Gartner profits down as firm bolsters consulting

Gartner Group has reported fourth-quarter earnings below analysts' expectations and warned of more trouble ahead as the firm invests $US50 million to $60 million to expand its electronic-business consulting operations, which include augmenting its consulting workforce by 50 per cent.

An analyst and an executive at an IT services firm said they were concerned that the company would tread on its research clients' territory as it goes after the same electronic-business projects.

However, Gartner contends that it won't focus on implementation or systems integration. As a result, Gartner said it regards firms such as IBM and EDS as partners rather than competitors.

Julie Giera, director of research for IT services at Giga Information Group, said she thought Gartner's expansion into the electronic-business consulting realm represented its "need to make money, rather than anything strategic."

Gartner's fourth-quarter net income was $2.9 million, about 85 per cent less than last year's fourth-quarter net income. These results included charges associated with a spin-off as well as workforce-related costs, such as a $25 million employee incentive plan. However, year-on-year revenue rose to $186.9 million from $168.7 million.

According to Kennedy Information Research Group, the worldwide consulting market reached $89 billion last year and is expected to grow to at least $100 billion this year.

Giera said that while Gartner has the advantage of being able to leverage its "marquee name," the company will "straddle dangerous territory" as it competes with its research services' clients.

But Gartner dismissed such claims. Regina Paolillo, Gartner's chief financial officer, said that unlike IT services firms such as Andersen Consulting or IBM, whose strengths lie in either systems integration or implementation, Gartner will focus on areas that affect IT management and operations. For example, the company would create tools-- such as a project management template - on top of its research services, which would remain its core strength.