Solution Providers Gauge Accounting-Scandal Fallout

Decline in IT spending not likely

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Don't expect the accounting scandals at Xerox and WorldCom to have any impact on IT spending.

That's the sentiment of several solution providers following the disclosure by Xerox that it misstated $1.9 billion of revenue over the past five years.

"IT today is even more responsible for driving business revenue," said Dale Aychman, director of business development at Stirling Systems Group, a Boulder, Colo.-based solution provider that targets Fortune 2000 clients. "It used to be IT was always a cost center, but now it's about, 'How can my business generate more income?'%A0"

Customers have shown little concern over recent accounting scandals, he said.

The Xerox disclosure came after the Securities and Exchange Commission filed fraud charges earlier this week against WorldCom relating to $3.8 billion in improperly recognized expenses.

Bob Monio, director of strategic alliances at SBI, a Salt Lake City-based solution provider, said he thought the "damage was already done" to IT spending budgets by the tough economic climate.

Clients will spend, but they are going to look more closely than ever at each business partner and vendor to determine what benefit working with that partner or buying that vendor's products will provide, he said.

Stirling's Aychman said the scandals will have little impact on his own day-to-day purchasing.

"It's not going to stop me from buying a new car because Xerox inflated revenue or WorldCom or Enron hid expenses. I'm still going to plan for the purchases I need to have," Aychman said.

Kregg Williams, owner of Laser Life Technologies, a Livermore, Calif.-based Xerox solution provider, also said he does not anticipate the accounting scandal having any impact on his Xerox printer business. He said it is hard to believe that Xerox will not be able to rebound. Xerox is a great channel partner, but has had some problems in the past with its products, Williams said.

Williams opts to emphasize the Tektronix name instead of Xerox. Tektronix was the original manufacturer of much of Xerox's color solid-ink printer line before it was acquired from the test equipment manufacturer of the same name in 1999. "Unfortunately, we can only use the Tektronix name for another year, after which it reverts back to the testing equipment company," he said.

One Xerox solution provider who asked to remain anonymous said it was too early to say how the scandal would affect his business.

A Xerox spokesperson said the company does not anticipate the accounting restatement will have any impact on solution providers. "If anything, this lifts the cloud hanging over the progress we have been making on our turnaround," said the spokesperson.

-- Amy Rogers and Steven Burke contributed to this story.

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