Ernst & Young Bermuda Sells Technology Services Business

Tax-News.com, New York

08 May 2001

With effect from May 2nd Ernst & Young's technology consulting practice has been acquired by Paragon Bermuda Ltd. The acquisition involves the move of some E&Y personnel to Paragon and means that Ernst & Young Bermuda is no longer in the technology consulting business.

However Ernst & Young has formed a business alliance with Paragon to facilitate the ongoing provision of some technology services to their clients.

Jan Spiering Managing Partner, Ernst & Young, said: 'The alliance with Paragon makes sense for a number of reasons:

• it is an excellent deal for our clients who will now have access to a wider range of technology consulting services;
• it fits with our integrated services philosophy: being able to offer our clients integrated business solutions, bringing to their business the skills and expertise they want, when they want it and as quickly as they need it;
• it fits the new business model of outsourcing all but your core competencies.

'The decision to divest our consulting practice to Paragon was driven by our decision to put more focus and investment in our core business areas and the increasing significance of perceived auditor independence driven by the SEC.'

Paragon's President and CEO, Graham Pearson said: "We intend to continue to excel in deploying the best technology, knowledge, services and people to meet the evolving needs of our clients. The investment efficiencies and financial and human resources resulting from this acquisition will enable our firm to serve existing and emerging markets more quickly with expanded service lines and enhanced expertise.

'Our product and service offering will now include the entire range of IT consulting and management services, systems integration, technology development, design and outsourcing capabilities, all of which are in high demand as companies strive to e-Enable their business processes and save costs.'

As part of the transaction, Ernst & Young will be outsourcing its own internal information technology operations to Paragon.

Jan Spiering explains: 'Outsourcing is fast becoming a means of choice for many businesses. Ernst & Young is in the business of outsourcing, in fact, it is one of the fastest growth areas of our own business. We currently provide a range of outsourcing services to our clients, which include internal audit, information technology audit and back-office accounting services.

'Why outsource? Because it allows businesses the ability to focus on their core competencies and shift their internal resources to higher-value activities, and because there are bottom-line benefits from having a dedicated team of professionals with specialized expertise and industry knowledge delivering a high quality and efficient service in a cost-effective manner.

'Just like our clients, our business is changing rapidly. We are no longer just an accounting firm. We are a professional services firm offering a range of integrated services to our clients. We must be flexible enough to respond quickly to client needs be it through the introduction of new service lines, creative business solutions or new technologies. Outsourcing our IT function gives us that additional flexibility. Being able to draw from Paragon?s wider range of technological expertise will enable us to react more quickly to the fast-changing pace of technological development.'

Paragon's Graham Pearson said: 'There is an increasing demand by clients for Information Technology outsourcing. Our outsourcing team, Ignition (the new Managed and Application Service Provider - owned by Paragon and SBi and co-funded by eVenture Centre) provides full technology outsourcing services to clients enabling them to take advantage of the significant savings that can be made by having their operations centrally managed in a highly secure facility run by a core team of technology professionals.'

The acquisition of Ernst & Young's consultancy group and the IT outsourcing arrangement will impact the jobs of 23 Ernst & Young personnel.

Jan Spiering noted: 'Regrettably, while some members of our firm will be offered positions with Paragon, economies of scale will mean that there will not be room for everyone. There will be some redundancies but at this early stage we cannot say exactly how many.

'At Ernst & Young, we have always considered the strength of our firm to be the quality of our people. At all times we aspire to put our people first and it is with great sadness that we will have to say goodbye to some of our people, all of whom are highly skilled, highly trained technology professionals.

'We have committed significant time and resources to assisting all of our staff in finding new jobs including outplacement counseling, resume preparation, and interview and job search services. We will have a dedicated technology recruitment officer handling placement services for all of these individuals.

'Looking ahead, we will focus on our integrated services philosophy - strengthening our core services: audit, accounting, corporate finance and tax, and enhancing our business advisory services, such as Internal Audit and Information Systems Assurance services; Project Management and Outsourcing services. Our association with Hollis & Co means we can arrange for legal services and our Executive Search group, The James Partnership, can assist with client recruitment needs.'

 

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