Wall Street & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


00:00 AM
Connect Directly

Consulting Giants Take a Walk on the Cyber Side

At a time when the dot-com consulting firms are enjoying inflated stock prices, professional service consulting giants like Andersen, PricewaterhouseCoopers, KPMG, Deloitte Touche Tohmatsu and Ernst & Young have been equally busy transforming their own consulting practices into e-business firms.

E-business equals big bucks

It’s big business. Arthur Bowman, who publishes Bowman’s Accounting Report, says that last year, global revenues (including accounting income) for the five leading practices totaled more than $52 billion.

In 1998, PWC led the pack with $15.3 billion, followed by Andersen at $9.8 billion, Ernst & Young at $9.7 billion, KPMG International at $9.6 billion and Deloitte at $8.1 billion.

In terms of the U.S. consulting revenues, however, the rankings change. Andersen leads with $4.1 billion, followed by PWC at $2.6 billion, E&Y at $2.1 billion, Deloitte at $2 billion and KPMG sat $1.3 billion.

The consultants say the lion’s share of that money comes from the financial services industry and a fast-growing portion relates to e-business initiatives.

Alan Lloyd Paris, the e-business development manager at PWC in New York, estimates that e-business initiatives accounted for 30% of revenue in financial services as of January and will hit 50% by the spring.

Chris Vandenoever, the partner responsible for e-commerce in the financial services industry at Ernst & Young’s New York office, says that last year, the firm did more than $900 million in e-commerce-related work. About 40% of that is attributable to the financial services industry.

Deloitte’s Schneider says that his firm draws between $300-$330 million in consulting fees from the financial services industry in North America, while Andersen’s Web site says $2.5 billion was earned from the financial services industry globally in 1998. KPMG was the first to release fiscal 1999 numbers and it indicated that financial advisory services rose a whopping 39% to $885 million. Chris Everett, PWC partner in charge of the global e-business practice, is “bullish” that his firm will do “north of $1.5 billion of e-business project-oriented consulting services this year June 1999-June 2000.”

Firms incubating start-ups

By the same token, the firms are spending hundreds of millions of dollars marketing their practices, educating thousands of employees across the globe and even setting up incubator venture funds to finance dot-com startups. Take Andersen, for example, it spent $600 million on education programs for staff last year and $40 million on alliances and investment in 140 dot-com companies. In December, it announced Andersen Consulting Ventures, a colossal Palo Alto, Calif., incubation initiative that will see it invest up to $1 billion over the next five years to create new electronic businesses.

Andersen is not alone. All the firms are active on the partnering front in a bid to develop products and services they can deliver financial services to clients. KPMG, for example, has struck a deal with Cisco Systems that could see Cisco invest as much as $1 billion to help KPMG expand its Internet services business.

Meanwhile, Ernst & Young is in negotiations to sell its consulting practice to France’s Cap Gemini in exchange for equity in the company. While Cap Gemini is a leader in Europe, it has had problems cracking the North American market and newspaper reports indicate that it is embroiled in litigation over failed IT projects.

Carolyn Buck Luce, E&Y’s national director of electronic commerce transformation in New York, says “We’re very excited about the Cap Gemini transaction.” She acknowledges that it has “had its challenges in the U.S. and not been able to deliver everything they wanted to deliver.” But that spells opportunity for E&Y, she says. By blending its consulting practice into Cap Gemini’s, “We can truly deliver the best in depth and global reach.”

2 of 4
Register for Wall Street & Technology Newsletters
Exclusive: Inside the GETCO Execution Services Trading Floor
Exclusive: Inside the GETCO Execution Services Trading Floor
Advanced Trading takes you on an exclusive tour of the New York trading floor of GETCO Execution Services, the solutions arm of GETCO.