In 1989, that division split from Arthur Andersen and began using the name Andersen Consulting. Both Arthur Andersen and Andersen Consulting consisted of groups of locally-owned independent partnerships and other entities around the world, each in a contractual agreement with Andersen Worldwide Société Coopérative (AWSC), a Swiss administrative entity.
By 2000, Andersen Consulting had achieved net revenues exceeding US$9.5 billion and had more than 75,000 employees in 47 countries,whereas Arthur Andersen had revenues of US$9.3 billion with over 85,000 employees worldwide in 2001.
Through the 1990s there was increasing tension between Andersen Consulting and Arthur Andersen. Andersen Consulting was upset that it was paying Arthur Andersen up to 15% of its profits each year (a condition of the 1989 split was that the more profitable unit - AA or AC - paid the other this sum), while at the same time Arthur Andersen was competing with Andersen Consulting through its own newly established business consulting service line called Arthur Andersen Business Consulting. This dispute came to a head in 1998 when Andersen Consulting claimed breach of contract against AWSC and Arthur Andersen. Andersen Consulting put the 15% transfer payment for that year and future years into escrow and issued a claim for breach of contract. In August 2000, as a result of a conclusion of the International Chamber of Commerce, Andersen Consulting broke all contractual ties with AWSC and Arthur Andersen. As part of the arbitration settlement, Andersen Consulting paid over the sum held in escrow (then $1.2 billion) to Arthur Andersen, and was required to change its name, resulting in the entity being renamed Accenture.
Perhaps most telling about who had "won" the decision was that four hours after the arbitrator made his ruling, Arthur Andersen CEO Jim Wadia suddenly resigned. Industry analysts and business school professors alike viewed the event as a complete victory for Andersen Consulting.Jim Wadia would provide insight on his resignation years later at a Harvard Business school case activity about the split. It turned out that the Arthur Andersen board passed a resolution saying he had to resign if he didn't get at least an incremental $4 billion (either through negotiation or via the arbitrator decision) for the consulting practice to split off, hence his quick resignation once the decision was announced.
Accounts vary on why the split occurred — executives on both sides of the split cite greed and arrogance on the part of the other side, and executives on the Andersen Consulting side maintained breach of contract when Arthur Andersen created a second consulting group, AABC (Arthur Andersen Business Consulting) which began to compete directly with Andersen Consulting in the marketplace. Many of the AABC firms were bought out by other consulting companies in 2002, most notably, Hitachi Consulting and KPMG Consulting, which later changed its name to BearingPoint.
AC's change of name proved to be fortunate as it avoided the taint when Arthur Andersen was dissolved as a result of its role in the Enron scandal.
By 2000, Andersen Consulting had achieved net revenues exceeding US$9.5 billion and had more than 75,000 employees in 47 countries,whereas Arthur Andersen had revenues of US$9.3 billion with over 85,000 employees worldwide in 2001.
Through the 1990s there was increasing tension between Andersen Consulting and Arthur Andersen. Andersen Consulting was upset that it was paying Arthur Andersen up to 15% of its profits each year (a condition of the 1989 split was that the more profitable unit - AA or AC - paid the other this sum), while at the same time Arthur Andersen was competing with Andersen Consulting through its own newly established business consulting service line called Arthur Andersen Business Consulting. This dispute came to a head in 1998 when Andersen Consulting claimed breach of contract against AWSC and Arthur Andersen. Andersen Consulting put the 15% transfer payment for that year and future years into escrow and issued a claim for breach of contract. In August 2000, as a result of a conclusion of the International Chamber of Commerce, Andersen Consulting broke all contractual ties with AWSC and Arthur Andersen. As part of the arbitration settlement, Andersen Consulting paid over the sum held in escrow (then $1.2 billion) to Arthur Andersen, and was required to change its name, resulting in the entity being renamed Accenture.
Perhaps most telling about who had "won" the decision was that four hours after the arbitrator made his ruling, Arthur Andersen CEO Jim Wadia suddenly resigned. Industry analysts and business school professors alike viewed the event as a complete victory for Andersen Consulting.Jim Wadia would provide insight on his resignation years later at a Harvard Business school case activity about the split. It turned out that the Arthur Andersen board passed a resolution saying he had to resign if he didn't get at least an incremental $4 billion (either through negotiation or via the arbitrator decision) for the consulting practice to split off, hence his quick resignation once the decision was announced.
Accounts vary on why the split occurred — executives on both sides of the split cite greed and arrogance on the part of the other side, and executives on the Andersen Consulting side maintained breach of contract when Arthur Andersen created a second consulting group, AABC (Arthur Andersen Business Consulting) which began to compete directly with Andersen Consulting in the marketplace. Many of the AABC firms were bought out by other consulting companies in 2002, most notably, Hitachi Consulting and KPMG Consulting, which later changed its name to BearingPoint.
AC's change of name proved to be fortunate as it avoided the taint when Arthur Andersen was dissolved as a result of its role in the Enron scandal.