Form & Function To Merge With GroundswellForm & Function To Merge With Groundswell

The IT consulting market got a little less crowded Monday. This time, it wasn't a case of large hardware or outsourcing companies swooping down to pick at the assets of wounded niche service providers, as Dimension Data did with Proxicom and Hewlett-Packard did with Comdisco earlier this year. Rather, the proposed merger of Groundswell Inc. and Form & Function Consulting Inc. is a case of smaller service providers collaborating to provide the customer-relationship-management and supply-chain-management technologies customers are demanding.

The merger is expected to be approved by the end of August, with the actual integration of both companies lasting through November. When all is said and done, the new company will take the name Form & Function Consulting and will be headed by Bob Bernard, who founded consulting firm Whittman-Hart and later MarchFirst. Dean Alms, Groundswell's co-president and chief strategy officer, says he'll leave the new organization once the transition is complete.

The merger is a way for two relatively new E-service providers to find strength in numbers. Groundswell was formed in 1999 with $100 million in backing from Behrman Capital and with talent from a group of former IBM, KPMG, and Oracle consultants. The company specializes in consulting and systems-integration services that help its clients consolidate and simplify internal Web portal technology. Bernard funded and launched Form & Function Consulting earlier this year. The supply-chain-management and CRM consulting firm targets midsize companies with annual revenue between $100 million and $1 billion.

Merger and acquisition has been the natural result of the slowdown in technology spending, but Tom Rodenhauser, lead analyst with Consulting Information Services, says the consulting market should be able to see some sun through the clouds. "Consulting spending is picking up, but it's still pretty faint," he says. "Clients can't put off the technology spending forever; it's just not the way business is done today." And where there's spending on technology, there's a need for consultants to provide strategy and systems-integration services.

For now, larger service providers, hardware makers, and software vendors will be the preferred providers of these services, as customers look to consolidate spending and save money. Rodenhauser says that this trend reinforces the strategy behind Form & Function and Groundswell's merger.