited below-par sales per employee; but of those dismissive of venture capital, two out of three achieved exceptionally high rates. Overall, the companies sold between three and eight times more per employee than the average UK industrial firm, the IT employees averaging pounds 137,939 a year.
The survey points to a high-earning sector, but not an industry likely to lighten the burden of job centres, especially since half appear to be dedicated to remaining small.
Ronnie Yearsley, an IT pioneer and chairman of the WCIT's industry development panel, which commissioned the survey, says he was taken aback to discover that the aspirations of his early career are dismissed by many of his successors.
'Perhaps it's a pattern for our children's economy, not my generation, that they say they don't want to grow. We've been nurtured on Thatcherite principles that you have to grow, you have to build a company up. My children's generation say it's too much stress and strain; they want to do their own thing in Bracknell or Newbury; they don't want to touch what they call this 'vulture capital'.
'In a broader sense, the sunrise industry of information technology has these younger people saying they're not going to create new jobs, and that is a bit distressing.'
Mr Yearsley, 60, recently retired as deputy chairman and director of BIS, a software company he established with two colleagues in 1964 after dropping out of veterinary college. BIS has never moved out of central London - it is now near the South Bank - and has expanded to employ about 500 people. He concedes that BIS faced less risk in the early days because of the absence of competition and the ease of borrowing money.
Companies are reluctant to declare total allegiance to either the lifestyle or thrusting camp, but they do see themselves as weighted one way or the other. Ideal Hardware leans towards the latter category. Established seven years ago in Tolworth, Surrey, its annual turnover is pounds 70m. It has 135 employees, most of whom arrive by 7.30am and leave after 6pm. Among the first at work and the last to leave is James Wickes, the founder and managing director.
The firm is entirely involved in distribution. 'We compete very heavily against European and American firms and, as an emerging company, we have to work hard,' Mr Wickes says. 'It's not just people on the shop floor; it's everybody, including myself. But it's the sale force in general that is probably pushed the hardest, followed by the technical people. In terms of the amount of time they have to spend here, I can see no way round that, but they are rewarded well. They earn between pounds 30,000 and pounds 120,000 a year.'
Ideal Hardware has a strong profit motive and is heavily commercial, he says. It has grown by 50 per cent a year and expanded on to three sites in Harrow, Chessington and Surbiton. 'We enjoy the technology, otherwise we wouldn't be in the business. But we compete against large and well-financed organisations, and we have to be commercial. I don't think we shall have a problem in surviving.'
Floating Point Systems, a systems integrator and distributor of hardware and software, based in Bracknell, Berkshire, has only 18 employees and a turnover of less than pounds 5m. Its managing director, Ken Murphy - who led a management buy-out last year - says the company tends towards the lifestyle category, with elements of the thruster.
'The second description fits the way we're developing the market, but we have a long history - the parent company was 24 years old - and we're happy to have quite a lot of customers around. We are growing, and we need to be bigger to be secure. You need a certain critical mass.
'That doesn't mean expansive growth in terms of people; those days are gone. Our long-term prosperity depends on finding the services and products our customers are looking for - unlike the computer industry of the Sixties, Seventies and Eighties, which said, 'Here's the product, let's sell as many as we can.' '
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