IBM extends consulting unit with Equitant buy

Continuing its effort to build its business consulting unit, IBM will acquire Equitant, a provider of business transformation outsourcing services, the companies announced Wednesday.

Financial terms of the deal, which is expected to close in 30 days, were not disclosed. All 200 Equitant employees will move over to IBM, said Gillian Kenny, an IBM spokeswoman.

Don Schulman, vice president in IBM's global finance and administration BTO (business transformation outsourcing) unit, declined to say how much IBM will pay for Equitant other than it is "the fair market value of these kind of purchases."

The move is aimed at strengthening IBM's finance and administration transformation services, Kenny said. Equitant is a private company with primary operations in Dublin, and Stamford, Connecticut.

Equitant was launched 1987 to provide working capital management to large corporations. It then evolved to focus on advising customers on how to manage the so-called order-to-cash cycle, which includes all financial processes associated with receiving an order for a product through to receiving payment.

Equitant customers include Cisco Systems, Hewlett-Packard and Microsoft, according to the company's Web site.

Schulman said that IBM is open to making similar acquisitions in the future. "We primarily develop these services in-house but every so often a company like Equitant comes around that is a good fit. We are always on the lookout for those opportunities," he said.

IBM has said it is focusing much of its efforts towards strengthening its business transformation services. IBM cites projections from market research company IDC that US$16.5 billion will be spent this year in the finance and accounting business process outsourcing services market.

Last month, IBM announced it had signed a two-and-a-half year contract worth US$100 million with U.K. insurance company Norwich Union. The contract marked the largest business consulting services deal that IBM has won since it acquired the consulting arm of PricewaterhouseCoopers in 2002 for US$3.5 billion.

According to analysts, IBM likes to use the term "transformation" in relation to consulting, something that Accenture Ltd. originated a number of years ago when it was promoting the idea of business process outsourcing (BPO). The idea is that a company like IBM will offer the customer consulting on the best way to transform a company's business processes (rather than simply replacing a system) and will then offer support for the resulting systems.

IBM's Schulman pointed out that its BTO services are aimed at large global corporations. "This is a very fast-growing market, but I don't think that currently there is space for small or medium-size businesses, though in my opinion, that may very well happen down the road," Schulman said.

Schulman denied that there is any conflict of interest in providing consulting as well as the technology and support to follow through on that advice. "We are technology agnostic and we don't necessarily push IBM technology, but rather best of breed and what is in the client's benefit."

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