Capgemini Merges Consulting Units While IBM Launches New One

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Capgemini is restructuring its business consulting activities to profit from an economic downturn that has forced one of its consulting rivals, BearingPoint, to seek bankruptcy protection.

On Tuesday IBM too announced a restructuring of its Global Business Services consulting business, with the creation of a new organization offering business analytics and business optimization services. IBM Business Analytics and Optimization Services will draw on the expertise of other divisions at IBM, including a team of 200 researchers in mathematics and analytics at IBM Research, the company said.

Capgemini will concentrate its business consulting activities in a new structure, Capgemini Consulting, headed by Pierre-Yves Cros, who was previously strategy director for the group. Previously, the company's consulting activities were attached to national or regional business units.

Capgemini Consulting will employ 4,000 of the group's 90,000 staff, but will account for 8 percent of its revenue, Cros said last week.

The move will allow Capgemini to take advantage of the way its customers are responding to current market conditions, said Cros.

"When times are tough, clients change the way they operate. A lot of decisions would be taken at regional or national level in normal times," he said, but now those decisions to seek outside help are being taken at a global level. "It's important for Capgemini not to get in on the tail end of the decision-making process," he said.

The new global structure will also allow Capgemini Consulting to draw on expertise anywhere in the world to win new business, Cros said, citing a recent contract win in the U.S. utilities sector to which he was assigning two European experts, something that would have been more difficult under the old structure.

"It's a more fluid, global world where you have to transfer your top expertise," he said.

Capgemini boosted its business consulting activities in 2000, when it snapped up the former consulting arm of accountancy firm Ernst & Young. Shortly after, IBM formed its Global Business Services division with the 2002 acquisition of PwC Consulting, a spin-off from another accountancy firm, PricewaterhouseCoopers.

That reshuffle in the business consulting market followed pressure from the U.S. Securities and Exchange Commission on the then top five U.S. accounting firms to eliminate conflicts of interest with their auditing businesses by divesting their business consulting activities. Of the five, only Deloitte Touche Tohmatsu resisted: it was last to create a separate entity for its consulting activities, Deloitte Consulting, and ultimately decided in 2003 not to sell the unit. Meanwhile, Andersen Consulting had rebranded itself Accenture following an acrimonious dispute over the Andersen name, and KPMG Consulting adopted the nautical name BearingPoint to put clear water between itself and its former owner KPMG.

While IBM is launching new services and Capgemini is reorganizing to profit from the recession, BearingPoint has had to reorganize because the recession left it with no profit: it sought bankruptcy protection in the U.S. in February, and last month announced it is negotiating the sale of some of its activities to Deloitte, PricewaterhouseCoopers and others.

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