The fate of embattled accountancy giant Andersen could have serious
implications for its IT consultancy clients.
Andersen was indicted last week by the US federal government on
obstruction of justice charges in connection with the destruction
of documents when it was auditor of Enron, the collapsed energy
giant. The future of the company, which has been haemorrhaging
audit clients, looks bleak, with takeover rumours reaching fever
pitch earlier this week.
Andersen said last week that it intended to fight the indictment,
which it said was only an allegation. A spokeswoman added that it
was exploring several opportunities in the market and was not
ruling anything out.
Andersen, like its rivals in the top five accountancy firms, offers
outsourcing and e-business consultancy services. Whether or not it
retains its independence, the crisis raises some important
questions for customers of consultancies.
What happens if your IT consultancy runs into financial problems
and is taken over after you have signed a multimillion dollar
contract? Will your project be put on hold while the consultancy's
buyer imposes its own culture? What are your rights?
Outsourcing experts warn that users are left relatively powerless
in these situations, particularly if they are in the middle of an
intricate, long-term IT project.
The consultancy work could be delayed if the new consultancy
decides to change the platform of the ongoing projects, and meddles
with the technical specifications.
"The impact of your consultancy merging could be quite severe,"
said Robert Morgan, chief executive of outsourcing advisory
consultancy Morgan Chambers. "The key people involved in the
original project with your consultancy could decide to leave
because they don't like the new culture. You could be dead in the
water."
If consultancy staff jump ship from the project the customer could
try to poach them, to retain their knowledge of the project.
However, clauses in contracts with consultancies often rule-out
poaching, further limiting the user's room for manoeuvre, Morgan
added.
Often, though, the new consultancy will want to avoid negative
publicity and unnecessary rows with new customers, and compromises
can be reached.
Meanwhile, there was some welcome news last week for the management
consultancy market. According to a survey from the Management
Consultancies Association (MCA) the IT consultancy market reported
revenues up about 10% for the fourth quarter of last year.
Outsourcing income grew by a more modest 2%.
"All the indicators are that the worst of the economic slowdown
could be over for the outsourcing industry," the MCA claimed last
week.
Consultancy work to help clients to cut costs is a major growth
area, which suggests that companies are still holding back from
investing in major new IT projects.
Management consultancy, including strategy, HR and marketing,
accounted for £590m in revenues for the quarter (up 2.6%), followed
by outsourcing consultancy, £287m (2.1%) and IT consultancy and
systems development £230m (10.6%).