Out of the Box and Into the Future

No one consultancy, perhaps, is now championing the cause better than Scient Corp., the high-flying e-consultancy, whose CEO, Bob Howe, has so far ignored the alliance-building overtures of different e-package developers, preferring to preach the virtues of a technology agnostic.
"We have not done any of those partnership alliances because we think our clients want us to make the best objective decision at any point in time," explains Howe, who conters the claims of developers who suggest demand for e-packages is on the upswing.

"If that's true, we haven't seen it," says Howe, who suggests that such demand will likely first surface among consultancies with limited speed-to-market capabilities.
"Now, remember, everything we do is based on delivering solutions with speed. So, it may be that our approach allows us to deliver so quickly that we just haven't seen this type of [demand from clients]," he says.
No matter where the origins of the technology are rooted, however, consultants will be required to build large pieces of the solution. They will most likely use prebuilt components — either their own or from third parties — and adopt high-level tools and frameworks designed for the assembly of existing components.
"When you take a look at us, last year we were probably 50 to 60 percent out-of-the-box. With the release of Siebel 2000 earlier this spring, literally 80 percent of what's needed is right out of the box," explains Scott Creighton, director of multichannel sales for Siebel Systems, a software developer specializing in the area of customer relationship management. "What we learned in the ERP era was that for every $1 spent on application software, there were $6 to $7 spent on consulting services. What's happening now is that because of out-of-the-box e-business solutions, the ratio has become $1 of application software per $2 — maximum — of consulting services. Meanwhile, the average implementation period is 10 months and shrinking," explains Creighton.

The facts behind Creighton's ratio revelations have not escaped Scient's Howe and other top consultants, who are quick to underscore the maturation of their firms' own commoditized offerings.
"We are now building innovation frameworks, so that we can commoditize solutions ourselves, and as you know, this is different from making an alliance where you always pick Vignette and BroadVision," says Howe, mentioning two other developers now eagerly seeking to enlist consultancies to tout their e-packages.
No matter who ends up commoditizing the solution, it's clear consultants will own a big chunk of the overall market, however.

Forrester projects services revenue related to e-business software alone to hit $5 billion by 2003, up from $441 million in 1999, a better than tenfold increase. The research firm expects the total e-business services market, including strategy, marketing, design, and technical services, as well as e-business software, to grow a bit more than 600 percent from $10.6 billion in 1999 to $64.8 billion in 2003.
"The implementation of packaged solutions represents a significant portion of a professional services firm's revenue going forward," says David Hofferberth, senior analyst, Aberdeen Group, Boston. The implementation of the packaged e-business solution, however, is just the start of the e-business revenue stream. Professional service firms are bundling packaged implementations with upfront strategic planning, change management, enterprise application integration, and training. Without these other services, even the best application packages are likely to fail.

"This creates a different role for the consultant. With custom development, the question becomes, What does your business need to succeed? With a package, we're asked to show how to best benefit from the package," observes Mike McLaughlin, CEO, One Inc., Chicago. Although One Inc. does both custom development and packaged implementations, "our bias is toward packages," he adds. In practice, for many customers it is not an either-or choice, package or custom development. A successful project will include one or more packages and some custom design as well.

The critical enabler

One is not alone; other consultancies are viewing the e-business packages as critical enablers. In a marketplace where speed is crucial, the use of an e-business package greatly speeds the project to completion, a message the vendors have been effectively promoting. "The vendors are waking up our clients to the power of these packages. They are creating tremendous pull and urgency," notes Dave Sutton, vice president, strategic services group, Inforte Corp., Chicago.

Sutton, however, warns clients about unrealistic expectations. "In the end, an e-business package is no different from any other packaged solution. They should never be viewed as some magical silver bullet."
Such warnings aside, the rapid proliferation of third-party e-business solutions and the rush to develop relationships between e-business package providers and consulting firms requires a change in tactics by independent consulting firms. In the past, independent firms swore vendor neutrality. They presented their vendor neutrality as a benefit, allowing them to provide the customer with unbiased guidance. Vendor neutrality differentiated the independent firm when competing against the professional services arms of companies such as IBM, Digital Equipment Corp. (now Compaq), and Microsoft.

Today, few consulting firms can claim true vendor neutrality. To the contrary, consulting firms must develop relationships with packaged solutions vendors, although few if any can maintain relationships with all providers. Close relationships, cooperative development agreements, equity stakes, and other alliances are critical if the consulting firm is to gain timely access to the latest technology advances, technical details, and special partner support that vendors offer to those firms with which they have relationships.

Neutrality and other fibs

The Web sites of some of the leading e-business packaged solutions providers show the extent of their partnerships with independent consulting firms. For example, Ariba lists Andersen Consulting, CSC, Deloitte Consulting, Ernst & Young, Lante, KPMG, and PricewaterhouseCoopers (PwC) among many partners. Many of the same firms show up as partners of i2, along with Cambridge Technology Partners and Cap Gemini. Again, most of the same players, with a few additions such as Renaissance and Da Vinci Partners, align themselves with Commerce One.

While the largest firms can maintain relationships with multiple packaged solution providers, smaller firms may not, due to the financial and resource commitments these relationships entail. As a result, some consulting firms have become little more than value-added resellers (VARs) for a few packaged application providers. Their objectivity as advisors, at least when it comes to selecting a packaged solution, is open to question.
"Objectivity can be overrated," declares Michael Herzog, managing director, KPMG Consulting, Mountain View, CA. "The clients," he continues, "really want an informed choice." KPMG partners with selected players, usually the top solutions in each category, and thereby gives their clients a choice. "We disclose any financial ties if we have any," he adds. Currently, KPMG maintains relationships with about a dozen e-business solution providers, including Ariba, Octane, Web Method, Oracle, and Epiphany, in which it has an investment.

One Inc. maintains relationships with Pivotal Corp., Siebel, Vignette, Microsoft, and a handful of others. "We try to be objective about the packages," explains McLaughlin. The firm closely follows the introduction of packages as it watches for new opportunities, but its existing alliances represent big-ticket relationships backed by commitments of hundreds of thousands of dollars.
The trend today is clearly toward more partnering with packaged vendors and less neutrality, reports Hofferberth. "Many firms are trying to remain vendor neutral, but it is very hard. Once they start partnering with solution providers, they aren't really neutral."

The growing speed-to-market requirements of clients have only made alliances more critical to successful implementations, according to Siebel's Creighton.

"Siebel is taking all of its intellectual property around sales, marketing, and alliances, and we're now putting that into the box along with [our technology], and we're actually going to be licensing it to consultants. So there is going to be full knowledge transfer, and this ultimately will be higher-margin business for the consultant," he explains.

Not all consultants are prepared to take the leap. "We are still vendor neutral," counters Art Fritzson, vice president, Booz-Allen & Hamilton, McLean, VA. The consulting firm does not even take a markup on the sale of any packaged products that it provides its clients. "If we buy any products, we pass them right through," he reports.

More than on the complete, packaged e-business applications, consulting firms need to focus on reusable components. These usually take the form of enterprise Java Beans (EJB), Microsoft COM components, or, in some cases, CORBA  components. By using existing, proven components in conjunction with high-level tools such as Allaire's Cold Fusion or an e-business framework or platform, the consulting firm can quickly crank out e-business applications or perform the required front-end-to-back-end integration.
"We have piles of components that we have already built which we can combine with third party products," explains Fritzson. Starting with an e-business framework, such as those provided by BEA or IBM, Booz-Allen's developers can bang together the necessary components to meet an e-business application need. "We're not using canned complete applications as much as we're using what are fundamentally toolkits," he continues.
Even if a consulting firm wanted to implement a single packaged application, it would not constitute a complete e-business solution. The reality of the e-business market today is that no single product delivers a comprehensive e-business solution. "We really look for piece parts. The idea of one enterprisewide e-business package that does it all is probably dangerous," notes Sutton. Today, Inforte is likely to recommend i2 for the supply chain and Ariba for a B2B marketplace. While it appears Siebel will dominate customer-facing applications, "there are still a lot of options on the demand side," he adds.

Although e-business packaged solutions clearly appear to be here for the long term — it is unlikely that anyone today would build something that could be readily purchased — consulting firms may not be the source of packaged e-business solutions going forward. Of the $14.5 billion Forrester projects to be spent on e-business software, some part of that will go to application services providers, according to the researchers.
"ASPs are competing with me," notes McLaughlin, whose firm has added its own hosting service. The simplicity and ease inherent in the ASP concept, in which the ASP installs and maintains the applications while the customer runs only a browser, certainly is attractive to customers — even those buying packaged applications today, he concedes.

If ASPs take off, they can cut consulting firms out of a large piece of the e-business packaged solution market. It hasn't happened yet, "but what we're really talking about is behavioral change," McLaughlin adds. And predicting behavioral change is very dicey indeed.

Sidebar: PowerPoints:

•As more software developers introduce "out-of-the-box" solutions, more consulting firms will find themselves implementing and integrating e-business packages rather than building customized e-business solutions from scratch.
•Not all consulting firms believe their clients are yet demanding "e-packages," and consultancies like Scient, Sapient, and Booz-Allen believe they can still tailor e-solutions and satisfy their clients' speed-to-market requirements.
•As the number of application services providers grow, consultants fear they could cut consulting firms out of a large piece of the e-business packaged solution market.