Slump bites at E&Y

More redundancies in high-level IT consultancy could be on the way after Ernst & Young’s SAP consultancy practice laid off ten people last week.

Like rival suppliers of enterprise resource planning software, Oracle and PeopleSoft, SAP has seen new licence sales dry up as customers focused on Year 2000 remedial work. In response, SAP has gone after more consultancy work.

Dennis Keeling, chief executive of BASDA, said: ‘SAP is expanding its consultancy in competition with the Big Five and the Big Five are losing out.’

While confirming ten people would be made redundant, an E&Y spokeswoman said: ‘The management consultancy arm of Ernst & Young in the UK continues to work very closely with SAP and other third-party vendors and our clients to ensure their needs are being met.’

Peter Robertshaw, product marketing manager for SAP, explained: ‘SAP is not trying to cannibalise or eat up its service revenues. SAP UK only became as successful because of its partner strategy.’

E&Y’s SAP practice is small compared to other Big Five firms, all of which invested heavily in ERP over the past five years. A consultant in another Big Five firm confirmed it had been affected by an ERP slump.

The source said the decision was a misguided short-term response to the downturn. But he admitted: ‘I wouldn’t be surprised if other Big Five consultants reduced their IT consultants.

We’ve also looked at laying consultants off.’

The losses are another body blow to SAP’s attempts to remodel itself as a mid-market supplier after a sequence of profit warnings and criticism about the speed and practicality of installing its R/3 ERP suite.

Earlier this month Accountancy Age revealed a #7m R/3 implementation at the University of Newcastle upon Tyne had overrun by six months and was branded a ‘disaster’ by one user (see Letters, page 13).

But Chris Gant, head of KPMG’s ERP practice, said it planned to expand its SAP practice to capitalise on emerging markets such as customer relationship management. ‘We’re looking to move the SAP practice into new areas and have no plans to reduce its size,’ he said.

Additional reporting by Lisa Kelly, VNU Newswire

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