Hosting & Cloud Providers with High-Risk Credit Ratings – similar to 2E2 before they went under

Understanding credit risk for Dummies

If you have ever taken out a personal bank loan, mortgage or applied for a credit card you will be familiar and accept that you were subject to some financial due diligence before accepted.

So why do many businesses run the risk of jumping into IT Outsourcing contracts with IT or software providers heavily debt leveraged, have a poor or negative cash position and deemed high risk by professional credit check providers like Graydon?

Many Directors and Managers who enter their employers into such agreements are not financially literate and in the UK many businesses are not carrying out any financial background checks.

Performing financial due-diligence is not just an exercise you should carry out during the selection process. The IT industry is fast changing and so are the fortunes of many software & service providers in this space. Which is why credit checking agencies recommend annual checks as a minimum.

If your systems are already hosted off site in an external data centre you should perform background checks on all the businesses who may be in the supply chain. Often software companies are now signing up deals direct with their customers and although the business you contract with may be financially sound under the covers they may be sub-contracting the data centre and in some cases the IT infrastructure supply to 3rd parties in the supply chain. Sometimes there can be as many as 4 or 5 providers and should any one business fail your business could wake up down the creek without a paddle. So general advice is to identify all parties in the supply chain and have them checked.

Presently as of December 2015 I’m aware of 5 medium to large IT providers who are presently deemed high risk with a higher chance of going out of business, or at the very least causing a high level of disruption. Many of us in the industry saw what played out with 2E2, don’t let your business get caught out. 2e2 the sad inevitable loss

Financial due diligence could not be more simple and cost effective. Entry level check cost from just £8.99 from experts such as Experian or Graydon.

This blog was written by Lee Bailey an IT Cloud evangelist with over 20 Years industry experience. Should you are any questions relating to this blog or would like to find out if your business could receive similar benefits please feel free to contact Lee directly


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