InformationWeek

August 14, 2000

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Though Daisley has a hard time seeing Cap Gemini Ernst & Young as a single company, he plans to take advantage of the merger. In May 1999, Riggs Enterprise Solutions began work on a three-year project to develop online cash applications for helping sovereign governments and multinational companies manage their money online. Riggs already had hired Cap Gemini and IBM Global Services for their global reach and their ability to provide project-management and systems-implementation services.

The formation of Cap Gemini Ernst & Young lets Riggs Enterprise Solutions' online cash project make use of three consulting firms for the price of two, Daisley says. Although the addition of former Ernst & Young Consulting personnel isn't likely to affect the project initially, Riggs now has easier access to their knowledge of the financial industry.

Cap Gemini Ernst & Young's work with Riggs Enterprise Solutions is a prime example of where Unwin envisions the merger will take his company. In addition to tackling global financial-management projects that make use of Ernst & Young Consulting's growth out of a tax and audit firm, the newly merged company has its sights set on Net marketplaces and the development of customer-facing E-business applications. Ernst & Young LLP also has the ability to refer tax and audit clients to Cap Gemini Ernst & Young for technology issues without attracting scrutiny from the SEC.

Unwin refused to discuss specifics regarding Cap Gemini Ernst & Young's E-business plans. But he did indicate that area would be part of the future strategy: "To follow through on E-business' promise of integrated, real-time communication between participants, Cap Gemini Ernst & Young plans to provide E-business services that address the needs of its clients, as well as their suppliers and employees." Cap Gemini Ernst & Young's focus on the development of digital marketplaces already has led the company to pursue projects with major auto manufacturers, three banks in France, and England's Ministry of Defense.

Other initiatives are in the works. The company will pool existing consultants from both companies and organize them by industry expertise, geographical location, and business practice. By doing so, Unwin says, he hopes to prevent any talent from being lost within such a large organization.

The five new business practices, to be introduced early next year, include a business-development unit that focuses on the selling and development of Cap Gemini Ernst & Young's services; a strategic consulting unit; a business solutions unit that includes consultants who specialize in certain application areas such as human resources and supply chain; a technology unit that offers consultants who specialize in operating system and networking knowledge; and an operations unit for running outsourced systems for Cap Gemini Ernst & Young clients.

Riggs Bank's Daisley points out that one of Cap Gemini's greatest challenges has been gaining access to executives at potential client companies in the United States, rather than middle-level IT managers. Ernst & Young's consultants are more used to meeting with executive-level representatives within client organizations, meaning Cap Gemini will get more exposure there as well.

As the company pools its consultants under a common umbrella, it plans to consolidate offices in cities where Cap Gemini and Ernst & Young offices overlap. Unwin says plans for office consolidation are still in the early stages, and he doesn't anticipate the need for consultants to change location outside of a particular city or region because of the merger.

Despite the changes, Cap Gemini Ernst & Young's pricing isn't expected to deviate from its time-and-materials or project-based fixed-fee models, although this could change as the new company gets a feel for what it takes to operate an organization that has doubled in size. "It's important for Cap Gemini Ernst & Young to keep pricing consistent, because no client is going to accept higher costs just because the name of their service provider changed," Unwin says.

Even if prices stay the same, Unwin expects a 5% to 10% increase in revenue for Cap Gemini Ernst & Young from the cross-selling of services. This means that former Ernst & Young Consulting clients can expect, for example, to be offered Cap Gemini call-center hosting services. Similarly, existing Cap Gemini clients will be offered Ernst & Young's project-management and strategy services. Successful cross-selling could add up to between $330 million and $750 million annually, Unwin says.

Most of Cap Gemini and Ernst & Young customers aren't concerned about the prospect of cross-selling between the new company's merged businesses. Standard & Poor's Rating Services, a global provider of credit analysis and information based in New York, wants to leverage Cap Gemini's foothold in the European market.