MTS Allstream sells IT consulting wing to PwC Canada

PricewaterhouseCoopers Canada has purchased MTS Allstream Inc.’s non-telecom IT consulting business in a move aimed at rebuilding its IT consulting business.


In addition to a slew of client contracts, the acquisition will bring PwC Canada 180 new employees from MTS Allstream’s professional services consulting group, including those specializing in enterprise apps, IT management, systems integration, and project management.


The history behind the acquisition might actually date back to 2002 and a deal which saw IBM Corp. pay US$3.5 billion to buy up PwC Consulting and its 30,000 consulting professionals. The massive acquisition also came with a five-year non-compete clause, which ended in 2007.


Nigel Wallis, a research director for IDC Canada Ltd., said that with the non-compete agreements now expired, PwC’s global subsidiaries are working to slowly rebuild its consulting business through acquisitions.


“This isn’t the first time PwC at a worldwide level has done a deal like this,” he said, referring to PwC’s U.S. firm and its purchase of some of BearingPoint Inc. in 2009.


This time around, Wallis added, PwC is focusing on consulting services that complement its auditing, analytics and risk management work. “They’re looking to grab tech advisory people with skill sets in Oracle and project management,” he said.


As for whether PwC Canada can parlay the purchase into strengthening its client base, Wallis warned that many of the incoming contracts will be systems integration deals, which typically have a lifespan of six months to two years.


“That’s going to be their window to try and pitch them,” he said.


For MTS Allstream, the transaction is expected to bring the company back to basics, with a renewed focus on its core business offerings in unified communications and converged IP services.


The company also announced a new strategic alliance as part of the deal. This alliance will have PwC Canada customers referred to MTS Allstream for communications solutions and MTS Allstream customers sent to PwC Canada for non-telecom IT support.


Dean Prevost, president of MTS Allstream, said that customers are continually migrating to IP-based services and will benefit from this new working relationship.


He added that the company is keeping the vast majority of its security portfolio, with much of the outgoing expertise based in app development, business intelligence and ERP services that were not core to its business.


Andy Woyzbun, a lead analyst with Info-Tech Research Group Ltd., said MTS Allstream had built its professional services division through a variety of acquisitions many years ago.


“They’re a viable consulting organization, and therefore, they would be attractive to either be spun off independently or merged into PwC,” he said. He added that the consulting division’s top expertise is in Oracle Corp.’s suite of financial apps.


The rationale from MTS Allstream makes perfect sense to Woyzbun, who said he was always a bit puzzled about the synergy between telecom services and some of the consulting work they were engaged in with the professional services division.


“Overall, it seems to be a win-win for both organizations,” he added, with MTS Allstream in particular being able to use their acquisition funds to focus on areas like connectivity and unified communications.


As for why the MTS Allstream had ever made investments in this field, Prevost said that the company and many of its competitors were expecting a more direct relationship between the telecom world and the IT world.


This didn’t come to pass, he admitted, as telecom companies primarily need expertise in areas such as unified communication as opposed to ERP and business intelligence.


“Still, we learned a ton and grew as an application services organization,” Prevost said, as well as in other areas such as project management and enterprise architecture.


Both MTS Allstream and PwC Canada expect a seamless transition over the next six months. The transaction will officially come into effect on Feb. 1.

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