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It’s no secret that Accenture Ltd. set up its headquarters in Bermuda to reduce its overall tax burden. But now, that move could cost the consulting firm dearly.

Indeed, Illinois State Comptroller Daniel Hynes on Monday blocked more than $2 million in state payments to Accenture. The state’s Procurement Policy Board is now reviewing whether Illinois should be doing business with U.S. companies that choose to incorporate outside the country, according to Reuters and Chicago Sun-Times reports.

Hynes set the stage for this move back in November, when he announced an aggressive plan to “crack down on corporations that use offshore tax havens to avoid paying their fair share of state and federal taxes.” The plan includes legislation to prohibit so-called “expatriates” from doing business within Illinois. That legislation, however, remains stalled in the Illinois Senate.

Hynes in November noted that American corporations with “paper” headquarters in Bermuda and the Grand Caymen Islands would “dodge roughly $4.8 billion in federal taxes over the next decade.”

He named three “offshore” companies during his November statement: Accenture, as well as construction firms Foster Wheeler Ltd. and Ingersoll-Rand Co., which are incorporated in Bermuda, according to recent SEC filings. Neither construction firm could be reached for comment.

Meanwhile, an Accenture spokesman said the company has “always paid U.S. taxes on income generated by its U.S. operations,” according to Reuters.

Hynes by accounts disagrees. His attack against Accenture comes as more and more U.S. companies outsource their IT projects to low-cost software developers abroad.

Digital Elections? Some Vendors are Upbeat

Deal 2: Digital Elections? Not all states are feuding with their IT consultants. In fact, the mood is very upbeat at Covansys Corp. and PCC Technology Group. The pair partnered to win a $2.8 million contract with the Rhode Island Secretary of State’s Office.

The deal calls for Covansys and PCC to build a centralized, interactive statewide voter registration system by October 2004. Covansys will design the system using PCC’s ElectioNet software.

Rhode Island Secretary of State Matt Brown said the system will interface with records of state agencies, such as the motor vehicle department, to identify and cull out duplicate voters, and ease voter registration throughout the state.

Covansys and PCC both have extensive experience in the government sector. Forty-seven states have turned to Covansys for IT services and 25 percent of the company’s revenue comes from state and local government clients. PCC’s Elections Division develops software that adheres to state laws for campaign finance and centralized voter registration.

Deal 3: Offshore firm makes U.S. house call. Satyam Computer Services Ltd., one of India’s largest IT consulting firms, held its 2004 Customer Summit earlier this week in Key Largo, Fla. Several IT managers who attended the event declined to be quoted by name in this article. The reason? They’re fearful of backlash within their companies.

“You can cut your costs by outsourcing to Satyam,” said one IT manager from a midsize financial services company. “But talking about your outsourcing relationships publicly has become politically incorrect. Politicians are bashing offshore outsourcing but they don’t take the time to mention how outsourcing makes U.S. businesses compete more effectively with foreign rivals.”

Foreign consulting firms continue to cash in on the boom. For its year ended March 31, Satyam’s revenue jumped 32 percent to $553 million. Some of its recent contract wins include eight Fortune 500 companies.

About Contract Watch: Each week, this column examines customer engagements that are stirring the channel, and the solutions providers behind them. Our goal is to strip away the hype and tell you what’s really selling—and what isn’t—in today’s IT marketplace. Send your tips to

Joseph C. Panettieri has covered Silicon Valley since 1992. He was most recently editorial director at New York Institute of Technology.