Preferred Treatment?

Yet the trend toward vendor-solution provider alliances has been a double-edged sword in Internet services, they said. Though partnerships are yielding more turnkey solutions for customers, they're also creating more competition.

Large systems integrators and vendors, for example, are forming e-business partnerships to help them lock in business, roundtable participants said. And some alliances have ignited a price war in certain software segments, where large integrators and consulting companies have teamed with vendors such as Commerce One and Art Technology Group (ATG), executives said.

"We're seeing price reductions from certain companies that you would never expect. They're Fortune 50 companies, and they're dropping prices like nothing I have ever seen in 20 years," said Kevin Rowe, president of North America at Agency.com, a New York-based e-services firm. "That tells me they're just as desperate today as anybody."

Among the partnerships impacting solution providers are Accenture and software vendors BEA Systems and Commerce One as well as EDS and BEA and ATG, executives at the roundtable said. Some big integrators have committed to training hundreds of employees on certain software products, and in turn the software vendors have agreed to steer millions of dollars in business back to the integrators, said Kelly Rodriques, CEO of Novo, a San Francisco-based Web services firm.

"This is buying business on the back of some training investments with strategic partners," Rodriques said. "That's a very interesting phenomenon in the last 12 months."

Move to vendor-solution provider alliances a doubled-edged sword in competitive landscape.

However, EDS said its $1 billion Bluesphere E-Solutions arm has not dropped prices on any ATG or other e-business engagements. In fact, the integrator raised prices in the fourth quarter for engagements for all of its 6,500 consultants, said Bluesphere President Brad Rucker.

"We are seeing a shift where companies that used to look at boutique firms see us as a safer choice," Rucker said. "Frankly, last year at this time we were seen as stodgy, old-fashioned, old skill-set. Now we are seen as hot, new and sexy. We went from being Ernest Borgnine to Clark Gable in one 12-month period."

He added that EDS has not done any deals in which it trains consultants for minimum revenue commitments from software vendors. "Mostly what we get are free training and discounts on product and reseller agreements, and what they get in exchange is preferred treatment," he said.

That "preferred treatment" means that an integrator will use that vendor's product as its first choice as long as it is the best fit for a customer.

'We have turned away from being totally (product) agnostic, and right now ATG and BEA are all we build on.' -- Kelly Rodriques, Novo

Under the deal, Commerce One agreed to accelerate the training of a dedicated team to support Commerce One engagements and allocate multiple teams of Accenture employees to the Commerce One Professional Services Organization.

What Accenture did, Rodriques said, was spend millions of dollars to get its consultants trained on Commerce One and then demand a "minimum" revenue commitment from Commerce One. Accenture did not return calls for comment by press time.

Novo has entered into similar arrangements with BEA and ATG, Rodriques said. "We have turned away from being totally [product] agnostic, and right now ATG and BEA are all we build on," he said.

Revenue commitment deals with software makers have always been part of systems integrators' tactics for winning business, Agency.com's Rowe said. But the difference is big integrators such as $10 billion Accenture can afford the huge training investments necessary to make those deals, whereas Web services firms might not have the resources to do so, he said.

'We don't lead with the technology. If (customers) won't do it on that (platform), then we can't do it.' -- Edward Bell, CrossTier.com

CrossTier.com wins business from larger competitors through a well-defined market niche, said Edward Bell, president and CEO. The Fairfax, Va.-based e-services firm has aligned itself solely with Microsoft so it "could really be experts at one set of technologies," he said.

"We don't go into a situation and say, 'You need to develop this on a Microsoft platform.' We don't lead with the technology. If they won't do it on that [platform], then we can't do it," Bell said.

When pursuing partnerships, executives said they're now more closely scrutinizing the financial viability of prospective vendor partners. David Fry, CEO of Fry Multimedia, Andover, Mich., said he first looks at the quality of the vendor's product and then evaluates its financial viability relative to the "size of the engagement and how important they are to its success." Fry also considers whether the vendor will be around for the next 18 months. "If they're there for even six months, that's probably enough for me to choose them," he said.

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