IBM Getting PwC Consulting for $3.5 Billion

MoThugz writes: "This Yahoo! News article reports that IBM will be buying PriceWaterhouseCoopers Consulting for a cool $3.5 billion in cash and stock. From the page: 'The purchase is aimed at boosting slowing revenues in the computer giant's large services business, which now accounts for more revenue than its well-known computers and mainframes. ... The merger gives IBM, the world's largest supplier of computers and computer services, the consulting arm of PriceWaterhouseCoopers, the world's largest accounting firm. The combined IBM-PriceWaterhouseCoopers will rank a close second to top consultant Accenture Ltd. , formerly Andersen Consulting.'"

Comments

Hmmm

[Supa Mentat]

You know, I just read a story charging IBM's CEO of running the company into the ground with mergers and acquisitions and deals done to drive the stock up. It was very convincing and a deal like this makes me wonder. Do you guys see this as a good move or one driven by a love of the stock market, and what about IBM's future? Somebody once said, "The service and consulting business is the last refuge of the damned." I can't help but wonder if that will prove to be true.

Re:Hmmm

[nelsonal]

They picked it up really cheap, so its probably a good thing in the long run. The stock will be down, at least tomorrow morning, because the earnings per share will go down in the short run.
Gerstner did a pretty good job changing IBM from an old mainframe company in a PC world to a profitable service company. He, like almost all good CEOs, used aggressive accounting. In IBM's case it was the assumptions on their pension, and some income from what is known in street parlance as one time items (sales of assets or businesses, and some of their licensing agreements with up front payments). It happened that an enterprising reporter from the NYT scooped the street on figuring out how much of their earnings in 2001 were a result of this shortly after Enron filed for bankruptcy. When the story broke IBM's credibility dropped rapidly, and their lower earnings this year didn't improve the new guy's reputation much either. They aren't broken and will continue to be a very dominant force in technology, but that doesn't mean that has little to do with the current stock price movements.
From my quite limited experience with consultants I would guess that your quote refers to the employees of consulting firms, the firms themselves mint money. Thats what created one of the biggest problems with accountants.

Re:Couldn't they just hire them?

[Anonymous Coward]

If they're trying to boost revenue, wouldn't it be cheaper to just hire them as consultants?

You set that up deliberately, didn't you?
Fine, I'll bite.

Remember the age old adage:
If You're Not A Part Of The Solution, There's Good Money To Made In Prolonging The Problem.

Oracle

[artlu]

Im curious as to if this is IBM's response to Oracle's "underground" consulting group. (underground as in, just regular employees doing the consulting when needed instead of just hiring another party) Now, IBM will have a direct link to their customers and can provide them a complete access tool. Anyone have any thoughts on Oracle/if it will effect oracle's stock in a negative manner drastically?

Just a thought,
Aj

Ha!

[rabtech]

I have dealt with PWC's "consulting" before and IBM just paid a lot of money for a really crappy business and a gaggle of STUPID people.

Out of the six or so PWC-run projects I've been involved with at various places of work, every single one has been:

a) a massive failure
b) over budget
c) not at all what the customer wanted in the first place
d) way over on scheduled time

Re:Ha!

[medcalf]

This is basically true of all the large consulting firms (PWC, KPMG, E&Y, etc). The methodology, from my dealings with them, seems to be:

1. get the CIO well-fed and well-laid, and if possible the CFO and the CEO or COO (whomever has responsibility for the CIO and CFO)
2. now that the contract is yours, hire a bunch of people off the street - they should have good college degrees and no practical experience. These monkeys must be able to speak and write effectively, and must have no ability to think critically at all. They are just there for documentation
3. get the monkeys to ask the client's IT guys what problems they are facing, and how they would solve them if they didn't have to do what upper management told them to do
4. without doing any fact checking, error checking or even prima facie review (these are critical to the program - not doing them, that is), edit the interviews into a single document. It doesn't matter if the document is not internally consistent (and it won't be, coming from many sources), as long as it's what the CIO has already heard from his people (and it will be, because it came from his people to the consultants). This validates the CIO's excellent hiring and promotion strategies, six-sigma ho-shin plans and whatever.
5. after making sure that step 4 takes as long as the client will tolerate, charge $200 per consultant per hour
6. brag in ads and so forth about how you helped a $6bn/yr company fix all its IT problems, but you can't say who they are because it would violate the non-disclosure you insisted on in step 1

Basically, the big 6 (or 4 or whatever they are today) are worthless piles of crap. On the other hand, independent consultants and IT services companies tend to be pretty good. IBM was odd in that they charged $400 per hour for good people, but they could actually get good people (who they paid $70 per hour at most). Maybe they ran out of good people to get, and decided to hire the monkeys.

As a former PW person, this makes sense

[anomaly]

Back in the day (before it was known as PwC) I worked for PW. Because they were a part of a accounting company, they were constrained by the accounting rules. This meant that even though we computer types were not accountants, we still needed to comply with the investment rules and the continuing education rules. We watched Andersen form AC, then morph that to Accenture, and wondered what was stopping PW from doing the same thing.

I've seen some postings about idiots, wasted money, and pet technologies being implemented by these firms. I worked with some of the smartest people I've ever met while I was at PW. I also watched some big dopes try to make things work.

Some folks did squander client's money. Other clients demanded that we build something that pleased the CIO of their company, even if they were told that it would never solve the problem that they wanted it to solve.

I did participate in some great projects - projects that helped companies and government agencies solve some really big problems.

PW's strength (from my perspective) was that they could bring smart people to the table who could figure out how to solve problems while not being held back by company politics or excessive meetings.

Now, as a member of a large corporation, I see that there are many projects that we are simply unable to tackle because we don't have enough team players, or enough aggressive and smart players to move the ball. That's when we call the big folks like IBM and Accenture.....

I guess my pension $$ are now a part of IBM's program. :)