When is consulting advice impartial?

IT vendors are aligning themselves as the new management consultants, but how independent is the counsel they offer?

Written by Mark Street, IT Week

Now that auditors have divested themselves of their consultancy arms, IT vendors want to become the rightful guardians of IT services. But many IT directors are suspicious that vendors may use their service arms to sell solutions based on the vendors' own technology.

For IT suppliers, it makes sense to sell implementation and integration services with their products to win more business. This trend is encouraged by slow hardware sales and discounting as competition hots up. As a result, many alliances formed in the past between consultancies and vendors will come under pressure. The big money is no longer in simple project implementation but in integration and outsourcing, and vendors are well placed to argue that they are best qualified to maintain and join up their own products.

In 1997, IBM Global Services made a major move to boost its services arm when it acquired UK consultancy Data Sciences. Now, with the acquisition of PwC Consulting, it has confirmed its position as one of the world's largest service providers.

But IBM is not the only vendor looking hungrily at the services sector. HP famously tried to acquire PwCC for $18bn in 2000, but talks broke down. And in July, HP said it wanted to build on its merger with Compaq to move into managed services, with plans to make the service division account for a third of its business within five years.

At the start of the year, Dell signalled its intent to get further into services by poaching Jeffrey Lynn, general manager of professional services at Compaq. More recently, Michael Dell himself declared his desire to acquire a consultancy to seal Dell's position as an all-encompassing IT firm.

"All the vendors have become IT consultants," said Anthony Miller of analyst firm Ovum Holway Miller. "There are very few high-end, pure-play consultancies left that offer consulting as a core part of the service. Most want to sell additional services."

As vendors position themselves as fully fledged business consultancies, they must offer solutions from a variety of vendors because almost all firms now operate on multi-vendor platforms, said Miller. There is nothing wrong with relying on a trusted vendor to deliver services, but buyers should ensure their service suppliers have to compete, he added. "IT directors should tender out a stalking horse to ensure the price is competitive," Miller said. "Competition is the best way to keep the vendor honest."

Dr Chris McKenna, lecturer in management studies at the Saïd Business School, University of Oxford, noted, "You need to ask how much you want objectivity because sometimes IT directors want (service suppliers) to be yes men. The board may want outside advice to approve a big purchase, and this advice may be used at a later date to protect them against shareholders."

McKenna also questioned whether truly impartial advice exists. "When IT directors dealt with auditor consultancies, how did they know the firms did not have a preferential relationship with an undisclosed vendor? At least with services supplied by a vendor, it's better the devil you know."

But Peter Hutchinson, managing director for Core Services at Fujitsu Services, primarily an IT infrastructure management business, denied that his firm's advice was not independent. "We've never tried to force anyone into a particular technology," he said. "That way, you lose your client's trust."

Fujitsu Services worked with PwC as a strategic partner on some major projects, and while these arrangements continue, future collaboration is less certain. "It's too early to tell," said Hutchinson. "IBM will want to exert some influence over what PwC does, so things may get more difficult."

Some IT directors are talking about forming their own "in-house consultancies". Christine Ashton, IT director of BP Gas and Power Europe, argued, "There's a need to create an internal consultancy made up of experts who can understand customer needs using a cross-charging model. Eventually it could turn into a profit centre."

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