Last year, after a painful detailed analysis, Agency.com did the unthinkable,it fired a customer.
A few short years ago it was unheard of for a solution provider to tell a client it no longer wanted its business. Today, it is happening more often, and data shows the divorce rate is on the rise. The trend is accelerating as e-business integrators grow out of corporate adolescence and customers change their own project needs.
Every solution provider has its own story to tell. For Agency.com, it was a case of being caught in that awkward stage between start-up and IPO. As management prepared the Web integrator to go public, they reviewed its list of top customers and made an unsettling discovery: Three of the 10 largest accounts,including an original client,embraced business agendas ill-matched with Agency.com's own maturing strategy. It was clearly time for some relationship counseling.
KEVIN ROWE: president of North America, Agency.com
"One of them we resigned because we couldn't steer them back on course," recalls Kevin Rowe, president of North America for the New York-based Web integrator. "We weren't threatening, but we said, 'We don't think this is good for both of us. Here's why. Here's a way we could be most effective. Here's why.' And two of them then changed their ways. We got back on track."
Nowadays, the length of an average customer engagement hovers around 4.4 years, according to Reality Research, a division of CMP Media, publisher of this publication. This compares with 5.2 years to 5.5 years, a time frame that had held fairly steady in recent years, and shows a 17 percent drop.
Agency.com's dilemma resonates with virtually every Web integrator, regardless of size. It can be boiled down to one simple question: How can a Web integrator remain true to customers while remaining faithful to its own evolving business plan?
Let's face it, the identity of a professional service firm's clients define it for the outside world. Work with too many dot-com start-ups, and you risk overexposure. Stick to established brick-and-mortar companies, and you may not have a chance at risky work that lets your technical and creative staff stretch its skills. Commit to a job with unreasonable deadlines, and you face a staff insurrection. And then there's the inconceivable: fail to deliver, and face the public wrath of a client scorned.
"We are very selective in terms of why do we want to work with certain people and not for others," says Heiner Rutt, president of Proxicom, Reston, Va. "I think it has to do with the potential. We are not interested in a project, we are interested in creating a reference. How can we create a reference? By being sure at the start that people are serious about some of the transformation challenges that they're facing," he says.
In Agency.com's case, the choice came down to one between flirtation and long-term commitment.
As the company moved from start-up mode to full-fledged corporate adulthood, it adopted a strategy that called for clients to invest in more than one service offering, Rowe says. This is one guidepost the integrator now uses to evaluate a prospective or existing client. Other screening factors used by Agency.com include a potential customer's willingness to commit to a long-term relationship, how much focus it puts on fixing every detail of contract pricing, its willingness to take risks as Web technology advances and whether or not there is a good cultural fit.
|1. The Customer engages in short-term projects without investing in long-term planning.|
2. The solution provider has difficulty identifying an internal champion for the engagement.
3. The integrator is no longer being called on to perform cuttin-edge work.
4. Price-not strategy-has become the major negotiating factor for contract renewal.
5. The client has aproblem setting deadlines or schedules for completed work.
As for the account Agency.com divorced, the integrator worked out a transition plan that saw the customer working with other solution providers within three to four months, Rowe says.
The integrator did this by reassessing the account's needs over four to five months and documenting situations in which it did not see eye-to-eye with the client. Most notably, Agency.com was being called upon to handle maintenance services that were not part of its core skill set. Ultimately, it proposed several alternatives, including recommending the client move to other solution providers, Rowe says.
Referral is relatively common. Web integrators report from one-quarter to one-half of new customers were previously involved with another solution provider.
Brian Farrar, COO of Chicago-based Xpedior, says there are plenty of small and specialized players eager to pick up where someone else has left off. Xpedior even created a referral network as a backup in cases where it has to part ways with a client.
"We're never going to walk away from someone we've made a commitment to," Farrar says. "Life is too short, and the world is too small to abandon people in the middle of a commitment."
Sometimes it's best to convince the customer to bend early on. When CrossTier.com signed up with eCommerce Industries (ECI), an e-commerce start-up in the office-supplies market backed by WorldCom Vice Chairman John Sidgmore, the company wanted to use Java as the development platform. It changed course when presented with CrossTier.com's formidable skills in Microsoft infrastructure, and the fact that the integrator would not take on the account if Java was in the picture. ECI President and CEO Paula Jagemann gives CrossTier.com, Fairfax, Va., points for speaking up,and for diving in quickly.
"Of course there are a lot of players out there who want to be your partner, so they say all the right things and fall short on actually doing it," Jagemann says. "Fortunately for us, our CIO had a prior relationship with CrossTier, so we brought them in and it was an aggressive project."
Cardinal rule No. 1 for any e-business integrator is that no matter how attractive the dowry, you'd better take time with the customer courtship ritual.
"The key to long-term referenceability is to pick the right clients in the first place," says Steve Mack, COO of Inforte, a Chicago-based Web consultancy. "Which means before you get down the line when you get into a situation where you've got to fire them, you look for the telltale signs: Is there executive sponsorship? Do they actually believe? Is this something that they're bonused on, that they're completely committed to? You look at just the working relationship you have the first few weeks. Well typically, when we initially come in, we'll do a diagnostic. So it's a short engagement. Very, very quickly you can find out what their modus operandi is. How are they going to work? How are we going to work with them? So, at that point you're in a situation where you can break it off, and you haven't invested too much."
It should come as little surprise, then, that many Internet solution providers subscribe to a formal process of indoctrinating new customers. "One of the challenges that you have is that transferring specific information from a group involves the process of transferring explicit knowledge and tacit knowledge," says Doug Kalish, chief knowledge officer of Scient, New York.
At the start of every client engagement, Scient spends time defining and outlining goals and collaboration strategies with the customer's project team. Expected deliverables are scheduled, common vocabulary is agreed upon and responsibilities are defined. The client and the integrator also share bonding exercises. One example is Scient's venture capital game, in which members of the customer's project team are challenged to dream up a business plan so credible it could win funding.
"It helps the team come out fighting," Kalish says.
Scient's approach has another purpose: helping document the process for the future. This helps cover an integrator in unforeseen scenarios, such as a change of management at the customer,a very real possibility in the dot-com world.
Some integrators are considering more methodical approaches to manage customer expectations and protect themselves along the way. For example, Lante is incorporating a technique known as extreme programming into some implementation processes, says Marv Richardson, CTO of the Chicago-based integrator. "It allows requirements to change as you go along, while guaranteeing quality," says Richardson.
Rather than operating under vague long-term deadlines, extreme programming requires development projects be broken into two-week increments, during which three features are handled and then reviewed,no more, no less. Kent Beck, a proponent of the method and an independent programmer with Three Rivers Institute, Merlin, Ore., was put on retainer by Lante to educate its technical staff on the pros and cons of the technique.
"It's not development's job to sort out the relative priorities. That has to be someone else's job," says Beck. "What you really want is someone with business savvy who knows the market and what they are doing and can make the tough decisions."
Another key to any good marriage is communication surrounding everything from project expectations to billing, something Razorfish Managing Director Stephanie Spong knows firsthand. When she joined the firm's Venice, Calif., office, Spong immediately sensed tension surrounding one of the group's engagements,not one of the firm's biggest customers, but a core client nonetheless. Her fears were confirmed in short order when the customer called to request a lunch meeting.
Spong invested personal time to explore the situation and develop ideas to put the deal back on the right track. She even gave the customer an opportunity to address some of the integrator's managers during a Razorfish off-site meeting. Within six to eight weeks, many of the customer's problems were addressed. "She saw responsiveness from us, even though things didn't get perfect right away," Spong says.
Since its own experience last year, Agency.com has established a more formal way of keeping up with customers. It hired someone to focus solely on reviewing and monitoring projects. There also are more than a dozen managers within the company certified to act as marriage counselors should a relationship turn sour.
Likewise, Xpedior regularly reviews the bottom 15 percent of accounts, says Farrar. "It does sometimes mean abandoning a customer," he says. "After you've served someone for three or four years, they have certain expectations."
However, the integrator is just as likely to pitch the client on more services. "We would never walk away from a project, even though there are broadly missed expectations. Every consulting firm makes mistakes," Farrar adds.
To get a sense of whether or not this has paid off, consider the following: Two years ago, Xpedior's top 10 clients contributed an average of $2.5 million in revenue to the services firm. During the first quarter of 2000, that amount was closer to $7.5 million, Farrar says.
Agency.com's Rowe can cite a similar set of statistics. Just two years ago, it relied on approximately 180 customers for around $50 million in revenue. Now, it has around 130 clients but is roughly three to four times the size and is on a run rate to produce approximately $160 million in 2000.
How's that for a happy ending?