Andersen Consulting to Grab a Piece of the Internet Pie

  • Written By: Steve McVey
  • Published On: December 15 1999



Andersen Consulting to Grab a Piece of the Internet Pie
S. McVey - December 15th, 1999

Event Summary

Andersen Consulting recently announced plans to deploy $1 billion of its privately-held capital to foster growth in web start-ups and new technology companies. Up to half of the stake will be in cash and half in access to intellectual property. The new venture will operate from Silicon Valley, home of Andersen's research facility in Palo Alto, CSTaR (Center for Strategic Technology and Research). Jackson Wilson, formerly the firm's managing partner of global markets, will head Andersen Consulting Ventures in its bid to harvest the Internet economy.

Market Impact

A long time resident of Silicon Valley, Andersen has apparently grown tired of watching idly as tiny Internet start-ups spring from the ground and mushroom into mega-giants. The $9 billion management consulting firm's millionaire partners have taken a bold step, one that promises as much for it as it does for its investments. The move was designed in part to stem further turnover in its 65,000 consultants, a chronic problem for private firms in general and Andersen in particular. In the past year, Andersen's supply chain practice alone has lost at least twenty experienced resources to startups, software vendors, former clients, and other consulting firms. Even former Managing Partner George Shaheen proved unable to resist the lure of Internet riches when he left his post to lead on-line grocer Webvan. As Shaheen's example illustrates, private firms must constantly seek creative ways to retain talented employees. Of the Big Five, Andersen has the most conservative compensation strategy, reserving million-dollar salaries for the select few who make partner. Others, like Ernst & Young and Deloitte, do a better job of sharing their take with rank and file employees, a practice that has resulted in lower attrition rates. It is unclear just how investment returns will be distributed among its employees, but Andersen should consider offering some portion to its legion of talented though less experienced consultants to keep and cultivate them.

User Recommendations

Probably the most important criterion to consider when choosing a service provider is the competence of its staff. Consulting firms often use the expertise of a few individuals to represent the qualifications of their organization as a whole. They often elaborate on past accomplishments, but fail to disclose whether the people behind the success are still on the payroll, let alone whether they will be the ones working on your project. The sobering fact is that, on average, the consultants who will implement your $8 million ERP package and dig around in your legacy systems will have less than two years experience - probably less in the package that you have chosen. Make sure that the proposal team of every service provider you interview guarantees that the people behind the glowing resumes will be the ones on your project.

 
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