What BearingPoint's Chapter 11 filing means to you and me

What BearingPoint's Chapter 11 filing means to you and me

Summary: BearingPoint's chapter 11 filing isn't good news for anybody.

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A long time ago I worked for KPMG Consulting - and because I still have friends with what's left of the firm, the bankruptcy filing by its successor wasn't a great surprise.

BearingPoint's problem was always that it was structured and controlled by people whose goal was to make money - not people whose goal was to do consulting. As a result I'll offer two cheerless predictions:

  1. that their current re-organization plan will trigger an exodus by both the better qualified and the better connected - leaving the MBAs and nickel and dime merchants to sell their own dubious services to the once burned, and twice shy, survivors among the customer base; and,
  2. that the survivors will claim expertise on government medical information processing and position themselves as the go to guys on the tens of billions now going into medical records nationalization in the U.S.

So what's it mean to you and me? if you work for one of the surviving big consultancies it's one less competitor; if you work for an affected client, your chances of having your voice heard over the salesman's pitch from above just got a bit better; and, of course, there's exactly no practical chance that the medical records thing will ever produce anything that works, so all the people involved are really just going on the dole.

What it doesn't mean is the saddest thing of all: if you think this might be an opportunity to bring some serious talent back into line management, you'll find the pickings slim indeed - because their management's supposed bottom line focus fostered promotion on sales, not service.

Topics: Government US, Government

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  • Good riddance?

    The Brits are finding out the hard way about digitizing medical records. Their own national IT project is way over budget and not very close to a solution (I know because I read the Register!). If the FBI can't even get their case file system working, what chance do we have of getting true paperless medical records?

    I think Obama doesn't understand the reality that most (all) IT projects fail. I hope we (as taxpayers) don't pay for his ignorance . . .
    Roger Ramjet
    • Canadian experience even worse

      The wrong people, hired to implement the wrong strategies, using the wrong technologies.. produces billions lost by every province and no one keeping score.
      murph_z
      • Where are the architects?

        Everywhere I go (in business) I see examples of VERY poor architecting. I wonder what it takes to find good architects (since no one seems interested in myself ...). What kinds of people inhabit this realm? Are they sycophants or political-types? Do they have poor education or experience? Are they actually great at their jobs, but their ideas are ignored? What gives?
        Roger Ramjet
        • I don't know

          As I see it the closest thing to a generic reason large government projects fail that I know of is simply that the technology choices considered are inherently incapable of doing the job effectively - and the conflicting agendas and goals of the decison makers in the process don't get judged against the success or failure of the project. - meaning, basically,that the system is structured, particularly in terms of personal promotion and budget access, to prevent success.
          murph_z
        • Disillusioned

          I see the same. I can't speak for every case, but one architect was very candid with me... an architect is almost always a late addition to a company's staff. In most cases a company has been up and running for years or decades without one; there is a huge body of legacy systems.

          The architect can pick all the "right" technologies and come up with some very cool plans for implementing them. But when push comes to shove the company has other "urgent" priorities, be it a Y2K-like crisis, or some banking crisis. In good times you can substitute an acquisition or a push to globalization. Regardless of the economy there's some business need that supersedes retro-fitting the architecture.

          Invariably, the other priorities squeeze out the architect's plans. "Better, cheaper, faster" was the mantra at one client. To them this usually meant "how do we interface with [LEGACY_BLACKBOX]?" rather than "how do we modernize or replace it?" Imagine being hired to build a maglev train... then imagine that it's required to have SAILS. That's about the level of puzzlement and frustration an architect might experience.

          Defer enough of his initiatives and the most motivated architect will be reduced to bemoaning his ceremonial position with some consultant over a beer at the local pub. Then he'll quit having seen not one single initiative of consequence get past approval. Then the company will just assign somebody to maintain the code repository, while the CIO kvetches that that's all the architect did anyway.

          Obviously, completely "new" initiatives shouldn't have this problem. So they must be coming up with some different dysfunction.
          dave.leigh@...
  • Management problem, yes, but acquisitions

    Acquisitions help management because a larger company means a bigger paycheck for executives. But it also means vulnerability to a huge debt, which means cash flow is demanded.

    The sales were necessary to meet the debt payments, Murph, and when the company was delisted from the stock exchange and unable to make a payment, bankruptcy and wiping out stockholders was necessary.

    Mostly a reminder of whom a company is managed for these days.


    News quotes:

    An existing term loan of about $300 million will be replaced with a new term loan of about $300 million, according to BearingPoint spokesman Aaron Bedy.

    The remaining debt of about $700 million will be exchanged for preferred and common stock in the newly reorganized company. All existing equity in the company will be canceled for no consideration, meaning current shareholders will receive nothing.

    BearingPoint, a management and information technology services company spun off from KPMG LLP in 1999, has been landing new work despite its financial travails. In December it announced a contract worth up to $260 million from the Department of Defense's Business Transformation Agency to change management services. The company has 16,000 employees, including 3,600 in the Washington area.

    http://www.bizjournals.com/baltimore/stories/2009/02/16/daily34.html


    BearingPoint's government work, the largest slice of its business [one-fourth plus], has involved a host of technology projects for clients ranging from the Marine Corps to the Department of Health and Human Services. The firm received $520 million in government contracts in 2007, according to the Web site Fedspending.org.

    http://www.washingtonpost.com/wp-dyn/content/article/2009/02/18/AR2009021801973.html


    The McLean, Virginia-based company, which began as the consulting arm of KPMG LLP and later struggled with accounting problems and a U.S. Securities and Exchange Commission probe, has been laboring under heavy debt exacerbated by an acquisition spree between 1999 and 2002.

    The company began as the consulting arm of KPMG, with the accounting firm creating a distinct business unit for those consulting services in 1997.

    It was later spun off from KPMG and BearingPoint Inc (BGPT) began trading on the New York Stock Exchange in 2002.

    Between 1999 and 2002, the company took on debt to make various [mostly foreign] acquisitions.
    [Ironically, the foreign parts of the firm are not involved in the bankruptcy.]

    The company later delayed filing its annual financial reports as it worked to establish internal controls. Corporate expenses rose, due to accounting and audit costs. The company also took charges related to the decline in fair value for some of its reporting units.

    http://money.cnn.com/2009/02/18/technology/BearingPoint_bankrupt/index.htm
    Anton Philidor
    • Agreed

      but it's sad - when I worked with them the U.S. practice in particular had some of the best and most dedicated people I've ever met.
      murph_z
  • n/a

    n/a
    dave.leigh@...