HP Leaves PWC's Consulting Arm On The Table--Twice

In September 2000, HP was in talks to acquire PricewaterhouseCoopers' consulting arm for $18 billion. But HP Chairman and CEO Carly Fiorina ended the negotiations, citing "poor market conditions."

And last week, an HP spokeswoman confirmed that the vendor recently had another chance to purchase PwC Consulting at a fraction of the price that was discussed in 2000, but company executives decided not to pursue the deal.

The spokeswoman said that HP nixed a potential deal because it would be difficult for the vendor to integrate PwC Consulting and that some of the New York-based consulting firm's customers might perceive such a move as a "loss of independence."

HP recently had tightened its relationship with PwC Consulting, one of its key consulting and systems integration partners.

In an interview with CRN the day before the acquisition announcement, Juergen Rottler, vice president of marketing for HP Services, said HP had named nine companies,including PwC Consulting,as global alliance partners to which HP intends to make "over-and-above contributions."

Also on HP's list of global alliance partners are Accenture, Deloitte Consulting, BEA Systems, Cisco Systems, Microsoft, Oracle, SAP and Siebel Systems.

The HP spokeswoman said IBM's planned acquisition of PwC Consulting won't change HP Services' strategy or affect its value proposition. HP remains committed to its current systems integration partners,which also include KPMG and Cap Gemini Ernst and Young,and the vendor and its customers have "a distinct advantage" to be able to partner with all integration companies, she said.

Including the recently completed merger with Compaq Computer, HP's services arm has annual revenue of about $15 billion and 65,000 employees. IBM plans to meld PwC Consulting with the Business Innovation Services unit of IBM Global Services, which would give IGS annual revenue of roughly $40 billion and about 180,000 employees.

Such critical mass likely will spur other systems integration players to seek out strong allies, said Bruce Myers, vice president of the Americas' Extended Enterprise Application/ERP group at New York-based Cap Gemini Ernst and Young.

"It puts more pressure on Deloitte Consulting and KPMG to find a partner if they want to be a competitive global player in the long term," Myers said.