Why IBM Called In the Consultants

摘要

When IBM Scooped up PriceWater-houseCoopers Consulting in October, 2002, Big Blue bet that the $3.9 billion deal would help solve its long-standing challenge of sluggish revenue growth. The consulting business itself seemed to offer bright growth prospects, and PWCC's 30,000 whip-smart consultants were supposed to help drive sales of IBM's other products and services. But on Jan. 15, IBM's Business Consulting Services, which includes the PWCC consultants, stumbled. While the rest of IBM's finan-cials for the fourth quarter were strong, revenues for the BCS group fell 2%, to $3.25 billion, compared with expected growth of 3%. The news was enough of a surprise that Merrill Lynch & Co. analyst Steven Milunovich slashed his revenue prediction for the consulting group from 10% growth in 2004 to a 4% decline. Big Blue's big push into strategic consulting is proving to be one of the thorniest challenges in the young tenure of Chief Executive Samuel J. Palmisano. While Palmisano and his top lieutenants have managed much of the PWCC acquisition smoothly, they've been confronted with a consulting industry that's more troubled than most anyone anticipated it would be two years after the U.S. recession officially ended. A glut of capacity and the rise of offshore competitors have led to brutal competition. The result is that many IBM consultants are sitting on the bench, dragging down revenues and profit margins. "They're probably a little bit behind where they were hoping to be," says analyst John B. Jones Jr. of Soundview Technology Group.