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By Jon Bernstein, 12 August 1999 11:54

COMMENT The US Government has said it will look into Cisco's proposed $1bn stake in services and consultancy company KPMG (http://www.silicon.com/a32003 ). The Security and Exchange Commission (SEC) - the US equivalent of the UK's Monopolies and Mergers - is concerned how the deal will sit with auditor independence rules. Legitimate enough - but isn't there a concern closer to home? Specifically, how does the deal sit with the supposed impartiality of IT vendors and consultancy firms? The likes of KPMG, Arthur Andersen, CSC, EDS and Cap Gemini are seen as a cut above your average systems integrator or, God forbid, reseller. They offer strategic vision; they don't try and punt a particular vendor's products. Until now, that is. Part of this distinction may be little more than perception, but it is a perception happily perpetuated by the services companies themselves. KPMG will insist that just because Cisco has a 20 per cent stake in the company and, doubtless, has a seat on the board, it doesn't mean the company's products will be the first on the lips of consultants recommending networking technologies and services. Perhaps not explicitly, but tacitly how can KPMG fail to favour Cisco? It plans, after all, to dedicate 4,000 staff to its Cisco relationship. Four thousand? To put that in perspective, European consultancy Cap Gemini has a total of 8,000 IT specialists, a fraction dedicated to networking. For KPMG, recommending Cisco will become the 'path of least resistance'. Sure, the Nortels and Lucents of this world will continue to arm KPMG consultants with the latest information about their wares. However, these consultants are never going to know Nortel or Lucent like they know Cisco. Some might say IT services companies have had relationships with IT vendors for years. All the big names do it, and are not shy in telling you about them. Nevertheless, there is a big difference between partnership and ownership. In the words of one consultant, "partnerships are fickle". That means when it's convenient for one or both parties to break it off, it can be done with the minimum of tears. When one of those companies have a seat on the board, breaking up is a very different proposition. Another solution, say those in the know, is to ensure that 'interests' are declared in much the same way as members of the UK parliament must declare any extra curricula activities. Again this is to miss the point. If by declaring an interest, you absolve any 'conflicts of interests' then we have a problem. If a conflict of interest exists, it should be dealt with whether it's out in the open or shut away from prying eyes. For this reason, once the SEC has finished with its current investigation, it should open a new one to protect the interests of IT professionals everywhere.