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IBM

IBM Getting PwC Consulting for $3.5 Billion 209

Posted by timothy from the total-cost-of-ownership dept.
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.'"
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IBM Getting PwC Consulting for $3.5 Billion More

IBM Getting PwC Consulting for $3.5 Billion

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  • 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

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

    • Re:Couldn't they just hire them? (Score:1, Insightful)

      by 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.

  • Hmmm (Score:2, Insightful)

    by Supa Mentat ( 415750 )
    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.
    • Due to scandals, consulting firms come cheap right now. This is a GREAT oppurtunity for IBM to merge their consulting arm with PWC Consulting.

      Remember, the new corporate scrutiny will only increase revenue for consulting firms, since the consulting firms are hired to "straighten out the books".

      As far as "service&consulting being the last refuge of the Damned" goes... I don't think it applies to financial consulting. Only to software/engineering/research consulting.

      • Remember, the new corporate scrutiny will only increase revenue for consulting firms, since the consulting firms are hired to "straighten out the books".

        Not quite. PricewaterhouseCoopers are really two organizations. The consulting side does systems integration, large software implementations, and advises on supply chain management and so forth. It's separate from the accounting/auditing side, which will either become more profitable because more corporations need better accounting, or less profitable because the "Big 5" are no longer trusted by shareholders and corporations look further afield, to smaller (but still sizeable by anyone's standards) accounting firms.

        IBM are buying the consulting side. Now's probably a good time to do that, since it will be cheap as not many corporates are spending a lot of money on consulting right now, but IBM can leverage it to support outsourcing, which they're big on (and corporations are spending money on, because it saves money).

    • Re:Hmmm (Score:3, Insightful)

      by nelsonal ( 549144 )
      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.
      • They picked it up cheap, if you assume all the revenue is coming over. Integration of professional services firms is never easy.

        Earnings per share shouldn't go down in the medium-term because PwCC/Monday was profitable and IBM is paying mostly in cash. In the short-term, though, IBM will probably take a big charge to restructure their own consulting organization (by restructure I mean fire many people, of course) and make PwCC fire many people as well.

        My prediction? 1+1=1 here.

    • Re:Hmmm (Score:1, Flamebait)

      by telstar ( 236404 )
      I think your sig pretty much answers your own question.
    • It sounds ominous to me.
      When IBM started their big services kick one of the first things they did was to aquire the backend to Macromedia's educational software development system back end called Pathware and jack the prices through the roof. Now obviously this is profitable because one of the juciest target audiances for this program is public school districts --ie tax dollars. How's that for free market strategy?
      Knowing that this is the kind of services growth strategy that IBM uses along with their alleged mobster like patent strategies I'd be a bit concerned to hear they're getting into accounting in a big way.

  • That was fast (Score:3, Funny)

    by Sneftel ( 15416 ) on Wednesday July 31, 2002 @01:02AM (#3984093)
    Jesus, Andersen changed their name already? What, do they have a small army of business card printers and sign-repainters standing by in case of corporate scandal?

    "Hey, aren't you from Ande-"
    "Hmm? Nope! Nope, never heard of them! I'm from *checks card* uhh, Accenture, and I am a *checks card* ...quality promotion liaison."

    • Re:That was fast (Score:1, Informative)

      by David_R ( 118153 )
      Accenture is Andersen Consulting, which is a totally separate entity to Arthur Andersen, the no-longer-with-us accountancy firm. Just as (what was) Monday was nothing to do with PriceWaterhouseCoopers the accountants (I believe) and KPMG Consulting is NOT the same as KPMG LLP the accountants.
    • Accenture was orginally part of Anderson and was spun off a few years back. Anderson kept on doing accounting while Accenture was more IT consulting.
    • (* Jesus, Andersen changed their name already? What, do they have a small army of business card printers and sign-repainters standing by in case of corporate scandal? *)

      They just use the engines from their massive shreaders for printing instead.

    • Re:That was fast (Score:2, Informative)

      by nelsonal ( 549144 )
      Accounting was one of the first places to really start using "big iron" in business. Computers are really good at bookkeepping. Becuase the auditors were very familiar with the mainframes and minicomuters as everyone else started realizing that they might be useful for other projects, the auditors became computer consultants as well as auditors. This worked quite well for the auditors, who owned the accounting firms. However the computer consultants, who broght in most of the money during the 1990s wanted their cut. Becuase of this there was quite a bit of internal pressure to split the divisions, from the consulting side of the business, but the auditors wanted to protect their arrangment. Anderson/Accenture was one of the first to split off. The name change resulted from arbitration following the nasty split up of the two companies.
      The other 4 accounting firms also have consulting divisions, that are in various stages of separation from the parent auditing company. Ernst & Young is still together, PWC is obviously spliting now, KPMG apears to still be part of the audit firm, and Delotte & Touche is also still together, I believe. E&Y is the least likely to split up, becuase most of their services are of the tax and financial type. However, they are all more likely to split now that sentiment is pretty strong against auditors providing consulting services.
      • The other 4 accounting firms also have consulting divisions, that are in various stages of separation from the parent auditing company. Ernst & Young is still together, PWC is obviously spliting now, KPMG apears to still be part of the audit firm, and Delotte & Touche is also still together, I believe.

        Er...

        E&Y sold off their consulting division to Cap Gemini in 2000. [com.com] Hence Cap Gemini is now Cap Gemini Ernst & Young. [cgey.com]

        PwC is now getting rid of their consultants, and have been trying to for a number of years now.

        Deloitte Touche Tohmatsu (or D&T in the US), has renamed their consulting unit Braxton Consulting, and is either going to spin them off or sell them off at some point.

        KPMG spun off their consulting unit, the unoriginally named KPMG Consulting. (KCIN is their ticket symbol).

        As you did get right, Anderson and Anderson Consulting split quite a while ago... mostly over how to split up the profits in the firm. For a while there you would get proposals from both Andersen's Consulting unit and Andersen Consulting, and they'd actually fight over the work... AC had to drop the Andersen name and pay $1 Billion to Andersen as part of the settlement. I'm sure looking back its the best Billion dollars they've ever spent.

        Basically accountants can't be in the consulting business anymore -- clients don't want to deal with the appearance that there might be something sketchy going on, and the law recently makes it pretty much impossible for them to do so anyway in wake of the Enron fiasco (not that there is any evidence that accounting/consulting ties had anything to do with it). They were good cash cows back in the day of the multi-year multi-million dollar ERP implementations...
      • Um no. The pressure came from the SEC over independence issues, starting some 3 years ago.

        Of course, in the last 6 months, it's only got stronger, and now there's significant client pressure as well.

    • Re:That was fast (Score:4, Informative)

      by Anonymous Coward on Wednesday July 31, 2002 @02:07AM (#3984303)
      My current summer job is at Accenture and I've had to listen to these damn presentations about Accenture's history, so I might repeat it to clear the confusion. :)

      In the beginning... there was Arthur Andersen, they founded a computer and strategy consulting company called Andersen Consulting. It didn't take many years for Andersen Consulting to grow larger than Arthur Andersen itself. Now Andersen Consulting had to pay each year large amounts of money to their parent company, because they couldn't make enough money on their own.

      Now the people at Andersen Consulting wanted to break from Arthur Andersen, because they thought the yearly payments they made to Arthur Andersen was slowing down their growth. Arthur Andersen however didn't want to let Andersen Consulting go, so a legal battle began. As a part of the settlement in this legal battle (sometimes during year 2000), Andersen Consulting agreed to change their name to Accenture.

      So basically the people here hate Arthur Andersen and they've been laughing their asses of because of Arthur Andersen & Enron.

  • No more Monday? (Score:2, Informative)

    by mparaz ( 31980 )
    http://www.monday.com used to be a site saying "PWC Consulting is now Monday" and explained the name. Now it points back to pwcconsulting.com and the IBM announcement.
    • Had to sell out when the genius consultants couldn't figure out how they would answer the phone on Tuesdays.
    • That's amazing. A company called "Monday"? Sounds like the Adams Family goes to Wall Street.

      I can think of no better way to drive employee morale into the very bottom of the old outhouse like having to work at "Monday" every damned day of the bloody week. When I have a bad day at work on a Tuesday, if someone asks I say "Monday's still here."

      Mondays suck. Then, I hear PwC did too. For sure the consultant that picked such a scary name for a company sucked at thier job.

      Anyway, I bet there's a bunch of PwC workers jumping up and down screaming "W00t!! No more Monday!!!" :P

      G'nite, folks.

      Soko

    • The name change to Monday never really happened. It was supposed to happen when PwC Consulting was spun off of PricewaterhouseCoopers in an IPO. The spin off got canceled with the IBM purchase announcement.

      However, if the IBM deal fails like the HP deal did, then perhaps Monday will return.

  • Two points: (Score:2, Interesting)

    by burgburgburg ( 574866 )
    1. I wonder how much it would have cost before the whole accounting meltdown
    2. This will be a great tool for pushing Linux servers; "It's our fiduciary responsibility to inform you that you'll save money short and long term."
    • I wonder how much it would have cost before the whole accounting meltdown

      Last year PwC was in the midst of a deal with Hewlett-Packard when it blew up because of disputes over PwC's price tag ... then a much larger $18 billion. In comparison, IBM got the consultancy arm on somewhat of a "fire sale".
    • Christ almighty! Do you people not ever take care to know what you are talking about? PwC Consulting is a *subsiduary* of PwC the Global Financial Services company. They do not do fucking accounting. Likewise Accenture is now nothing to do with Andersen, and CapGemini Ernst and Young has bugger all to do with Ernst and Young.

      To answer your question, probably about the same since the unit that's being sold has sweet FA to do with accounting.

  • Is it because they Like donkeys? (Score:1, Funny)

    by Anonymous Coward
    I guess they won't be calling themselves "Monday" anymore.

    http://www.introducingmonday.co.uk

    http://www.introducingmonday.com
    (Was the official site)
  • This sort of thing really creeps me out. I mean, from a business standpoint I'm sure it makes sense, but it also seems to be the next step in the sorts of things Karl Marx was describing. We already have a media cartel and a software monopoly. Now we have IT corporations buying up consultancies?

    Does this freak anybody else out at all?
    • IBM has been one of the largest IT consulting companies for well near a decade. It freaked people out pretty good when they started doning this, in the early 1990s.
    • Usually I'm the first to throw out a good conspiracy, but I think you're wacko.

      Real things freak me out like DRM, or National ID's... Karl Marx's idea's were just crafted to either get or help someone get political leverage.

      The revolution of business and technology is scarry because it could infringe on our lives, or it could be beneficial - helping each person become more free and "closely-independant" than ever. But what you shouldn't fear is the big picture - it's the little ones that are the most threatening.

      Who shall examine this "convergence" and see what threat there really is?


      • The revolution of business and technology is scarry because it could infringe on our lives, or it could be beneficial - helping each person become more free and "closely-independant" than ever.

        Don't look for the evolution of business and technology to promote any kind of "free" and "closely-independent" person in society. Rather, look for the exact opposite.

        Fundamentally, commercial success relies upon your dependent relationship based upon commercial transactions with suppliers of goods and services.

        Look for suppliers to:

        • find new things for you to depend upon, and
        • for them to increase your dependency on existing products and services.

        Dependency is moving largely into the emotional arena, too, as advertisements tend to target people so as to get them to think they need that new CD, that wireless phone, etc. If there were a way for advertisements to mentally condition you to be addicted to their product (I don't mean obvious physiologically addictive products like nicotine, alcohol), then believe it would be done. Can you imagine any product more succesful than one in which customers thought they'd die without it and feel completely satisfied only temporarily at each moment of purchase?

        In the modern world, we're at an unprecedented level of interdependency already. If the trucks that bring food to my local grocery store stopped running today, then I'd starve within a few weeks.

  • Accenture has been around for a while. They are the consulting, not the accounting wing from Andersen. They help companies make their ideas into real products and stuff like that. IBM probably figures that they can make a big chunk of change in this field two ways. The direct revenue from consulting, and I suppose the PWC consultants will be "suggesting" IBM solutions for their clients a lot more often now. Win-win for IBM if they can manage the business right.
    • IBM probably figures that they can make a big chunk of change in this field two ways. The direct revenue from consulting, and I suppose the PWC consultants will be "suggesting" IBM solutions for their clients a lot more often now. Win-win for IBM if they can manage the business right.

      If they can manage it right. IIRC, EDS had the same big idea when they bought A.T. Kearney. After that, it was all down hill for EDS. As a former employee of EDS, and a current employee of IBM, I'm not happy to hear this.

  • Before making a comment, read this... (Score:5, Interesting)

    by irony nazi ( 197301 ) on Wednesday July 31, 2002 @01:08AM (#3984119)
    INFORMATION FOR SLASHDOTTERS:

    These figures are off the top of my head, please correct me if wrong.

    Consulting made up ~25% of IBM's 18 Billion in revenue last year. It's been a significant part of IBM for a long time and many credit the consulting arm of IBM for pulling IBM through the '90s. IBM is *much* more than a harddrive manufacturer or computer hardware company.

    If you have a hard time understanding this, put it this way... IBM was the Microsoft of the 60s, 70s, and 80s. Back then, Computers were mostly for *accounting* and various services that you would hire consultants for. IBM took advantage of this and became big. I question Microsoft, because after ~10 years as a substantial Monopoly, they haven't successfully branched into another area and their largest competition is given away for free.

    Anyways, I figured a consulting explanation was in order for anybody who wants to post a *WHY WOULD IBM BUY A CONSULTING FIRM?* comment.

    BTW, does anybody know what happened to the name "Monday"? I thought PWC consulting was changing it's name to "Monday". Am I wrong?

    • "Monday" (Score:1, Redundant)

      by CBNobi ( 141146 )
      Maybe they backed off after they realized their crucial mistake [introducingmonday.co.uk].

      Just a guess.
    • Still, it's not a great advertisment for their Linux services division. Basically, they are saying that they can't make enough money selling software consulting so they've got to pad out their revenues by selling old-fashioned accounting advice.

      -a
      • They're not buying the accounting division. That's worth more than $3.5 billion. Almost all large accounting firms are spinning off their consulting arms in order to avoid further accusations of conflict of interest ... such as, say, fudging your client's annual report in return for a consulting contract or ten.
      • I assume that's a troll, right? All of the Big Financial services companies (except Andersen) operate as a federation of national companies. They all also started up consulting divisions a while back. As big IT projects became more and more common during the '90s the consulting divisions realised that they were making significantly more profit per partner than the other divisions and were itching to split from their original parent. This is why Accenture split from Andersen, EY consulting was sold to CapGemini and so on.

        PwC consulting has absolutely nothing to do with PwC Financial services in the operational sense. Secondly, Linux Consulting accounts for an absolutely tiny fraction of GS revenues.

    • Consulting made up ~25% of IBM's 18 Billion in revenue last year.

      IBM's Investor Relations Website [ibm.com] shows that IBM Global Services (IGS) made up $35 billion (41%) of IBM's $85 billion in revenues for 2001. According to the annual report, IGS operated at a 27.5% gross profit margin ($9.6B). This is almost directly comparable to the hardware division, which pulled in $33.3 billion (39% of IBM total revenue) at a gross profit margin of 27.7%($9.2B).

      Your point is quite valid, however. IBM wouldn't have survived the early 90s if not for the fact that it diversified and became an IT solutions provider. Its strategy, not a secret, is to be the "one stop shop" for your IT needs: IGS drafts a plan (with pricing options for IBM and non-IBM vendors), and can set you up with the solution you need, be it IBM or non-IBM parts. Of course, you'll probably get a touch of a discount for shopping IBM - call it a bulk deal.

      PwC's IT consultancy was looking for a buyer, and IBM wanted to swallow a bit more market share in that area. Plus, at $3.5 billion for a division that brought in $4.6 billion last year, the price was right -- certainly much "more right" than the $18 billion price tag that Hewlett-Packard turned its nose up at last year.

      Also, don't forget that IGS will not only sell you IBM hardware, but also IBM software, which is far and away the most profitable division of IBM. While software pulled in only $12.9 billion in revenue, but made $10.6 billion in profit at a gross margin of 82.5%.
    • PWC was going to change its name to Monday and have an IPO to raise money. Now that it's been bought out, they no longer need an IPO. Probably the fact that they needed money is why they were bought out so easily.

      As far as your figures, for 2nd Quarter 2002, IBM Global Services (consulting) revenue was 8.7b out of 19.7b (44%) total. Hardware made up 6.7b/19.7b (34%) and software 3.3b/19.7b (16.5%), and the rest other units.

      A subsection of IBM Global Service (BIS - Business Intellience Services) will be merged as a new unit with PWC. Apparently PWC has/had 45% of the Fortune500 companies as clients.

    • Its actually more like 45% of about 85 billion in revenue. I think you got a quarterly number. IBM missed out pretty badly on the PC revolution, they were stuck with lots of very nice but much more expensive mainframes and large servers. At the time Sun was beginning to eat their lunch with cheaper servers, so IBM decided that they needed to expand their consulting & services. It has woerked very well for them. Enough that HP wanted very badly to be the little IBM, they tried to purchase PWC consulting last year or the year before. But they had to settle for Compaq and hope they could cut costs to compete with Dell.
      About Monday, PWC was in the process of selling the consulting division to the public through an IPO, and the accountants wanted the name for themselves, so the consulting division came up with Monday. Since IBM is likely to just call it a small part of IBM Global Services, the name it currently has is pretty irrelevant.
    • IBM's revenue was 85 Billion Last year, not 18. (http://www.fortune.com/lists/F500/index.html)

      I doubt 25% of that was consulting. Unless they really overcharge as much as I thought...

      And as far as the name "Monday," I think this purchase once again proves... IBM + Any Company = IBM
    • Comment removed based on user account deletion
    • I question Microsoft, because after ~10 years as a substantial Monopoly, they haven't successfully branched into another area and their largest competition is given away for free.

      You mean like content (msn, msnbc), services (msIM, .NET), hardware (xbox) and software subscriptions (lots)?
      • none of those make up a significant percentage of MS profit. In fact most of them are money losers and are being subsidized by the MS monopolies of windows and office. MSN, IM, .NET, Xbox etc are all losing money and certainly would have gone belly up if they had to fend for themselves.

        For any other company this would be called dumping and declared illegal but if you own the attorney general then it's OK.

        BTW. whether or not .NET makes money is kind of a silly question. .NET is nothing more then a marketing term. Every MS product has or will have the .NET label on it which makes the whole question kind of moot. Even the ham sandwiches at the MS cafeteria will be called "sandwich .NET version 8" (naturally versions 1-7 never existed, this is MS marketing after all).
        • Even in its heyday, IBM made its profits from selling goods, so it couldn't generate the obscene amounts of cash which MS is sitting on. The scandal is that MS has made monopoly profits from software, where the direct cost of sale is almost zero, and rather than doing anything with the money or paying it to shareholders in dividends (and hence paying taxes like the rest of us) they have amassed a cash mountain. So while IBM has bought PwC Consulting, MSFT has *chosen* not to.

          So on Microsoft's part, this displays either a different plan or (more likely) a lack of vision. Having made easy money from the Windows/Office monopoly, they don't understand how to run a "normal" business where you have to sell goods or services (where the cost of sale is not insignificant compared to the price tag).

          As for IBM, while Global Services is a managed service offering which also performs implementations, PwC Consulting will be mostly implementation based. Their plan will be to use the PwC arm to feed ongoing business into GS (which means that when they report the accounts of the two arms separately IBMGS will show impressive growth).

          Dunstan
          • So you are saying that Microsoft should have bought PWC?

          • It's a puzzle as to why ms is sitting on so much cash. I raise the question in my sig. My guess is that Bill Gates knows something we don't. Whatever this thing is will be so catastrophic that MS will need 40 billion in cash to come out of it whole. What could it be? Some guesses.

            MS is a target for terrorists. This is certainly plausable. A dirty bomb exploded in redmond would crush MS in a big way and you'd need 40 billion to rebuild.
            MS will be split up.
            The US economy is on the brink of a collapse.
            The world economy is on the brink of a collapse.
            MS plans on folding shop in the US and moving to another country (perhaps Bill gates will buy haiti, cuba, philipines or something). It will need that cash when the US economy crashes as a result.

            I am sure you can come up with other scenarios but these I see as most likely.

            Bear in mind I am not saying that I think these things are imminent just that Bill Gates thinks they are imminent and that's why he is hoarding cash.

    • You obviously didn't notice that Microsoft now sells a CRM suite [microsoft.com] and a reasonably well thought of Content Management System [microsoft.com].

      Now the CRM suite is no match for Siebel [siebel.com], as it's targeted at SMEs, but the CMS is in the tier just below Vignette and Documentum, and has inflicted major price movements in the CMS market.

      Oh, btw, spot on with the rest of your comment.

  • Oracle (Score:1, Insightful)

    by artlu ( 265391 )
    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

  • Before Andersen Jokes Spread.. (Score:5, Informative)

    by CBNobi ( 141146 ) on Wednesday July 31, 2002 @01:13AM (#3984135)
    and this post gets modded down as redundant:

    Accenture [accenture.com] was originally part of the Arthur Andersen LLC [andersen.com] conglomerate, as Andersen Consulting. Notice the consulting, not accounting. In January 2001 they renamed themselves to Accenture and began public trade.

    That all doesn't mean that it's off the hook [bbc.co.uk], however.
    • Anderson Consulting was spun out of Arthur Anderson the accounting firm, it was set up to take advantage of the "additional" services that they could offer to clients whose books they audited.

      So it is actually founded on exactly the mentality that led to Enron et al.

    • Those looking may like to note that Accenture's full name is Accenture Ltd and it is registered in an offshore tax-haven (Bermuda). It appears that they haven't lost their bad habits from the Andersen days. This fact is not revealed on their web site or their annual report, however its is revealed in their SEC 10K Filing [corporate-ir.net]. They in turn own shares in Accenture SCA, a Luxemburg based partnership which is the main operating body. That is minimal fiscal transparency.
  • Today, XYZ corporation went under for bad accounting. Eyes are trained on the actions of the newly formed IBM-PwC.

    Microsoft spokesman Mr. Longhorn said "that open-source *had* to have contributed to the shortcomings of their accounting scheme. With Microsoft software, since we do not show the source, corporations can better hide their iillegal deads."

    RMS responds, "Accouting through obscurity does not work."

    In other news...
  • for a cool $3.5 billion in cash and stock.

    they didn't seem to want to go for my offer of $5.37, maybe after next weeks allowance...

  • next merges.... (Score:2, Funny)

    by Anonymous Coward
    next merges

    Apple buy IKEA
    Oracle buy Chanel
    Microsoft buy playschool
    Boeing buy John Deer

  • Ha! (Score:3, Insightful)

    by rabtech ( 223758 ) on Wednesday July 31, 2002 @01:23AM (#3984168) Homepage
    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! (Score:5, Insightful)

      by medcalf ( 68293 ) on Wednesday July 31, 2002 @01:41AM (#3984227) Homepage
      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.

      • Re:Ha! (Score:5, Interesting)

        by Ami Ganguli ( 921 ) on Wednesday July 31, 2002 @02:23AM (#3984341) Homepage

        Indeed. I've seen the same pattern myself (and I even worked for a time at a company that pulled that kind of scam).

        The only thing I'd add is that most of these companies have pet technologies that must solve every problem. At one company I worked for this resulted in half a dozen aging Novell servers that worked perfectly well being replaced with about two dozen massive NT4 servers that were horribly unstable. Our wonderful NDS tree that was a pleasure to administer was replaced by unmanagable 'domains' with complex trust relationships that nobody understood.

        At the consulting company I was working for, Tivoli was the 'one true solution' for everything (you can guess the company). Clients were conned into buying Tivoli agents for everything. It's amazing how expensive these agents can get. Then of course you need more of their expensive consultants to configure the resulting mess.

        What I've learned is that consultants have their place, but you have to keep them under a tight reign. Give them specific, well scoped projects with well-defined deliverables. Do use them for specific skills that you don't have in-house, or extra manpower when you don't have enough staff for a specific project. Never let them define the goals, scope, or technology to be used.

        • the reign in speign falls meignly on the pleign (Score:2, Informative)

          by Anonymous Coward

          "...you have to keep them under a tight reign."

          rein. under tight rein. like reindeer. they're reined together, see? or like horses. that's where the saying comes from. if you give a horse free rein, it will just do as it pleases. to control it, you have to keep it under tight rein.

          • pedant (Score:2, Funny)

            by Ami Ganguli ( 921 )

            pedant n: a person who pays more attention to formal rules and book learning than they merit (WordNet ® 1.6, © 1997 Princeton University)

        • Check this out then [amazon.com] -- it's sad and hilarious at the same time, perfect drama in other words. It's mostly about business consultancy, not IT, but it's the same patterns. Highlights include Anderson getting bonuses that get higher as they manage to get more people fired at the client site.

      • Re:Ha! (Score:2, Interesting)

        by david_e_v ( 42652 )
        IMHO you should stop for a moment and think why these now big consulting companies are so big. Do you really think all their clients are really stupid people?, because all these consulting firms are really expensive. I don't think it is realistic thinking that all these firms could charge that much if their clients didn't see any real benefit from their services. This doesn't mean, of course, that some projects end badly, bad I don't think it is the most general case.
        I'm quite fed up with this bad attitude against the big consulting corporations. I've worked with some small consulting companies, and many times I have seen just a bunch of code monkeys, unable many times to compromise with the client or take the responsibility for the project when it is needed.
        IMHO again, the reason why many times the big companies go for the services of the big consulting firms, is just because they know they are not able to accomplish their objectives by themselves.
        And finally, the big consulting and the small and freelance consulting worlds are not very far away. I know people who has crossed borders in both ways.
        • IMHO you should stop for a moment and think why these now big consulting companies are so big. Do you really think all their clients are really stupid people?

          I have worked with major consultancy firms. Their work is substandard and they attempt to bully their way past any independents or local technical management with incompetent ideas that are poorly implemented.

          What they give to senior management is schmooze, payoffs (come visit our corporate HQ in the Bahamas) and the ability for the board to escape the blame when defending their poor results to shareholders.

          I have seen the large consultancy companies take 200 people to do the work of 20 competent staff. This is why I dislike the biggies so much.

      • Bar talk... (Score:5, Interesting)

        by MADCOWbeserk ( 515545 ) on Wednesday July 31, 2002 @04:46AM (#3984752)
        I once talked to a very high level consultant working for one of the big consultancy firms, at a bar. He told me this,

        "Look at there business and come up with the most complicated solution, and describe it in the most vague and unintelligible way you can. Make sure to use lots of big technical words,especially trendy ones, feel free to make up entirely new terminology to desribe everyday things. For instance a gateway is now a "Inter/Intra network liason device", and a router is now a "packet traffic management switching and delegation processing unit." Do not spell out clearly how to implement your plan. If the business does well, take all the credit. If not, claim they did not implement your plan correctly, and that it is their own fault for leaving out the most "critical" piece of your solution."

        That was from a guy I knew in Philly who made 7 figures a year, and that he employed the strategy on all consultant gigs from management, to manufacturing and IT.

        Could Jesus microwave a burrito so hot, that he himself could not eat it? HS
        • Yeah. Well, I work on the customer side of these big consulting deals (IAAL), and I'm the guy that sits down in a room full of fifty IBM suits during the bid phase and chews them out long and hard because their technical solution is a giant POS. I *do* so enjoy my job!
        • That was from a guy I knew in Philly who made 7 figures a year, and that he employed the strategy on all consultant gigs from management, to manufacturing and IT.

          So, the lesson here is: To make it big and rich in IT, sell your soul to the Devil, and cheat your way to the top.

          Awesome. This honest, stable, and average-paying programming job was getting stale, anyway. Now, where'd I put that back-stabbin' knife...

          (just kidding; honest and stable is pretty darn good)
    • No, IBM has paid a large amount of money for a substanial and lucrative customer base with which they can further their own consultancy business.
    • I have you beat. We hired PWC for a huge project. All of the young turk managers attached their star to the project because they knew PW would get the job done. We trained...I repeat, WE trained their people in COBOL/CICS/DB2 and they hammered the code. When all the programs compiled, the project money ran out and we sent them packing. The code wasn't even close to the specs. They got the program to compile, declared victory and went to the next program. Some programs did nothing BUT compile. They were empty shells.

      Meanwhile, all the young turk managers are leaping off the project like the sumbitch was on fire. The project heads are going around trying to find resources for the project and getting nowhere

      "Hey, can you help out with the Billing System?"
      "No, can't do it. Health problems. I have a bone in my leg".

      In the end, the project heads are standing around with this flaming shitbag of a project with layoffs headed their way.

      It was fun to watch.

  • IBM has always been a "Solutions" company (Score:3, Interesting)

    by in.johnnyd ( 534394 ) on Wednesday July 31, 2002 @01:38AM (#3984218) Homepage
    This acquisition makes perfect sense. Just as corporate security requires much more than just securing the computers, offering business solutions requires more than just offering hardware and software. When IBM's clients are faced with a business problem, IBM can now offer not only hardware and software, but solutions for the tax angle, the public relations angle, etc. My guess is that they've been looking to do something like this for a while, and now there's a 60% off sale going on at the NYSE.
  • Is this to make it clear that they are doing something about conflicts of interest involving account consulting?

    Perhaps they've got some misdeeds that may come to light, and are trying to prevent anything that might be discovered from precipitating an Anderson-esque collapse?

    Well, in any event, to an ignoramus like me, it sounds win-win.

  • Tree Saver (Score:4, Funny)

    by Tablizer ( 95088 ) on Wednesday July 31, 2002 @01:49AM (#3984251) Journal
    Good! Tech mergers mean I get fewer rejection notices!
  • A blast from the past [com.com] - "HP is considering the acquisition of PricewaterhouseCoopers' global management and information technology practice for between $17 billion and $18 billion in cash and stock, the company confirmed in a statement early this morning."
    • Amusing how much difference the dotcom bubble bursting makes to the value of a Consulting firm like that.

      Obviously they've lost themselves a few customers. Ironically, the customers probably went out of business because they spent all their money on consultants.
  • ... compared to the [infoworld.com]
    17 to 18 billion HP wanted to pay 2 years ago.

  • IBM probably got a good deal (Score:4, Informative)

    by Animats ( 122034 ) on Wednesday July 31, 2002 @02:35AM (#3984374) Homepage
    The new corporate-crime bill Bush signed today requires that accounting firms get out of the management consulting business and stick to accounting. Much of the Enron mess came from Andersen both constructing the tax and earnings gimmicks as management consultants, then auditing them as accountants. Big-time conflict of interest. That's now illegal.

    So PWC had to sell off their consulting unit to somebody, or spin it off as a standalone entity. IBM makes sense as a buyer, since they already do IT consulting and related services. IBM probably got a good price, since this was a forced sale.

    No big thing; it actually makes sense as a deal.

  • What do you get if you cross IBM and PWC? (Score:5, Funny)

    by tlambert ( 566799 ) on Wednesday July 31, 2002 @02:46AM (#3984402)
    Q: What do you get if you cross IBM and PWC?

    A: IBM

    (Yes, it's not funny; it wasn't funny when they bought the company I worked for, either...)

    -- Terry

  • Poor HP (Score:2, Interesting)

    by GenCuster ( 121609 )
    Last year HP tried to buy PWC, the deal ended because the price was too high, something like $18 Billion. Now that HP has merged with Compaq and has all of the Compaq nightmares IBM buys PWC for $1.5 Billion.

    Carly must be dieing right now.

  • More possible mergers... (Score:5, Funny)

    by gusnz ( 455113 ) on Wednesday July 31, 2002 @04:11AM (#3984682) Homepage
    As merger season is apparently upon us, here's some other possible additions to the merger club:

    Hale Business Systems, Mary Kay Cosmetics, Fuller Brush, and W.R. Grace Company merge to become Hale Mary Fuller Grace.

    Polygram Records, Warner Brothers, and Keebler Crackers merge to become Polly-Warner-Cracker.

    3M and Goodyear merge to become MMMGood.

    John Deere and Abitibi-Price merge to become Deere Abi.

    Zippo Manufacturing, Audi Motors, Dofasco, and Dakota Mining merge to become Zip Audi Do Da.

    Honeywell, Imasco, and Home Oil merge to become Honey I'm Home.

    Denison Mines, and Alliance and Metal Mining merge to become Mine All Mine.

    Xerox and Wurlitzer will merge and begin manufacturing reproductive organs.

    Fairchild Electronics and Honeywell Computers will merge and become Fairwell Honeychild.

    3M, J.C. Penney and the Canadian Opera Company will merge and become 3 Penney Opera.

    Knott's Berry Farm & National Organization of Women will merge and become Knott NOW!
  • I hope the Bob's don't start laying people off!
  • these big IT consulting firms are only as good as the clowns they put on your project. In my career so far, i've been involved in 3 major projects involving "Big 5" consultants. Often, you get graduates with little experience under their belt.

    Their answer to this is that their employees are able to draw on a vast and global pool of knowledge.

    I think that's bollocks.

  • If some employees leave or get sacked from PwC, I hope they send emails around as good as this one [fuckedcompany.com] from a sacked PwC employee.
  • OK so they slashed BIS in the thousands of jobs. They crush variable pay so that if you literally walk on water you get a dollar or two. Annual increases are cut by 75%. Dump the disk business. Cut all business travel. Training dollars - if there ever were any are now approved by God Himself and No One Else. 2 to an office is standard. Conflicting gibberish about whether we're supposed to work mandatory 15% OT or if were supposed to bill 40 hrs to internal and not one minute more. Constant chatter of who will get cut next & when. Stock is down by almost half. And now we have to make room for 30,000 PwC pussies? Let's see how many Partners are converted into a new gibbering gabble of do-nothing VPs and high dollar pimps. Half of these beotches are the same customer hired flunkies who are on an engagement to tell the customer what a bunch of fucked up losers the IGS team is - now we're all gonna be one big wet sploogy purring love pile.

    God was smoking rat poison on this one.

  • As a former PW person, this makes sense (Score:3, Insightful)

    by anomaly ( 15035 ) <[moc.liamg] [ta] [3repooc.mot]> on Wednesday July 31, 2002 @09:14AM (#3985440)
    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. :)

  • PWC was the second-biggest "business consulting" firm. The biggest IT Consulting firm was, and will continue to be, IBM Global Services. It will simply now have a much bigger business consulting wing. (It already had one, it just wasn't as large.)
  • HP tried to by that same division for $38 billions 3 years ago. I say they are getting a deal.
  • Remeber when HP was going to buy Price Waterhouse Cooper a year or two ago?

    HP wanted to buy it for 17-18 Billion.

    IBM will now be buying it for 1/5 of that.

    Here [infoworld.com] is the link if no one remembers.

    What a mistake that would have been!

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