IBM purchase boosts revenue to $380m - IDC

IBM's purchase of the consulting arm of PricewaterhouseCoopers will create one of the country's largest IT companies and boost IBM revenue to $380 million a year, according to IDC analyst Mark Cribbens.

IBM's purchase of the consulting arm of PricewaterhouseCoopers will create one of the country's largest IT companies and boost IBM revenue to $380 million a year, according to IDC analyst Mark Cribbens.

Cribbens believes the new company will have around 10% of the New Zealand IT services market.

"This will consolidate IBM’s second position in the New Zealand services market, and provide a significant lead on the new HP which is estimated to have managed services revenues of between $80 and $90 million for 2001. IBM will be second behind EDS."

The sale, valued at $US3.8 billion (see IBM to buy PwC Consulting for $US3.5 billion), means IBM will have achieved where HP failed; buying PwC Consulting. HP had attempted to buy the consultancy prior to its merger with Compaq, although negotiations broke down at the $US15 billion mark, almost five times what IBM ended up paying.

Cribbens says the IBM acquisition of PwC Consulting makes much more sense than the HP attempt.

"IBM already has a well established consulting and services division and is capable of swallowing the PwC Consulting division and ensuring that an IBM culture is still influential."

Cribbens says the purchase marks the almost complete transformation of the services market in New Zealand over the past year.

"Five years ago, PwC, Ernst and Young, Deloitte Touche, Arthur Andersen and KPMG were fully fledged accounting firms with large and sophisticated consulting arms. Today, Arthur Andersen has disappeared and spun off Accenture, Ernst and Young has split off its consulting arm to Cap Gemini, KPMG Consulting has become a separate entity and is part-owned by Cisco, and Deloitte is becoming Braxton."

Cribbens says it is becoming increasingly difficult to find an implementation consultant who is vendor-agnostic.

"Theoretically, PwC would assess the best available technology for a particular client’s requirements and provide consulting and implementation services around that. Now it will be aligned with IBM’s technology offerings”

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