| | By Mick James
While a royal wedding
looms in the UK, the
talk in consultancy has
all been of divorces and
splits. First there was
Carly Fiorina’s sudden
exit from the CEO seat
at HP, then the
announcement that EDS
was discussing at least
a partial MBO with the
top brass at A.T.
Kearney.
HP is playing its
cards very close to its
chest after Fiorina’s
departure, promising to
take at least four
months to find a new
CEO. The successful
candidate will probably
be someone who’s
prepared to follow a
board-determined
strategy, rather than a
visionary with their own
agenda.
Whatever happens, it
must be the end of the
attempt to grow HP into
a rival to IBM, which at
one point saw the firm
toying with an $18bn
price tag for PwC.
Recently the company
seemed to be getting
very close to
BearingPoint, but the
fact that the Compaq
merger is now widely
seen to have been a
failure marks the end of
HP’s acquisitive streak.
In any case, the
practice of sticking
together companies to | |
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| | try and take on IBM has
a long and inglorious
history. You want Ford,
you’d settle for
Volkswagen but you end
up with British Leyland.
In HP’s case, the
process has been
intensely destructive of
brands. Brands such as
Digital, Compaq, Tandem,
even—which in the mind
of the older CIO at
least are synonymous
with the idea of
respectable opposition
to IBM. It has subsumed
them into an HP brand
which simply cannot
accommodate such a broad
church. HP also found
itself in the
strategically weak
position of fighting a
war on two
fronts—against IBM in
the enterprise space,
and against Dell in
commodity desktops and
servers. It could never
work.
Could the hardware
brands follow IBM’s PC
business into the hands
of Chinese
entrepreneurs, leaving
the printing and imaging
business alone under the
HP banner? IBM has
finally woken up to the
fact that the
commoditisation of
computing was good for
IBM as well as the world
at large. When IBM
formally launched its
Consulting Group in 1992 | |
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| | the perennial question
was “aren’t your
consultants just
salesmen for IBM kit?”.
When customers realised
that the kit was all the
same, it made them not
only more receptive to
buying IBM services, but
even to including IBM
kit in the deal. It was
all cheap and
interchangeable, so why
not? The final step for
IBM was to let someone
else enjoy the wafer
thin margins on PC
manufacture.
It might seem this is
the end for HP in
consultancy, but maybe
not. While I suspect it
may swiftly back out of
the outsourcing I think
there is a major
opportunity in the SEM
space which it has been
neglecting at its peril.
Before buying Compaq the
company had a carefully
nurtured channel of
resellers and VARs
dealing with the SME
market. The Compaq deal
brought an obsession
with beating Dell that
threatened all that by
developing direct sales
channels and switching
the focus from
value-added quality to
margin-busting quantity.
HP should leave Dell
alone and nurture its
incredibly valuable
skills. Wrapping an
essentially dull item | |
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| | like PCs in services,
support and finance
creates business assets.
There’s a huge reward
for whoever really
cracks the SME
consultancy market, and
HP (possibly with some
assistance from open
source software) could
still be the ones to do
it.
A potential buyer for
HP’s outsourcing
business could of course
be EDS, flush with the
cash it gets from
selling A.T. Kearney
back to its partners.
This is a move as long
overdue as Charles and
Camilla’s marriage—the
only excitement being
how they will actually
manage it. The two
companies have been
leading an increasingly
arm’s length existence,
with the separation of
management structures,
reward pools, and the
relocation of A.T.
Kearney to its (and
arguably consultancy
itself’s) spiritual home
in Chicago. The central
paradox of the EDS/
Kearney relationship was
that if it was too close
the Kearney brand
suffered, too distant
and it offered few
benefits that couldn’t
be better achieved
through partnerships.
The economics of turning
Kearney partners from | |
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| | high-salaried corporate
execs back into risk
sharing owner-managers
must be uncontestable
after the last few
years.
What will be
interesting to see, if
they ever indeed emerge
to light, are the
details of the buy-back.
I doubt the Venture
Capital community are
that interested in
consulting firms at the
moment, so there’ll
probably be a
fascinating mixture of
earn-outs, return of EDS
options and borrowing.
It’s also a great
opportunity for Kearney
to extend the ownership
of the consultancy
deeper into its own
ranks and break the
stranglehold of the
partnership culture once
and for all. A great
opportunity—but I’m not
holding my breath.
All views expressed
in this article are
those of Mick James and
do not necessarily
reflect the views of
Top-Consultant.com and
Consulting-Times.com
Contact Mick with
your views or
suggestions at:
mick.james@top-consultant
.com
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