Commander customers face uncertain future

The IT support functions of several large federal and state government agencies face an uncertain future in coming weeks as Commander Communications' receivers attempt to find buyers for the IT services company.
Written by Liam Tung, Contributing Writer

analysis The IT support functions of several large federal and state government agencies face an uncertain future in coming weeks as Commander Communications' receivers attempt to find buyers for the IT services company.

Organisations likely affected by the collapse of the firm this morning include Victoria's Department of Education and Early Childhood Development, the departments of Finance and Deregulation, and Agriculture, Fisheries and Forestry, as well as South Australian agencies. All hold multi-million contracts with Commander that span several years.

According to Intelligent Business Research Services technology outsourcing analyst Terry Dargan, organisations engaged in business with Commander were in a tight spot.

"I wouldn't like to be in the position myself. Customers would have to move smartly and Commander's staff would be unsettled by the news, probably looking over their shoulders to see what else is out there," he told ZDNet.com.au today.

I wouldn't like to be in the position myself ... customers would have to move smartly.

IBRS analyst Terry Dargan

Dargan said the receivers could sell the contracts to other outsourcing outfits, but said this could be complicated by any contractual fall-back clauses.

One option for customers would be to back out of existing contracts, however this would be fraught with difficulties.

"Backing out is a very expensive exercise and it would take, depending on the size of the outsourcing deal, many months," he said.

Commander's receivers McGrathNichol today said it would trade Commander on a "business as usual" basis until it found buyers for it, according to a statement by the company.

Despite ongoing uncertainty about the future of the business over the last year, today's news was not foreseen by the Department of Finance and Deregulation. Just last week it awarded Commander a one year, $3.8 million extension on a deal which saw it managing the Electorate Office's 1,000 desktops, laptops, printers and servers.

At the time, Commander's CEO Amanda Lacaze, who was appointed in December 2007 to rein in the company's debts and sell non-core assets, was "delighted with the extension" that would see it support the Electorate Office until 31 June 2009.

The deal with the Department of Finance is one of at least two the agency has locked up with Commander. Late last year, it awarded a two-year extension to an expiring three-year deal running until 2009, boosting the value of the work by $1.5 million on a previous deal with the department, worth $3.5 million.

The Victorian Department of Education and Early Childhood Development might also need to make alternative arrangements. It signed a three-year, $23 million deal with Commander in December last year, prior to Lacaze's appointment, which saw Commander responsible for implementing Microsoft software licences across the department.

South Australian government agencies however, could be shielded from Commander's woes, according to a spokesperson for the state's core technology agency, the Department for Transport, Energy and Infrastructure.

"The impact of Commander appointing voluntary administrators is assessed as low due to the availability of contracts with alternative suppliers to provide these services," said the spokesperson.

Last year the state warned agencies not to re-enter agreements with Commander's subsidiary Volante for at least one contract it had previously held, citing "uncertainty about [its] ability to supply".


Amanda Lacaze
(Credit: Orion

However, three months into Lacaze's appointment, it decided Volante was once again fit for business.

SA won't escape completely however, since Commander is a supplier to the SA Government for distributed computing support services and the provision of desktops and laptops. However, the spokesperson said it had appointed a replacement supplier for its Large Account Reseller services.

The department of Department of Agriculture, Fisheries and Forestry (DAFF), could be in the stickiest situation of the organisations mentioned in this article.

DAFF's contract with Volante expires 26 June 2009, and it recently released a request for tender for work which involves managing 5,000 PCs and laptops over 300 sites, 400 printers, 300 servers, three storage area networks (SAN), 40 terabytes of data on file services and SANs, and over 30 mid-range applications.

If the receivers aim to sell Commander's contracts to outsourcing outfits willing to take on the work, those with contracts of less than nine months could be hard to sell.

"It won't be much point buying if the contract has only nine months remaining, particularly if the deal is already in difficulties," said IBRS' Dargan.

If the receivers pursue that approach, the new owners of the work would also need to be on each agency's approved supplier list, posing further possible complications.

Commander's position as an outsourcing company under administration was quite rare in Australia, said Dargan. "This doesn't happen too often in the outsourcing game," he said.

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