What's Happening To Our Market?

What once was a relatively stable (even boring) industry landscape has now evolved into a giant free-for-all of clashing and competing business models, fueled by technical breakthroughs and entrepreneurial zeal.

Strategies and approaches differ widely, influenced by geography, history, expertise, gut instinct and, of course, customer need. Fierce competitors partner with each other in enterprise accounts. Some touch the hardware; others wouldn't be caught dead doing so. Some embrace the Web; others stick to more tried-and-true solutions. Most differ in strategic approach, but all swear they are motivated by one overriding influence: the customer.

This year's VARBusiness 500 is scarcely immune from this strange divisiveness: The qualification form took last year's "Web integrators" business model option and expanded it to "Internet professional services organizations," slicing and dicing it to encompass five distinct business models: ASPs, ISPs, interactive agencies, strategic Web consultants, and Web integrators and developers.

Clear evidence, of course, points to the Web that is causing most of this confusion. But to Web or not to Web is no longer the central question.

The larger issue--The Great Divide, according to many industry players,is specialization vs. generalization. It's a matter of how you approach your customer. Are you a general contractor handling myriad interests and integrating various technologies for your accounts? Or do you favor the specialist role, focusing on technology excellence? That seems to be the emerging dividing line, especially for those heavily involved in Web integration and services.

Focus On Technology
Nelson Carbonell, president and CEO of Cysive Inc., Reston, Va., believes a more limited, focused approach is central to success.

"We provide one critical service," Carbonell explains. "We allow [our customers] to build the technology platform they need to run their businesses. And we don't do anything else."

In Carbonell's view, the best technology determines the winning business model, especially with more businesses gravitating "We think that the technology, in most cases, differentiates the winners from the losers," he says. "In the end, when you can't get the system to work, it doesn't really matter if the rest of the stuff [provided] was great."

In nearly 80 percent of the cases Carbonell sees in the marketplace, the systems don't work. They don't deploy working applications that people can use, he says.

The fact that some competitors prefer a one-stop shopping approach irks Carbonell. He views it as evidence of a still-maturing market.

"We focus on really executing on the technology. And I think largely immature markets tend to breed one-stop shopping," he says. "As marketplaces mature, people hire people because they are good at something. You certainly aren't going to walk out the door and go to the French restaurant/dry cleaners/bowling alley because you don't really think anybody can be in all those businesses and be good in all of them."

In the end, the jack-of-all-trades truly is master of none.

"What ends up happening is that none of those services is the best it can be," he says. "Our stake in the ground is this: As this marketplace matures--and it is continuing to grow very rapidly--you are going to get hired for two reasons: It's important to the customer, and they can't do it for themselves. We believe that, with technology being probably where 80 percent of the dollars are going to get spent, that's the place to be."

Solving Problems, End To End
Many of Cysive's competitors, however, don't see it that way. In their view, the winning business model offers a broad array of services to business customers.

Martin Wright, CEO of Emerald Solutions Inc., Portland, Ore., defines his company as "an end-to-end e-business solution provider" that takes clients through three phases: business strategy, digital strategy (where creative work is done and applications developed) and integration. In that scenario, Emerald will even partner with ISPs and ASPs to manage or host applications.

"I think [our approach] is accountability, ease of a single vendor," Wright says. "The problem with a strictly management vs. general contractor kind of [approach] is, do you have the capabilities in-house to manage three different delivery organizations? It's much easier to have one person on the hook for that, and that's the role we step up to."

In Wright's view, the problem with a very focused, specific approach is an underlying, flawed assumption: "You can be best-of-breed in one area, and that means, by definition, you are not going to be best-of-breed in the other two. That's not something we believe."

Emerald has three distinct divisions that work together seamlessly for the client to deliver strategy, interactive

and then technical solutions, Wright says.

"We've set those up such that even the physical environments for those groups can be slightly different to make sure that we still attract the very best strategy people," he says. "We want to be recognized as doing business strategy at the same level as a McKinsey or a Bain, and digital strategy at the same level as a Diamond Technology Partners. We want to be recognized for our creative capabilities to be superior in the industry. And the Emerald Solutions brand is probably best known already for the ability to deliver the best technical Web solutions. So we don't buy into the concept that focusing on one area means you have to be bad in the others."

Wright sees traditional systems integrators rapidly reengineering themselves to become Internet professional services companies.

"[The Internet] is just another technology now," he says. "And we believe you do need creative capabilities to be a really good Internet services company."

No Clear-Cut Answer
Still, some competitors believe such a broad approach can set up unrealistic expectations with customers and create problems for Web integrators. Just make sure the technology works and the implementation is sound, and success will flow from there, according to that view.

"We actually are very focused, and the focus is on engineering around the network infrastructure," explains Joseph Beninati, CEO of Greenwich Technology Partners Inc., White Plains, N.Y. "That has been our charter now for 36 consecutive months. We are typically providing the security engineering services, performance engineering or internetworking engineering services as it all relates to the network."

Beninati's business model is simple. "My underlying theme is that, in the technology industry, there are 25 ways to build substantial wealth, and the surefire way to fail is to focus on more than one or two at any one given time," he explains. "Things change very quickly, and focus is important. You have to pick a market that's big, that's growing fast and in which you can make a difference. There are almost too many options...you have to pick one or two to be successful, to be meaningful in a given market."

Greenwich Technology's revenue has grown rapidly from $800,000 two years ago to $14.5 million in 1999, which Beninati attributes to a laser-like focus on recruiting, new business development and customer satisfaction. What do his customers want most? "Engineering excellence and attention to detail, attention to their satisfaction," he says.

Cysive's Carbonell believes the growth of Web businesses and e-commerce makes almost every application mission-critical, placing greater importance on the success of the technology.

"What fundamentally shifted in this industry is that 10 years ago, if the system you built didn't work, it didn't matter," he says. "If the accounts payable system you hired a Big Five firm to build was 18 months late, nobody got hurt. But if the e-business system you build [now] doesn't get delivered, the customer has no business."

The model that will survive, Carbonell adds, is one that says you are going to focus on what it takes to be good and be successful at what you do. "You are going to find focused, best-of-breed players that really hone a skill to do something," he says. "There's a specialization that takes place in order to be good."

Customers are becoming more technology-dependent, a development Carbonell believes will favor the specialist.

"The days where you are a jack-of-all-trades, master of none, one stop-shop, full-service, end-to-end model, those models are doomed because those models breed mediocrity," he says. "The models that will succeed are the ones that breed excellence and that put together groups of people that are focused on doing something very, very well. That's where we are positioning ourselves in this market."