Too many players in crowded field

Speculation about a coming shakedown in the oversupplied mid-size IT consultancy and systems integration industry is growing.

Speculation about a coming shakedown in the oversupplied mid-size IT consultancy and systems integration industry is growing.

Consultants are staying quiet on, or firmly denying, specific planned takeovers. Notably Synergy, said by sources to be readying itself for takeover with the help of a merchant bank. It’s doing no such thing, insists chief executive David Irving.

Irving says the rumour might spring from the disposal of shares by retiring chairman Chris Comber. But even if Comber’s stake was sold to one party, that wouldn’t amount to a takeover.

Comber was on holiday in Wales last week and did not reply by press time to Computerworld’s messages.

Irving says Synergy is in good heart, with a recent $8 million contract in the US and a cornerstone shareholding taken by the ANZ Bank. It is not looking to take over anyone else specifically, he says, “but if the opportunity arises, you have to give it appropriate consideration”.

Gen-i is strongly rumoured to be in the market to take over a smaller competitor, with Infinity in particular mentioned. Gen-i chief Garth Biggs denies that rumour.

“We have not had any conversations with Infinity, but that doesn’t preclude us ever talking to them.”

However, “we have publicly stated that we’re interested in growing by acquisition, and we have an ongoing programme of talking to various people. That’s a long-drawn-out process. As they say, you’ve got to kiss a lot of frogs before you find a prince.

The market has long been depressed, Biggs says. “In the integration arena, the industry has lost money over the past 10 years, and it’s got worse recently. There are probably only three or four businesses making a profit in this space right now.”

It’s hard to know how well the multinationals are doing, because of complications about New Zealand subsidiaries having to pay their dues to the corporate office, he says.

The departure of Accenture and the shrinkage of some of the other large multinationals like PricewaterhouseCoopers (now part of IBM) and KPMG, now known as BearingPoint, “ought to have made some room”, Biggs says.

Simpl Group managing director Bennett Medary sees the need for consolidation.

“Restructuring of some kind is a no-brainer,” Medary says. “We can sit here and moan about how the good times have gone and it’s all so much tougher, or we can do something proactive.

“I think there is a space for a powerful local agency for servicing New Zealand business and the way to get there looks to be by merger.”

Medary says large customers are seeking more “pragmatic” input from consultants and integrators. “Not just more visions, strategies and white papers.”

As to the causes of the shift in the market, Medary says government, in particular has “turned off the tap”.

A State Services Commission source, not wanting to be quoted by name, confirms government has been “bringing skills back in-house” since a fuss in 1999 when the new Labour government pointed to the “exorbitant” public-sector use of consultants across all fields, not just IT.

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Tags consulting market

More about Accenture AustraliaANZ Banking GroupIBM AustraliaInfinityKPMGPricewaterhouseCoopersState Services CommissionSynergy

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