Andersen Consulting Cuts Ties to Arthur Andersen

Andersen Consulting has been granted complete independence from financial obligations or future relationships with Arthur Andersen LLP and Andersen Worldwide, as per a ruling by an International Chamber of Commerce-appointed arbitrator.

The decision brings a tumultuous three-year dispute between the Chicago-based organizations to a close, granting Andersen Consulting the power to resume its aggressive and prosperous consulting endeavors which quickly grew out of favor with its Andersen brethren, said Traci Gere, vice-president of services research at Framingham, Massachussets.-based IDC.

"Clearly Andersen Consulting has a very active [acquisition and alliance] venture strategy in place. With the additional freedom of movement the split-off will afford them, the pace of that will continue to pick up," said Gere. "[Consulting] is certainly growing faster than [the] tax and audit," business focus of Arthur Andersen, she added.

In particular, Gere predicted that Andersen Consulting will reinforce its efforts of partnering up with emerging dot.com's that could reap the company future growth benefits down the road.

In his 129-page decision, arbitrator Dr. Guillermo Gamba found that the separation should occur because Andersen Wordwide did not effectively manage the separate business organizations -- Arthur Andersen and Andersen Consulting -- in accordance with the agreed upon legally documented language.

In other findings of Gamba's ruling, the Andersen name and any derivatives cannot be used by Andersen Consulting, nor can the company use any jointly developed technology, according to a prepared statement by Arthur Andersen.

Also, transfer payment funds held in escrow amounting to $1 billion dollars must be returned to Andersen Worldwide for distribution to Arthur Andersen member firms.

Gere said that going forward, Andersen Consulting and Arthur Andersen will face significant competition from large system integration and outsourcing firms from the IT side, such as IT Global Services and EDS. At the same time, as IT becomes more embedded in business solutions, consulting firms such as Deloitte & Touche, KMPG, PricewaterhouseCoopers, CAP Gemini, Ernst & Young, and pure play consulting houses like McKinsey, Bain, and Boston Consulting Group, will pose a threat to each party.

In terms of which of the two companies has a stronger foothold in the ongoing quest to marry and integrate technology and business for the IT industry, the answer is no contest, said Gere.

"Andersen Consulting's footprint in this industry dwarfs Arthur Andersen's," she remarked. "The result of this arbitration is a situation where you've had a nagging headache and every morning it's in the back of your head. And this morning, [Andersen Consulting] woke up and the headache is gone."

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