It strategy - Big Six climb on Microsoft's bandwagon
The Big Six are falling – after years of resistance – at Microsoft’s feet. The software giant saw a chink of light amid all its US Department of Justice troubles last month, when it struck a wide-ranging alliance with Ernst & Young.
E&Y became the third of the Big Six to set up units dedicated to solutions based on Microsoft’s NT operating system and its corporate products, led by Back Office. Such powerful partnerships put Microsoft in stabbing distance of its dearest goal – to dominate the enterprise market. Its spats with the antitrust authorities over how fairly it competes in the Internet browser wars against Netscape are small potatoes compared to the gains it can make through friendships with the big consultancies – especially as these will never come under the regulatory spotlight.
E&Y has set up a unit called Entyron, aiming to create complex enterprise solutions for large corporations running on NT. It follows Andersen and KPMG into this field. Both set up divisions last summer – KPMG as a joint programme with MS and networking leader Cisco – to concentrate on NT systems.
Both were particularly interested in solutions for electronic commerce and Internet-based applications.
It is not surprising that the Big Six should launch services to support the world’s fastest growing operating system, nor that they should ally themselves to some extent with a firm of Microsoft’s influence. But setting up dedicated units seems to go beyond just following industry trends and responding to customer demand.
A recent survey named “independence of advice” as one of the top three reasons why firms go to consultancies for advice when formulating an IT strategy. But how independent can a unit devoted to one product – and a proprietary one at that, for all its portability – really be?
The consultancies have always come under fire for being too close to certain suppliers and recommending solutions where they believe they can make the most money. That is almost inevitable in the world in which they operate – after all, there is no such thing as complete objectivity.
But if the big consultancies’ NT units prove they can command high margins – which is likely, given the acute shortage of NT skills – will there not be a strong reason to direct wavering customers in that direction and away from other possible routes such as Unix or Novell?
The shortage of skills in NT and experience of its deployment are key factors in the consultancies moving into this field. Large corporations are nearing the stage where they “know Unix” and can implement large Unix systems almost unaided. But NT is an unploughed field, and the fees commanded by its experts almost dwarf the costs of bringing in a major consultancy.
As long as companies need skills that the consultancies have, they are bound to promote those areas. The classic case has always been SAP, whose R/2 and R/3 products have succeeded in the corporate world outside their native Germany almost entirely on the back of support from the Big Six.
SAP has everything to appeal to a consultancy project – it is complex, it requires major rethinking of the buyer’s business processes, it has a lengthy implementation time and it involves skills that few people outside the main services companies have. It is specifically designed for the types of company that traditionally calls in the likes of Andersens – and so it makes sense for the consultancies to recommend it. SAP rivals have consistently blamed bias by the Big Six for their own failure to make much of a dent in SAP’s customer base.
But Microsoft NT is a rather different prospect. For all its power and influence, Microsoft has always been regarded as a supplier to the home and individual business user, operating mainly through channels and with a variable reputation in areas that boardrooms demand, such as quality of service. Although NT and Back Office are designed to change all that, they still suffer from the reputation of their supplier for being “just a PC company”.
This is where the consultancies are vital to Microsoft, giving it the corporate credibility it badly needs. The influence of KPMG et al on boardrooms – particularly those where the directors signing off the purchase are not technically trained – cannot be overestimated. A recommendation from the consultancies gives such directors all the confidence they need.
But it’s not all a one-way street. NT offers great potential benefit to a consultancy too. Like SAP, implementing a major system on NT and Back Office probably requires a major rethink of the company’s processes, methods of operating, infrastructure and supplier relationships. Like SAP, NT is an area where there are limited skills on the open market.
Like SAP, a major NT project will require long planning, implementation and training times.
The main difference is that NT is potentially far more pervasive than SAP. It can form the basis of the entire IT operations of a company, and with it comes all kinds of cultural baggage. It determines which hardware and networking suppliers the user is most likely to select from, and which applications will be strongest.
In other words, the consultancies are perfectly justified in leaping on a bandwagon that will bring new profit sources and respond to genuine customer demands. But they must be careful not to conspire in creating a stranglehold on the market for NT, based not on merit and client needs but on the industry snowball effect.
Caroline Gabriel is a group editor in VNU’s IT portfolio.