I don't like Monday, says PwC Consulting

9 February 2006

PwC Consulting falls into the arms of IBM only days after formally splitting from its auditing parent and rebranding itself 'Monday'

The efforts of auditing giant PriceWaterhouseCoopers to spin off and re-brand its consulting arm as 'Monday' seem to have been something of a smokescreen for a more radical move. Just days after the new identity came into effect in late July 2002, the consulting partners at PwC finalised a $3.5 billion deal to join IBM's vast Global Services operation. The purchase, which

WebGain finds Studio a new home

WebGain has found a final resting place for its Java application development environment, WebGain Studio. A few months after it ceased trading, the company has sold its core assets to rival tools vendor TogetherSoft.

As well as the Studio tool suite and its centrepiece the Visual Café development environment, TogetherSoft has taken WebGain's StructureBuilder, Business Designer and Quality Analyzer products. WebGain Studio customers will be offered an upgrade and integration package to get their applications to TogetherSoft's own integrated Java tools suite.

TogetherSoft's purchase follows the acquisition by database giant Oracle of WebGain's TopLink object-to-relational mapping tools in June 2002. This leaves WebGain, a start-up that received $220 million in funding over its 30-month existence, with just one product, its Application Composer software, which is also for sale.

came a mere two years after Hewlett-Packard's abortive attempts to buy PwC Consulting for a rather more generous $18 billion (€18.4bn), was the first major acquisition for IBM under new chief executive Sam Palmisano (a former head of IBM Global Services).

Assessing the key drivers for the deal, Palmisano cited PWC Consulting's bluechip client base and technological expertise - particularly in the areas of enterprise resource planning (ERP), customer relationship management and supply chain software implementations. PwC Consulting will add 30,000 employees to IBM Global Services arm (IBM GS) - itself the world's largest IT services operation with a headcount of 150,000 - and swell annual revenues to more than $40 billion.

But the deal presents IBM with some formidable challenges, say industry observers. Charles Rutstein at Forrester Research, for example, suggests it is a bold move given the current slump in spending on IT consultancy. He is also dubious about how well the relatively independent partner structure of PwC will fit with IBM's committee management culture. "Both IBM and PWC leaders assure us that the cultures of the two organizations will mesh well. We're not buying it: For PwC's 1,200 partners, it'll be a rude shock to transition from being equity-holding business owners to salaried employees," says Rutstein.

PwC's sale to IBM was largely influenced by pressure from US regulators, who have been pushing for the big accountants to separate their consulting divisions from their auditing arms in order to avoid conflicts of interest. Unable to float the business as a public company, PwC may have felt divorcing itself from PwC Consulting and changing the name to Monday did not actually put enough distance between the two operations.

Meanwhile, Bob Djurdevic of Annex Research, a long-time IBM watcher, points out that PwC Consulting is being subsumed into one of the most beleaguered constituents of IBM Global Services- its Business Innovation Services (BIS) unit. "The BIS operation, which accounts for about a quarter of the total IBM Global Services revenue, has been by far the worst performer among the Global Services business segments in the last year or so," he argues. In the last quarter, he observes, sales in the BIS unit declined by-11%."

The upshot for current and future customers of PwC, says Forrester: "Customers should be on [the] alert for a brain drain." Especially when partners receive their share of the $3.5 billion.

Acquirer	Activity	HG	Target	Activity	HQ	Price
Key IT industry acquisitions in August
Agilera	Appln outsourcing svcs	US	United Messaging	Unified messaging s/w &svcs	US	n/a
Bentley Systems	Engineering s/w	US	Rebis	Plant design s/w	US	n/a
Chevin	Network mgmt s/w	UK	Jyra Research	Network svcs mgmt s/w	US	n/a
CIBC World Markets	Investment bank	Can	Accenture's VC portfolio	Start-up venture capital	US	n/a
Cisco Systems	Networking systems	US	AYR Networks	Routing s/w &dist net svcs	US	$113.0m
Cisco Systems	Networking systems	US	Andiamo	SAN storage swicthes	US	n/a
Concur Technologies	Expense mgmt s/w &svcs	US	Captura	Hosted expense mgmt svcs	US	$12.5m
Finmatica	Supply chain mgmt s/w	Italy	Mercia Software	Demand/supply chain planning s/w	UK	n/a
GEAC	Vertical industy applns	Canada	Extensity	Employee relation mgmt s/w	US	$47.0m
Gores Technology Grp	High-tech buyout co	US	Aprisma div of Enterasys	IT infrastructure mgmt s/w	US	n/a
IBM	Systems, s/w &svcs	US	PwC Consulting	IT consulting svcs	US	$3.5bn
Internet Security Sys	Security software	US	vCIS	Behaviour inspection technology	US	$20.0m
Intuit	Finance mgmt s/w	US	Blue Ocean Software	IT resource mgmt s/w	US	$170.0m
Maximus	Gvmt services	US	Peregrine's Transport unit	Asset mgmt s/w	US	n/a
OpenService	Network security mgmt	US	Response Networks	Service level mgmt s/w	US	n/a
PeopleSoft	Business applications s/w	US	Teamscape	Learning mgmt s/w	US	n/a
PGP	Encryption s/w	US	Network Assocs' encrypt s/w	Desktop/wireless encryption s/w	US	n/a
Rational Software	Application design s/w	US	NeuVis	Application dev s/w	US	n/a
Software Research Assocs	S/w services	Japan	Turbolinux	Linux implementation	US	n/a
Sun Microsystems	Systems &s/w	US	Afara Websystems	SPARC chip design	US	n/a
Sungard	IT services	US	Monis Software	Derivatives analytics s/w	UK	n/a
Synopsys	Electronic design s/w	US	inSilicon	Integrated circuit design s/w	US	n/a
TogetherSoft	Java appln dev s/w	US	WebGain's Studio range	Java appln dev s/w	US	n/a
Tririga	Asset mgmt s/w	US	Peregrine's FacilityCenter unit	Infrastructure mgmt s/w	US	n/a