EDS CEO: There's Gold In Accounting/Consulting Split

EDS CEO Dick Brown sees "a lot of business coming EDS' way" from the split of the former Big Five's accounting and consulting businesses.

"Anyone that thinks that accounting and consulting will stay connected is in denial," Brown said to a roomful of financial analysts. "There is gold in them hills."

Observers have said that since the Enron/Andersen mess, it is clear that IT consulting and auditing functions do not mix. That realization could favor pure consultants such as EDS and Accenture, they said, even as the Big Five accountancies scrambled last week to put distance between their consulting and auditing groups.

Dietmar Ostermann, CEO of EDS' A.T. Kearney division took some swipes at management consulting rival McKinsey and Co.'s relationship with Enron. "We are still waiting for more reporting on what McKinsey actually recommended to Enron," Ostermann said. Questions have been raised about how involved McKinsey was in Enron's fall from grace.

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EDS bought A.T. Kearney, a management consulting firm, five years ago.

Bram Bluestein, executive vice president of A.T. Kearney, said the accounting/consulting split now going on will forever change the nature of the former Big Five's business.

"That relationship is clearly going to be severed going forward or challenged," Bluestein said. It isn't clear the level of business that A.T. Kearney will win, but "the discontinuity looks like it will be pretty significant," he said.

Bluestein said one client called recently and asked A.T. Kearney to bid on a request for proposal to which it previously didn't have access.

Peter Misek, a software research analyst at Scotia Capital, a Toronto-based investment firm said there is money to be made from the accounting/consulting split.

"The opportunity is billions of dollars," Misek said.

Misek, a former Deloitte consultant, said the amount of cross-selling that goes on between the accounting and consulting side is significant. In fact, Deloitte employees were compensated based on how much cross-selling they did, he said. "That model is gone, he added.

In the next six months, there are going to be some dramatic shifts in market share, he said. "Every board of directors meeting's first topic is going to be who are our auditors and who are our consultants," he said.