The professional services market felt another jolt from its smaller-size occupants last week as MarchFirst Inc. suffered resignations from some of its top executives and struggling Cambridge Technology Partners was bought by Novell Inc.
Meanwhile, Big Five consulting giants continue to feast on market opportunities, evidenced by airline booking behemoth Sabre Inc.’s decision last week to outsource its IT to Electronic Data Systems (EDS) in a US$2.2 billion dollar deal.
MarchFirst’s chairman and CEO Robert F. Bernard, and president and chief operating officer Thomas R. Metz, abruptly walked away from the troubled Chicago-based Internet consulting firm last week.
MarchFirst has failed to stop hemorrhaging during the past six months, leading to layoffs of 1,000 employees this month and a $73.2 million fourth-quarter loss in 2000. Other consulting and system integration companies have laid off workers recently in the face of reduced IT spending or budget cuts, including Razorfish, Atomic Tangerine, iXL, C-Bridge, Convansys, and Lante.
Strategy without the ability to execute or determine a clear niche or domain expertise has brought on financial and credibility problems for a number of these companies, said Kate Murphy, an analyst at Boston-based AMR Research.
“Some of these newer firms went away from the basic tenants on how to build a service,” Murphy said. “The trick is to find enough of a focus that you’re going to be known as something, and then build logical services around that personality or delivery.”
Lante, based in Chicago, is an example of a dot-com customer-oriented consulting firm that wisely decided to transform into a trading-exchange builder geared toward corporate customers and collaboration platforms for suppliers, she said.
Although Lante plans to be profitable by mid-2001, CEO and President Rudy Puryear expects more “belt tightening” on the part of customer budgets, forcing Lante and competitors to prove their worth against each other and the Big Five. “We argue about our flexibility, nimbleness, and responsiveness. … A lot of clients prefer that [culture] to a traditional Big Five.”
Mike Steenberge, vice-president of Information Systems, a C-Bridge customer based in Linthicum, Md., is a fan of the speed and flexibility of smaller Internet consultancies.
“Most of the [Big Five] seemed to have a methodology superstructure and were a little less comfortable in the really aggressive time lines we were trying to come after,” Steenberge said. “At the rate we’re growing, getting the first phase of a project in and up is critical to us because our environment changes so fast. If it takes too long, half of my needs may be different.”
Survival tips for professional services
– To avoid extinction, small to midsize Internet consulting firms will have to take a hard-nosed look at their options.
– Scale back excessive marketing strategies
– Define areas of focus and expertise
– Avoid very short or very long customer lists
– Ensure support for delivery model
– Compile positive customer references
Source: Industry analysts