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Update on the IBM/PwC merger

An IBM executive has said the process of bringing PwC Consulting into its fold is on schedule, but analysts countered that it was too early to tell how well the two organisations were melding.

IBM's belief is that by swallowing PwC Consulting, it would be able to strengthen key areas in its global services arm, which is already the world's largest provider of IT services, both in terms of size and revenue, to compete against service providers such as Electronic Data Systems and IT vendors with big service groups like Hewlett-Packard.

Observers agree that in theory, acquiring PwC Consulting was a good move for IBM because it could bolster Global Services' business strategy consulting services, as well as certain vertical industry practices, such as pharmaceuticals and technology, and customer relationship management.

But with the $3.5bn (£2.2bn) acquisition completed, IBM has the hard job of integrating PwC Consulting with its 30,000 employees and a private partnership mindset within Global Services, which has a staff of 150,000 and is part of one of the world's largest publicly traded corporations.

Gartner analyst Frances Karamouzis gave IBM credit for "clearly putting a lot of effort" into the PwC Consulting integration and for appointing PwC Consulting executives to key top-level posts within IBM Business Consulting Services, the new unit created from the acquisition.

Karamouzis reserved judgment on the integration process because IBM has not provided enough details about post-acquisition services, nor are there yet real-world client testimonials about the benefits of a combined IBM-PwC Consulting services portfolio.

To evaluate the success or failure of the integration, the market would need to see "joint bundled services that were legacy IBM and legacy PwC Consulting seamlessly aggregated and delivered to clients - that hasn't happened yet, nor been put to the test."

IBM is now in the second of the three phases of integrating PwC Consulting, whose acquisition from accounting giant PricewaterhouseCoopers it announced in July and completed in October, said Eric Pelander, global and Americas leader for strategic change solutions at the new IBM Business Consulting Services.

The first phase included the closing of the deal, the establishment of the new unit's operating models and the naming of the unit's key top executive leaders.

The second phase, which IBM expects to complete this month, involves filling in details around the operating model of the new unit regarding specific industries and technology areas, as well as appointing practice area team leaders and mapping the consultants to the different teams, he said.

Next year comes the final phase, focused on putting in place new IT systems and tweaking existing systems to fit the unit's business model.

PwC Consulting had already begun a process to become a publicly traded company, Pelander said, referring to PricewaterhouseCoopers' original plan to spin off PwC Consulting via an initial public offering.

IBM is not approaching the integration with the traditional acquirer's mentality of imposing its way of doing things on the acquired, Pelander said. Instead, IBM is adopting many PwC Consulting practices and philosophies, and naming PwC Consulting executives to key top positions.

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