Lucent Technologies announced earlier this month that it would no longer use PricewaterhouseCoopers for consulting work, but would retain the company as its auditor. A company representative said that while they were pleased with PwC's work and had "no reason to believe their independence has been impaired," the move will "further strengthen our confidence in the procedures that we have in place and assuage any concerns about objectivity." In some cases, the auditing firms aren't even waiting for their customers to ask for the separation. Three of the Big Five -- KPMG, Ernst & Young and Andersen -- have already spun off or separated their consulting arms. And PricewaterhouseCoopers has registered for an initial public offering of its consulting division. Those separated divisions will likely get some of the business being split off, said Merrill Lynch analyst Stephen McClellan. He said Accenture (formerly Andersen Consulting), Cap Gemini Ernst & Young, and KPMG consulting, all of which are separate entities from their accounting counterparts, could grab more business, as well as EDS, IBM Global Services and Computer Sciences. But given the size of those businesses, he thinks that it's "not that material a windfall or that noticeable in bookings or new contracts." It's also not that easy to switch consultants at the drop of a hat. "Clearly, relationships have been built with these consulting firms for years and years," said Dave Munn, chief executive of the IT Services Marketing Association. "Some (companies) will spend time internally saying, 'Look, we have governance controls systems; we like these two entities we're working with; why fire our consulting arm when in six months they'll be a separate entity anyway?'" But, he pointed out, other companies don't want "any questions in the public realm of improprieties...and in a couple of cases, they might not have been happy anyway. So it's a way of looking publicly like they're above reproach." Tech gains?
John W. McCain, president of the E-Solutions division at EDS, said he's already seen some activity, although he would not name specific companies. "I think there are a lot of different timetables going on, but I would bet a majority of the changes will go on in the next six to 18 months," he said. "There's relationship activity -- things people will want to work out to make a more natural transition -- but this will happen." Smaller companies are hoping to get in on some of the action too. Adam Honig, president of customer relationship management firm Akibia Consulting, said his company has already gotten "half a dozen" leads from companies that are concerned about using the same firm as their auditor and their consultant. While their independence may be what makes firms like Akibia and EDS interesting, it's not necessarily something the companies will be pushing that strongly, executives said. "Companies looking for independent companies like EDS, and not many of the major consulting firms are independent," McCain said. "But we're not using fear, uncertainty and doubt as a strategy. It's a business decision. Not all (consultant clients) will change companies. But I think a lot of them will make a change and separate church and state."
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