Cisco Systems faces the possibility of reseller backlash in the wake of its decision to strengthen its services capabilitieswith an investment of more than $US1 billion in KPMG.
The joint venture, to be called KPMG Consulting, will advise companies on how to take advantage of the Internet in a move that blurs the traditional line between vendors and service providers.
Cisco will take a share of slightly under 20 per cent while KPMG, a global accounting and consulting firm, will assume costs for the remaining share.
The new venture is expected to be completed in September and KPMG's board of directors has approved the move, according to a press statement.
One network integrator in contact with ARN expressed dismay that Cisco would be bold enough to threaten its services-based revenues.
Lew Starita, managing director of high-end integrator CDM, said the deal will be detrimental to the services component of his business.
"It sounds to me like a whole lot of bullshit basically," he said. "It's crap. C. R. A. P."
Starita said Cisco has entered the services arena "with a vengeance".
"A mob like Cisco doesn't get into a deal with KPMG without knowing what effect it will have," he said.
Starita believes it is ironic Cisco demands such high levels of channel training and commitment to sales. "They turn around and hit you over the head when you are least looking," he said.
Lyle Potgieter, CNI group managing director, was reasoned in his approach to the news, claiming it offers new market opportunities. "I think the market is so big it doesn't matter," he said.
Potgieter believes the deal will help "legitimise" the e-commerce market, particularly in large enterprises.
He believes the problem is resellers do not have CEO-level access in most large companies.
"This will actually drive demand at the top end," he said, commenting that it will stimulate hardware sales growth in the channel as a result.
"We've already seen [this type of partnership] happen in other countries," Potgieter said. "It's the birth of a whole new industry."
Laurie Stevens, CEO of Anite Pacific - recently acquired by CNI owner Datatec - agreed, stating that it offers more partnering opportunities.
"We carry quite a different range of skills," Stevens said.
Stevens believes the deal will see KPMG Consulting work more along the consulting lines, which puts it in competition with the big outsourcing companies.
"I don't see it having too much of an impact on us," Stevens concluded.
Mitch Radomir, marketing and business development manager at another Cisco partner, NetStar, also believes the move will create more market demand for network integration services.
Radomir said KPMG is an influential "knowledge leadership" company that will stimulate the e-business market.
"That's the thing that has been lacking in the market," he said.
Com Tech's director of technical marketing, Darron Lonstein, also believes it will have a positive effect. "We see this as part of Cisco's commitment to the Internet," he said.
Although based in the US, KPMG Consulting will serve customers worldwide.
The agreement calls for KPMG to create six technology centres, where some 4000 Internet consultants will develop Net-based data, voice and video services for Cisco customers.
Cisco will provide the hardware to develop these products and services, and will use its sales force of 6000 people to market them.
The transaction is still subject to US Government approval.
While details of the rollout in Australia are still not clear, industry speculation has suggested one of the Asia-Pacific centres would be located in Australia.
According to Cabletron's CEO, Piyush Patel, the investment is good for both companies, but is a worry for KPMG customers.
Patel said customers rely on KPMG for vendor-independent opinion. "It's a bit damaging for KPMG customers because their consultants will be biased," he said during a conference call last week.
Executives from KPMG and Cisco were unable to provide comment by ARN's deadline.