The tie-up trend
News that HP and PricewaterhouseCoopers are talking about merging, of course, is only the latest and most dramatic example of the closer links between vendors and IT service providers. The trend, experts say, goes back to the early 1990s when consultants and integrators, anxious to cash in on the booming ERP (enterprise resource planning) market, began entering into close partnerships with vendors such as SAP AG. The partnerships allowed service providers to understand the direction that complex ERP products were taking and to more quickly train the large number of consultants that were needed to support specific ERP suites.
Recently, however, the ties linking vendors and service providers have grown tighter. Consultants and vendors have been investing in one another and launching joint companies. Cisco Systems, for example, invested US$1 billion in KPMG Consulting LLC when it launched in January as a separate company from KPMG LLP. Cisco is also investing with Cap Gemini SA to create a jointly owned services company. Similarly, Microsoft has joined forcesâ€"and capitalâ€"with Andersen Consulting to create a new company focused on Windows 2000 implementations.
Meanwhile, it's becoming common for consulting companies to take equity stakes in emerging vendors as part of their alliances. Andersen Consulting, for example, went as far as to form a unit in December that will invest US$1 billion over five years in new companies. So far, those companies have included e-commerce software company Blue Martini Software, CRM (customer relationship management) software developer Calico Commerce and e-marketplace ChemConnect.
To be sure, these closer ties among consultants and vendors can benefit IT. While the alliances take many forms, they typically involve consultants gaining better access to vendors and developing a deeper knowledge of products. Consultants often use the alliances as a basis for creating integrated software and service offerings targeted at the needs of a specific industry. Cap Gemini Ernst & Young, for example, has used its alliances with Siebel Systems to put together a call center solution called Centric.
