Video | Business Headlines | Internet | Science | Scientific Ethics | Technology | Search


IBM Moves Further Up The Value Chain

New Zealand IT Services and Solutions Market

IBM Moves Further Up The Value Chain while the demise of the Big 5 Continues
Analyst: Mark Cribbens

Today IBM announced that it would acquire PricewaterhouseCoopers’ global business consulting and technology services arm unit: PwC Consulting.

IDC estimates that the combined 2001 New Zealand revenues of IBM and PwC Consulting exceeded $380 million, and will further establish IBM as New Zealand’s largest IT company. When considering services related revenues only, IDC estimates that IBM ($160 million) and PwC ($40 million) together exceeded $200 million in 2001.

The combined company will therefore have approximately 10%, of the New Zealand IT services market. This will consolidate IBM’s second position in the New Zealand Services market, and provide a significant lead on the new HP which is estimated to have managed services revenues of between $80 and $90 million for 2001. IBM will be second behind EDS.

“The swiftness of the transformation of the Big 5 accounting firms is remarkable ” said Mark Cribbens, IDC New Zealand’s Solutions and Services Senior Analyst. “Five years ago, PwC, Ernst and Young, Deloitte Touche, Arthur Andersen and KPMG were fully fledged accounting firms with large and sophisticated consulting arms. Today, Arthur Andersen has disappeared and spun off Accenture, Ernst and Young has split off its consulting arm to Cap Gemini, KPMG Consulting has become a separate entity and is part-owned by Cisco, and Deloitte is becoming Braxton. To top it off, what’s left of PwC is renaming itself Monday”, added Cribbens.

Mr Cribbens believes that “the IBM acquisition of PwC Consulting makes much more sense than that which was proposed by HP some time ago. This is because IBM already has a well established consulting and services division and is capable of swallowing the PwC Consulting division and ensuring that an IBM culture is still influential.”

This is reinforced by the fact that the PwC Consulting business unit is being combined with one of the services units that exist within IBM’s services armoury. IBM is the largest IT services firm in the world. “The purchase of PwC provides it with extra capability in terms of its high level business and IT consulting offerings. It has truly become a one-stop shop, providing everything from IT software, hardware, and services, to business management consultancy services” said Mr Cribbens.

HP, on the other hand, would have taken much more of a risk when acquiring PwC Consulting, “This is primarily due to the relative size of both PwC Consulting and HP’s services division as it existed back then” says Mr Cribbens. The PwC division would have been a much more dominant entity in the proposed HP acquisition. In other words, HP’s services success would have been much more dependent on the component they were acquiring.

Moreover, HP was looking to pay around US$15 billion for PwC before negotiations broke down, a significant 329% more than IBM’s price of US$3.5 billion, according to

The proposed acquisition is a sensible one; if the transition process is successful the acquisition will further enhance IBM’s current mindshare in the New Zealand market of being a best of breed solutions provider. Mr Cribbens contends that “IBM already rate very highly as a preferred solutions provider when considering the primary end-user research which IDC New Zealand generates” (Markets and Solutions Survey 2002, IDC).

However, from an end-user perspective it is becoming increasingly hard to find an implementation partner who is vendor or product agnostic. “Theoretically, PwC would assess the best available technology for a particular client’s requirements and provide consulting and implementation services around that. Now it will be aligned with IBM’s technology offerings” said Mr Cribbens.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Electricity Market: Power Panel Favours Scrapping Low-Fixed Charges

An independent panel reviewing electricity prices favours scrapping the government’s low-user fixed charge regime, banning the use of prompt-payment discounts, and requiring greater disclosure of the profit split between the retail and generation arms of the major power companies. More>>


Bottomless Oil And Zero Climate Cost: Greenpeace Not Big On PEPANZ Gas Ban Report

The NZIER report commissioned by oil industry body, PEPANZ, claims the oil and gas ban issued by the Government last April could cost the the New Zealand economy $28 billion by 2050... But Greenpeace says the figures in the report are based on false assumptions and alternative facts. More>>


Sunday Fruit Fly Update: Devonport Fruit And Veg Lockdown

Work continues at pace on the biosecurity response following the discovery last week of one male Queensland fruit fly in a surveillance trap in the Auckland suburb of Devonport. More>>


Digital Services Tax: Government To Plan Tax On Web Operator Income

New Zealand is to consult on the design of changes to tax rules which currently allow multinational companies in the digital services field to do business here without paying income tax. More>>