Goodbye, independent consultants?

By Jeff Kaplan

Network World, 09/09/02

It's been more than a month since IBM announced its $3.5 billion acquisition of PwC Consulting. While the response has been generally positive compared with the overwhelming criticism of Hewlett-Packard's ill-fated attempt to acquire the same group for $18 billion two years ago, many customers wonder if IBM can successfully integrate PwC Consulting into its corporate culture. IBM's move also speaks to fundamental shifts in the IT/network industry that could have more profound implications.

IBM's announcement came on the third anniversary of Lucent's acquisition of International Network Services (INS), at the time largest independent network consulting company in the world. When Lucent announced its acquisition plan, it was to become the "IBM of the communications industry." Ironically, Lucent marked the third anniversary of the acquisition with a decision to spin off what little remains of INS for a couple of pennies on the dollar of its investment.

Today, IBM is paying $200 million less than Lucent paid for INS three years ago and getting more than 10 times the number of people, skills, client base and brand recognition. My guess is IBM will get a lot more value out of its PwC Consulting acquisition.

Few may realize IBM has been successfully recruiting business consultants from the Big 5 accounting firms for years. While many PwC Consulting professionals might have been unhappy with the idea of joining HP during the heyday of the Internet boom, those who have survived the onslaught of the Internet demise and accounting industry implosion will find IBM's relative stability a welcome refuge.

Interestingly, IBM has laid off more than 15,000 of its IBM Global Services employees, more than 5% of its workforce, since June 30. With the economy continuing to fail and corporate spending on IT stagnant, how can IBM justify acquiring 30,000 PwC consultants?

Simple. IT and networking are no longer technology issues; they are now truly business issues. Acronyms such as ROI and TCO have replaced LANs and VPNs in everyday discussions between IT/network managers and vendors. Vendors who can't translate the value of their products and services into business terms and integrate their technology into their customers' business processes are being turned away.

It might sound cliched, but IBM's move confirms the end of an era when technology drove business. Business now drives technology. Many IT/network managers are seeing this as they are pushed to more effectively apply technology to meet business objectives.

Expect other vendors to make investments in consulting firms or build service organizations to win and retain customers. A casualty of this trend will be the objectivity of IT consultants who are no longer vendor-independent. Savvy managers will challenge vendor-employed consultants to prove their objectivity and willingness to support multivendor setups as the real test of their sincerity and long-term success.

Kaplan is managing director of THINKstrategies, a consultancy in Wellesley, Mass. He can be reached at jkaplan@thinkstrategies.com.