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Cisco's $1bn in KPMG forms love triangle with MS

Consultancy is where the money is, Chambers notices

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Cisco intends to invest $1 billion in "global advisory firm" KPMG, which is what these bean-counters-cum-management consultants are calling themselves nowadays. That's a lot of Cisco shareholder cash. Cisco has relatively few people in consultancy, and so had to look outside for an entree into the systems integration scene. As CEO John Chambers told the New York Times, "You can be out of business in three years... whoever moves quickly first are those who will benefit first over the next ten years". But he seems to have overlooked IBM and Oracle, who've already moved into this field. KPMG itself has been trawling for technology partners for some time, and will use the money to hire 4,000 engineers and service professionals over the next 18 months. The focus will be on areas where Cisco manufactures kit. Six new centres will be set up, four in the US, and two elsewhere. Whether KPMG will find 4,000 people is another matter, but with all that cash, it could afford to pay rather well. In return for its money, KPMG will get "less than 20 per cent" of KPMG's US unit. KPMG entered a joint venture with Qwest Communications, called Qwest Cyber.solutions, earlier this year to develop order processing. Whether KPMG will be able, or will pretend, to offer "independent" advice to its clients in view of its relationships is an issue that needs addressing. Like Microsoft's "consultants", who at least admit that they only work with MS software, KPMG seems to be hedging on this important issue of professional ethics. For its part, Cisco has indicated that it will seek relationships with other consultancies - and of course already has a solid relationship with Microsoft. If Cisco is sincere about not allying with single vendors, it would also seek to strengthen its strategic partner relationship with Novell, although the Microsoft relationship may have some hidden clauses precluding this. A story that deserved to be told during the Microsoft trial was how Microsoft "persuaded" KPMG to desert Netscape's browser in favour of IE, as well as to use Exchange. Netscape lost 18,000 Navigator seats and a SuiteSpot back-end system. The previous week, Intuit and Lotus had also been "persuaded" to make the same switch. The person negotiating the November 1997 Microsoft deal was KPMG COO Roger Simboni, who later went to Epiphany as CEO. He told Microsoft vp Jeff Raikes at one stage during the negotiations that "You guys don't know how to partner with anyone." But Raikes put on a personal meeting for Simboni with Gates, and proposed that KPMG became a Microsoft "partner" and not just a customer. Despite Simboni's staff complaining that "Microsoft hasn't invented anything. All they do is marketing and copying", KPMG was won over but had to pay severance fees to Netscape for software that it never used. Raikes also gave KPMG $10 million to set up a unit of ten centres around the country to market services with 500 new staff to corporations adopting NT. ®

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