Making Sense of the e-Biz Buzz - Technology Information

FROM FORTUNE 50 COMPANY to local retailer, from utility provider to food manufacturer, we are all solidly immersed in the Internet age. E-business is a fact of life, influencing how we market products and services, sell and distribute goods, interact with our customers, and shape our internal business processes. Whether a company is at the leading edge--creating avant garde Web site content and capabilities--or in the middle of the pack, it is impossible to ignore the relentless call of the Internet.

Responding to the changes unleashed by the Internet is no easy task. Pressure is on companies to develop the vision and know-how to exploit the Internet, while simultaneously performing their regular duties and tending to the bottom line. Strategies and technologies shift rapidly and the stakes are extremely high. Newspapers are filled with post-mortem analyses of spectacularly expensive strategy failures. IT organizations shoulder the burden of developing and implementing e-business solutions in these shifting sands.

The skills needed for e-business differ from the skills needed for IT's traditional workload, and learning new skills on the job is risky. It is too easy to choose an architecture that later proves inflexible, to design a solution that later lacks scalability, to tackle a new development project that later collapses due to inadequate project oversight or skills. Small wonder that a seemingly boundless market has emerged for strategic and technical services to guide companies through the e-business minefield.

This market has attracted an incredible variety of services firms offering a dizzying array of styles, capabilities, and resources, and unfortunately, an even greater level of marketing hype. Whatever your need, there is surely at least one firm that is the perfect fit, but how do you find it? Everywhere you turn, there is another firm touting its capabilities. Buzzwords abound and, at first glance, everyone looks and sounds alike. But does strategy consulting mean the same at Agency.com as it does at Boston Consulting Group, for example?

This article proposes a framework for navigating through the maze of firms and service offerings. It offers a means of comparing firms by their capabilities to help companies winnow their options to a reasonable number. To illustrate the framework in action, the article uses it to evaluate a representative sampling of services firms. (See "Evaluating E-business Services Firms," this page.) The article concludes with a discussion on how a company can use the framework to select an appropriate service provider for its situation. The data for this article is drawn from Clarity Consulting's ongoing research of the c-business and outsourcing services markets.

The E-business Services Firm

What exactly is an e-business services firm? In the e-business world, terminology shifts as fast as technology, and traditional boundaries between functions blur. In the broadest definition, e-business services could include everything from online advertising to outsourced logistics. For the sake of this article, we are going to focus on the consulting services arena. These are the services used to develop business, market, and technical strategies, and to build, maintain, integrate, and promote c-business applications. Other e-business services, such as application service providers (ASPs) and infrastructure providers, are not primarily consulting offerings and are therefore not included in this framework. Those services are topics for a future article.

A quick glance at the market shows a plethora of e-business consulting firms, with additional firms appearing on a daily basis. Many of the newer firms concentrate strictly on delivering Internet professional services. Others. are established IT service firms that now offer Internet services to complement their existing IT solutions. In fact, just about every consulting company has recast itself into an c-business services firm over the past few years.

Virtually every e-business consulting firm offers creative design services to assist in Web site development. Many offer additional programming services and legacy application integration capabilities. Some offer marketing, media, and advertising services to help tune customer experiences, personalize customer relationships, promote products and services, and increase Web site traffic and transactions. The majority of firms offer some level of strategy consulting. As is always true, some are stronger in certain areas than others, and there can be considerable gaps between claimed and actual capabilities.

Evaluation Framework

Selecting the right partner for an e-business project can be a frustrating exercise. Without quite a bit of experience in the services market, it is almost impossible to distinguish between firms based on their marketing pitches. While the traditional rules for selecting a services partner, such as comparing proposals and checking references, still apply, the first challenge is to identify a list of reasonable candidates for further exploration. The framework proposed here classifies firms using eight basic capabilities. These capabilities offer a means of distinguishing between firms. Depending on your needs, you can select firms that specialize in a particular capability, combine a series of "best-in-class" category providers for a larger project, or choose a full-service firm that combines all capabilities.

Capabilities

To compare and evaluate e-business consulting firms, our goal was to define a standard set of capabilities that could be applied to all consulting firms. These capabilities had to cover the types of services typically encountered in an e-business project and had to be amenable to objective assessment. The terminology used by firms to describe their offerings is quite inconsistent, malting direct comparisons without a framework difficult. In our framework, we have chosen the following eight capability categories:

1 Business Management Consulting

These services cover the gamut of planning and strategy services. They include developing e-business vision and strategies for a company; creating business, marketing, and implementation plans; and providing assistance in writing RFPs and selecting e-business vendors and partners.

2 Technical Architectural Design

The technical architecture for a major Web application can be enormously complex and fraught with security, scalability, and performance issues. These services help design the technical infrastructure to support "industrial strength" Web applications.

3 Creative Web Site Design and Implementation

These services focus on visual and usage components of Web site creation, and include developing a Web site strategy; designing the layout, look and feel, and navigation of a Web site; implementing Web pages; and testing the Web site.

4 Web-side Application Development

These services develop, implement, and install Web-based application functionality for commerce, transactions, security, data display, etc.

5 Legacy Application Integration

More advanced e-business applications must access data and functionality present in back-end legacy applications. Providing these services requires a strong knowledge of traditional IT technologies as well as Web application development. These services include integrating legacy applications with Web-side applications, and Web-enabling legacy applications.

6 Application Outsourcing

Application outsourcing services cover the ongoing development, enhancement, maintenance, and support of e-business applications using external consulting resources. While renting applications from an ASP can be considered a form of application outsourcing, we have restricted this category to firms that outsource custom-developed applications.

7 Interactive Marketing and Branding

Interactive marketing concentrates on how to market the company and its products/services through its Web site. These services include developing the strategy and plans for marketing products and services in online or interactive media, executing those plans, strengthening and extending existing brands through interactive channels, creating new interactive brands, and designing online customer experiences.

8 Interactive Advertising, Promotions, and Media

Advertising and promotional services focus on online marketing through external partners and media placements. These services include developing and executing plans for promoting and advertising a company, its products, and/or services through interactive channels, referrals, and marketing partnerships.

Supporting Characteristics

Capabilities are easy to claim, but establishing the reality of those claims is hard work. How many experienced healthcare consultants must a services firm have to claim expertise in delivering e-business strategies for the healthcare industry? How many consultants will be needed to deliver on that claim? Perhaps only one, as long as he or she is very good and is devoted to your project.

There are many characteristics that can be used to buttress or disprove claimed capabilities. At Clarity Consulting, we track and evaluate a large number of corroborative data points. Examples include the firm's background, acquisition history, employee profiles, company size, revenue per employee, average project size, references, and the quality of its work. Each point provides another clue about a company's true capabilities. For the purposes of this article, we have chosen three simple characteristics from our tracking pool:

* Revenues

The firm's revenues are a good way to gauge its size and financial wherewithal. A firm with $3 million in revenues last year is not likely to be a good candidate for a $25 million project.

* Consulting Base

The size of a firm in terms of its consulting base provides a measure of the depth of its expertise and its ability to apply sufficient resources to support your project. For a small project, any size firm will do. If you are looking to support a worldwide rollout of a complex, integrated e-business trading community, you need a firm capable of fielding dozens of consultants at locations around the world.

* Web Site Quality

Would you hire a plumber whose house is full of leaks? The most obvious example of a consulting firm's capabilities is its own Web site. How well does it get its own message across? How much attention does it pay to details, such as the quality and freshness of its content? Does it match your stylistic needs and preferences? For this article, we relied on these three characteristics:

* Web site design--This factor assesses the attractiveness and interest of the site's design.

* Web site specificity--This factor assesses how well the site describes the consulting firm and its services. A high rating indicates a clear and sufficiently detailed description. A low rating indicates that the site's content was superficial and generic.

* Web site usability--This factor assesses the quality and intuitiveness of the site's navigation; i.e., the ease of using the site to find desired information.

Research Methodology and Observations

For the purposes of this article, we restricted ourselves to publicly available information about the selected consulting firms. This information includes Web site content, brochures, press releases, news articles, SEC filings, and analyst reports. By reviewing a cross section of these resources, we were able to develop reasonably informed opinions, which are reflected in the associated chart. Our subsequent research will include interviews with representatives from these firms and their customers.

When researching services firms, one quickly discovers that almost all the marketing literature intentionally lacks the specificity required to delineate their capabilities clearly. Terminology is used very loosely and inconsistently. Characteristics such as actual skill strength and true project experience levels are rarely obviously available. Typically, a reliance on hype and generalities serves to mask a lack of in-depth experience. It is worth noting that many service firms' Web sites tend to obscure rather than clarify their products and services--an ironic situation for companies claiming superior Web site design expertise. What's behind this lack of specificity, and downright obscurity? The most plausible explanation is the service firm's dread of being pigeonholed into a class of narrow service offerings. Much has been made of the ability to offer end-to-end e-service capabilities, causing many firms to stake as broad a positioning as possible. Consulting is infinitely pliable, enabling firms to str etch to take on business that is outside their normal realm of expertise. A firm may be able to complete the assignment, but will they do as good a job as a specialist in the area? The reality in the e-business services world is that firms never understate their capabilities.

Inconsistency in terminology is another area of concern. Every firm claims to do "strategy consulting" or "business consulting," but what they mean by these terms varies widely. The level of business consulting expertise required to help a small retailer launch an online commerce site bears little resemblance to the level of expertise needed to develop a worldwide Internet strategy for a major telecommunications firm. Beware of assuming that the strategy services offered by companies such as Razorfish are even remotely comparable to the services offered by firms such as Boston Consulting Group and McKinsey.

Similarly, the ability to perform "legacy integration" is claimed by most firms. Does legacy mean the ability to pull some data from a five-year-old client/server application, or does it include the expertise to Web-integrate a series of25-year-old mainframe applications written in Cobol using VSAM? The former is within the capabilities of most e-business services firms while the latter requires the broad legacy integration capabilities of a Keane or an EDS.

When evaluating the capabilities of the firms listed in the chart, we initially relied on the capabilities as claimed in their marketing literature. Where appropriate, we tempered their claims using the other information we collected and our knowledge of the market. We rated the selected firms in each capability category using the following scale:

* S--This capability is a strength of the firm

* C--The firm is capable in this area.

* P--The firm is purportedly capable in this area, but there is little corroborative evidence in the source materials.

* U--It is unclear or unknown whether the firm has this capability.

Selected E-business Firms

There are literally thousands of e-business services firms today. Due to time and space constraints, this article could not possibly attempt to cover all candidates. Instead, we selected an initial 16 e-business services firms to profile as an illustration of the evaluation framework. We selected these particular firms partly due to their prominence within their category, partly due to their clientele, and partly due to the perceived strength of their offerings. We intend to evaluate additional firms in future articles and reports, and welcome suggestions for inclusion.

classifying the short list of e-business services firms was an interesting exercise. Providers often have a very different view of which competitors should appear in their peer group than is justified by reality. When they classify themselves, they tend to expand upon their own capabilities while discounting those of their competitors. For purposes of this article, we defined four categories of e-business service providers:

1 Traditional IT services firms, including development houses, system integrators, and outsourcers (Andersen Consulting, IBM Global Services, Keane, PricewaterhouseCoopers, and Sapient).

2 Internet professional services firms, including Internet pure-plays and Web-side design and implementation specialists (Agency.com, marchFIRST, Proxicom, Razorfish, Scient, Viant, and Zefer).

3 Traditional business management consulting firms (Boston Consulting Group and McKinsey).

4 Interactive marketing and advertising firms (Modem Media and Organic).

Although not included in this article, a separate category could easily be created for e-business consulting firms specializing in niches such as security, network support, and performance monitoring, and another category could be defined for vertical industry specialists. Offshore services firms offer another interesting option for e-business consulting assistance. We may expand our analysis to include other categories in future articles.

Using the Framework

There is no such thing as the perfect e-services firm for every requirement. The needs of a dot-com start-up are very different from those of a Fortune 50 multinational. Selecting the right firm is an exercise in understanding and matching your needs to the capabilities and styles of the firms in your market.

The firms shown in our chart represent a very small percentage of the e-services consulting firms in the market and are meant as illustrations of the framework in action. Many very good firms were omitted due to time and space constraints. You can use the criteria described in this article to expand the chart to cover additional e-services firms. In this manner, you can compare the capabilities of those firms on a more equal basis.

The old approach of creating an RFP and waiting for firms to respond does not work in the fast-paced e-business world. Some of the best e-services firms have such a large backlog of projects that they can pick and choose their clients. You'll get the best results by doing your own research and focusing your final evaluation on a handful of carefully targeted candidates. To select the right firm to meet your requirements, we recommend the following approach:

Know your project. The type and size of your project should drive your first round of selections. If you know exactly what you need to accomplish, you can go directly to firms specializing in those capabilities. If your requirements are vague or at the earliest stages of definition, you should consider a strategy consulting engagement before committing to subsequent steps. The type of project will push you to a certain category of consulting firms. Is the project highly technically complex or is it primarily marketing-driven? You will use a very different firm to create an avant garde, leading-edge Web site than to partner with you in a major supply chain integration effort.

The size of your project is also important. Very large projects need firms with the breadth and depth of resources to support them. Small projects often get the best attention from smaller firms. Don't forget to consider the future maintenance and enhancement of the completed project. If outsourcing support is a desirable option, it is often better to select a firm with both development and outsourcing capabilities rather than unload a completed project on a new vendor.

Know your style. E-services firms vary as widely in style as they do in capabilities. Styles range from tragically hip Internet specialists to humble, "masters of the universe" positioning. Your ability to work with a given firm, and the match of its style to your market, are as important as the firm's capabilities. Are you looking for flash and creativity, or a solid operational orientation? Is speed to market more important than robustness, or do you need an application that is fail-safe under extreme usage? What does your market expect? A Web site for college students requires a different mindset than a business-to-business purchasing system.

Pick your criteria. Which criteria are most important to you and your company? Does the consulting firm need in-depth knowledge of your industry or extremely strong technical capabilities? Are you looking for firms to fill in the gaps in internal expertise or to take charge of the entire project from conception to completion? If you have strong program management expertise and a willingness to manage multiple vendors, you can take a best-in-class approach to selection. If you need a wide range of assistance or if the project is especially complex, consider a partner with end-to-end capabilities. Stack rank your criteria and use the framework to pick a reasonable set of potential providers that most closely match your needs.

Conduct-further research. If your e-business project is inconsequential, you can afford to cut corners in. your research. However, if your company and career depend on a successful project, it is worth devoting the effort to find the best possible match. Spend time evaluating each firm's operating results and financial performance. If they are not good at running their own business, how can they advise you on yours? If your legal department has access to the appropriate resources, check the firms' involvement in civil lawsuits. In today's litigious world, no company is immune from frivolous or unfair lawsuits, but important patterns may appear. Focus on the quality of their Web site. Consider their employees. Why would someone want to work for them? Who do they attract? Check references. Talking to others who have used the candidate firms is one of the best methods of separating the hype from reality.

Armed with this information, your chances are better for finding an e-services firm that will meet your needs.

Ian S. Hayes, founder and president of Clarity Consulting Inc., Hamilton, Mass., specializes in strategic consulting on issues surrounding the management and support of corporate business systems. He is the co-author of two best-selling Year 2000 books, The Year 2000 Software Crisis: Challenge of the Century and The Year 2000 Software Crisis: The Continuing Challenge (Prentice-Hall).

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