Ed blogs about what companies really sell is trust more than consulting services:

What is it exactly, do you suppose, that Ernst and Young sells its clients? If you said “auditing services” or “consulting”, you’re right, but I’m asking a more general question than that. To get to the heart of the matter, why would you listen to E&Y moreso than you would listen to your neighbor, a cousin, or that dude on the street that talks to himself?

The answer is Trust. That’s what they sell. At the core of the purchasing decision is the degree to which you do or don’t trust E&Y to deliver the goods – and the confidence that you have that they will add value.

Really what is the difference between one consulting company and another? You do business with those you like, trust, and respect. Big companies like to do business with other big companies … because they trust the work they are getting is better than anyplace else. The thing is the consultants that work for these companies are recycled through the industry as they all have worked for the same 5-10 companies at some time in their career. Trust is why a consultant can bill out at $95/hour at a small firm and almost twice that at a large one.

People pay for trust.

But what happens when that trust is lost? E&Y seems to have eroded some of that trust by loosing a laptop with unencrypted client data (several times) and never divulged the problem. Or how about when an ATM network is breached and your card is canceled leaving you with no access to your cash? Or how about when companies such as Visa tell you that your personal credit card information is stored in more places than you’d ever imagine or want it to be? What about when Google Base revolutionizes the way products are bought and sold? Will your personal information be any safer? Do people care?

The industry types think people will begin to care and that’s why they are working tirelessly to stop the bleeding and put systems in place that will protect their image from further erosion of trust. Because trust works just like money in the bank, if you build it up you will have something to pull from in the future. If the trust level is ever low or shaky, then consumer allegiance could falter affecting sales and profit and then nothing.

Update: I want to clear the waters here in that I am not saying anything good/bad about E&Y. Everyone is susceptible to attack, loss, damage, etc. But some companies have more trust capital to pull from than others do.

Update: Jacob has a great list of links, description of events, and truth about data loss.