Cash-for-clients hits wall of silence

Cash-for-clients hits wall of silence

Kickbacks for product placements grabbed the limelight after documents tendered to a US court revealed a salesman may have offered as much as 8 per cent to a consultancy to swing a deal.

The allegations, published by the Wall Street Journal (WSJ), surfaced in the US Department of Justice case in the US District Court in San Francisco concerning Oracle's attempted hostile takeover of PeopleSoft.

According to the WSJ report, documents before the court reveal an Oracle sales representative sought funds from his superiors to pass to Accenture to help land a financials account with cable provider Cox Communications - and that the Oracle representative wrote that such payment was expected.

Cox did not retain Accenture for the ERP implementation and there is no suggestion this was because of the alleged Oracle offer of money. Responding to the WSJ revelations, Accenture Asia Pacific spokeperson Christine Yee immediately distanced the consulting firm from the unfolding events before US courts.

"We were not retained by Cox Corporation to assist the company in the selection of an ERP vendor. We did not request nor did we receive a payment from Oracle," Yee said.

The WSJ article also quotes Oracle CEO Chuck Phillips as saying that paying consultants money to gain influence is "customary" behaviour. Whether vendors exported such practices to Australia has been met with a wall of silence from the community of normally talkative Australian vendors, consulting services providers and analyst firms.

Rejecting claims that Oracle engages in such business practices, Oracle Asia Pacific executive vice president Derek Williams said the company would never try to influence consultants with cash if they were hired to make an impartial assessment for a client.

But he added that Oracle and other vendors do provide referral fees if they are given a sales lead but this is very different to the case referred to in the WSJ and is a standard industry practice.

"Everyone in the market pays referral fees, that applies everywhere as long as it is above board, valid and logged to ensure it isn't untoward in any way," he said.

Local representatives of Accenture were unavailable for official comment on how they managed relationships with vendors. However, a senior source close to Accenture's vendor alliance strategy, who asked not to be identified, said any local vendor partnerships were open and above board in both the public and private sectors.

"The reason why you have alliances is because they add value [for the customer, the consultancy and the vendor]. Clients are aware of alliances and they see value in them. They get the discounts and the assurances [of such relationships]," the source said - adding that hundreds of alliances existed between Accenture and vendors worldwide and relationships varied from country to country.

Asked what industry standards existed for checking the independence of consultancy advice from vendors, the source said that, realistically there were "no black and white answers", although public sector deals were scrutinized and audited independently as a matter of course. Representatives of fellow consulting services vendor CapGemini were unavailable for comment.

A spokesman for IBM also declined to comment on how it managed its relationship with consulting services players. The spokesman stressed there was not enough information in the context of the Oracle/PeopleSoft case yet available to make any sort of informed comment.

While admitting that IBM placed great importance on, and value in the ethical integrity of its employees, the spokesman said he did not wish to make any comment that could possibly be linked to the current legal dispute between Oracle and PeopleSoft.

Asked whether IBM had ethical or commercial guidelines in place for how its staff dealt with the consulting services sector, the spokesman also declined to answer – even in the context of IBM Business Consulting Services, which it acquired from PricewaterhouseCoopers in October 2002.

Analyst firms Gartner, Meta Group and IDC were also unavailable for comment on the issue.

However, vendors attempting to influence either consultants or analysts with kickbacks risk incurring the wrath of both clients and shareholders alike, according to a CTO for a well-known financial services organisation.

The CTO told Computerworld that secret cash-for-clients type deals were generally thin on the ground and a high-risk exercise for anyone involved.

Rather, vendors now used more subtle and sophisticated cultivation techniques, including what he termed "cultural indoctrination".

The CTO said it was common for both consultants and vendors to offer corporate hospitality to the senior management of prospective clients – especially for Rugby Union.

However, the CTO said the big risk from such outings was not any influence over a given deal, but the potential loss of staff to either vendors or consultants.

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