InformationWeek

August 14, 2000

Printer ready

Smooth Transition

continued...page 3 of 3

More on outsourcing:

sidebar: DareStep Takes Steps To Expand Scope

Offshore Outsourcing Nears Critical Mass (6/12/00)

InternetWeek Outsourcing Trends: A Secure Place (6/12/00)

Send Us Your Feedback

Standard & Poor's Rating Services has worked with Ernst & Young for three years to develop a subscription-based service through which S&P makes research and ratings information available to its clients over the Web. With Cap Gemini's foothold in the European market, and that region's widespread adoption of wireless technology, S&P Rating Services envisions adding the capability to make its information available to wireless users.

Cap Gemini's acquisition of Ernst & Young's consulting business gives it instant global reach and tremendous technological depth to areas it was already strong in, according to Ken Moskowitz, CIO of S&P's Ratings Services. "This is important because I run a global organization," he says. "Because Europe is moving to the wireless market faster than the United States, Cap Gemini gives us a set of skills already on the ground in Europe."

Although the merger may be unsettling to some companies, others are signing up with Cap Gemini Ernst & Young with the hope that the new company can deliver on the potential of tying together worldwide strategy and implementation under one roof. Schneider Electric SA hired Cap Gemini Ernst & Young following the merger after looking at several Big 5 consulting firms. "None offered the strengths in technology implementation and strategy development that the combined Cap Gemini Ernst & Young did," says Eric Pilaud, senior VP for the E-business division of Schneider Electric worldwide, a $7.8 billion French manufacturer of electrical-distribution, industrial-control, and automation equipment.

Eric Pilaud Photo by Shahriar Ghane vThe planned integration of Cap Gemini and Ernst & Young's resources made the company a logical choice for Schneider, which needed to ramp up its E-business presence in a hurry. "My CEO gave me three months to come up with a plan to use technology to make our business more competitive and create a new value proposition to our customers," Pilaud says. So far, Cap Gemini Ernst & Young is meeting its deadlines in developing a plan for Schneider.

Schneider is looking to use Cap Gemini Ernst & Young's expertise to develop a more fully realized E-business plan that will let Schneider grow into new marketplaces and bring its product catalogs online, as well develop an online community where electrical engineers can go for information.

The success of Cap Gemini Ernst & Young's merger will depend upon its ability to portray itself as a unified organization that leverages its combined size and global reach. One way the company can do this is to keep consultant turnover to a minimum. Cap Gemini Ernst & Young has created a financial incentive for Ernst & Young Consulting partners to remain with Cap Gemini Ernst & Young. Shares issued to these partners during the acquisition will vest in a period of five years. Those who leave the company now are leaving a lot of money on the table, Unwin says.

Cap Gemini Ernst & Young will lose some talent, but turnover is high anyway in E-services, with consultants going to dot-coms and companies in specific vertical industries, Pilaud says.

"For the most part, Cap Gemini will make the change seamless," says Lance Wilson, CIO of Sunbeam Corp., a $2.4 billion Boca Raton, Fla., designer, manufacturer, and marketer of consumer products. Sunbeam has been an Ernst & Young client for the past two years. During the next year, Sunbeam will call on Cap Gemini Ernst & Young to act as consultants and business-process change specialists, optimizing the i2 Technologies, J.D. Edwards, and PeopleSoft software packages the company has installed. Sunbeam also plans to consider the consulting firm's services as it evaluates online marketplaces, Wilson says.

Lance Wilson Photo by Tony Arruza Whether Cap Gemini Ernst & Young's approach to providing big-ticket IT services is more successful than its competition in the Big 5 remains to be seen. Although organizational spin-offs and initial public offerings are viewed favorably because they let company heads retain their autonomy, these new entities find themselves without the size and security that comes with being part of a larger organization.

In the short term, the merger will have little effect on existing Ernst & Young Consulting's or Cap Gemini's customers because the two companies don't formally merge until early next year, says Tom Rodenhauser, lead analyst for Consulting Information Services LLC. Once they start operating as a single company, former Ernst & Young consultants will be compelled to sell Cap Gemini's application development and systems integration services rather than routing business to other firms, including CSC, EDS, and IBM Global Services. "Since Cap Gemini is a public company with specific revenue goals and Ernst & Young Consulting comes from a privately held firm, Ernst & Young customers may have to deal with aggressive sales from their reps," he says.

Such aggressiveness is needed for the company to retain its new ranking as the third-largest and most lucrative IT services firm in the world. Whether it continues to climb will depend on its ability to integrate and organize assets--and to act quickly to keep wavering customers in their court.