Choosing the right consultant can be easy.
Choosing an Interactive Professional Services (IPS) firm today is not unlike choosing a mutual fund. There are so many that it’s impossible to know even a little about a few and worse still, which one might be right for you. There are, in fact, more than 5,000 companies in North America that offer “interactive development” services to organizations wanting to do business on-line.
These IPS firms can be divided into seven key segments. They are Interactive Research firms, Management Consulting firms, Big Give Consulting firms, Interactive agencies, System Architect vendors, Client/Server Integration firms and On-line Marketing specialists.
The following provides a general overview of each IPS segment and includes its core interactive development competencies, examples of key industry leaders and a brief analysis of the category’s future development.
1. INTERACTIVE RESEARCH FIRMS
SOME SEGMENT LEADERS: Jupiter, Forrester, Gartner Group
CORE COMPETENCIES: Interactive strategy
OVERVIEW: Interactive Research firms provide up-to-date industry information on doing business on-line. They typically offer access to their large stable of reports, with fees ranging from $500 to $5000 per month, depending on the information categories a subscriber chooses. Some Interactive Research firms offer individual reports and some are priced at several thousand dollars each. Many of these IPS firms provide an extensive product offering, ranging from short, easy-to-read general Internet documentation, to publications with many chapters. Some examples of services include interactive project development reports, advertising/branding strategies and target market analyses. Along with large Internet-savvy companies, many other IPS firms, such as Management Consulting firms and Interactive agencies, are clients of Internet Research firms.
Interactive Research firms’ strengths are in on-line business-to-consumer research and their understanding of the financial services and consumer goods industries. Many are rapidly developing in-depth reports about other key, emerging on-line verticals, such as health and medicine, energy and telecommunications. With a growing trend toward on-line business-to-business, Internet Research firms will be forced to understand specific company value-process chains to better advise on interactive opportunities. In the past 12 months, these firms have also greatly improved their technical research offerings, such as back- and front-end integration and software platform analyses.
THE NEAR FUTURE: Watch for these firms to move into more company-specific strategic services. As the differences between business and interactive strategies become increasingly clouded, clients will seek better and timelier information about their on-line positioning; Interactive Research firms should provide this service. They will continue to develop their industry expertise by attracting experts from universities, Management Consulting and the Big Give firms, and industry professionals who are interested in this fast-growth industry.
Other IPS firms will continue to subscribe and purchase their reports, as the product’s quality and relevancy increases. Also, watch for potential consolidation by Management Consulting firms seeking to enhance their value-adding interactive strategic competencies.
2. MANAGEMENT CONSULTING FIRMS
SOME SEGMENT LEADERS: Bain, BCG, McKinsey
CORE COMPETENCIES: Business strategy
OVERVIEW: Management consulting firms have been making exceptional value-adding recommendations for over 30 years and are ideal in helping companies determine long-term business goals. With offices all over the world, Management Consultants can quickly assign their strategy consultants to various project locations. For the past two years, these firms have been aggressively moving into the IPS space, as their existing long-term clients demand their help in establishing an effective on-line presence. They are the best in the IPS industry at recommending a client’s target market and competitive positioning.
While Management Consulting firms promote their interactive skills passionately, they sometimes lack the knowledge of systems integration planning or implementation. Therefore, they are forced to partner with either Systems Integrators or Client/Server Integration Firms. While Management Consultants will offer a clear understanding of the on-line target market, clients may also require the help of an On-line Marketing specialist or Interactive Agency to help draw users to their site. Management Consulting fees are also the highest in the IPS industry.
THE NEAR FUTURE: These firms are here to stay and will greatly expand their strategic capabilities. Watch for them to increase their knowledge of value-adding, interactive strategy, as top MBA graduates continue to be attracted by their e-strategy recruitment pitch. The firms will also enhance their project planning and management abilities to better understand the business integration issues that exist further along in the implementation process.
Management Consulting firms will likely continue to partner with System Architects and Client/Server Integration experts, and invest little in building in-house integration/implementation capabilities. There is a strong chance of further consolidation with Interactive Agencies. If this occurs, it will be interesting to see how these two types of IPS firms handle challenging internal cultural issues.
3. BIG FIVE CONSULTING FIRMS
SOME SEGMENT LEADERS: Andersen, Ernst & Young, PricewaterhouseCoopers
CORE COMPETENCIES: Business, interactive and integration strategies, project management, systems integration
OVERVIEW: The Big Five Consulting firms are the early leaders in the IPS industry. Like management consultants, these are large, multinational corporations with offices all over the globe. They have the size, the expertise and the money to grow in this environment.
The Big Five are able to leverage their previous experiences with clients by utilizing their exceptional knowledge-management systems. To define a client’s on-line business objectives, Big Five firms can easily access their in-house strategy consultants. These firms have solid e-commerce integration expertise, can implement packaged applications into legacy systems and have a solid understanding of emerging technology. They are ideal for helping clients that want a scalable interactive solution.
While these firms are ideal for large-scale systems integration, they sometimes lack the skill to develop cutting-edge interactive sites, like those created by Client/Server Integration Firms or Interactive Agencies. The Big Five tend to focus on “business process re-engineering” and sometimes ignore “the customer relationship,” which may result in project deliverables that are inconsistent with their client’s overall strategic goals. They are also known to lack the value-adding creative design skills, and off- and on-line marketing expertise.
THE NEAR FUTURE: The Big Five firms will continue to receive the largest share of IPS revenue well into the 21st century. They will maintain strong relationships with their base of Fortune 1000 companies, and continue to invest large amounts of money in strategy and integration training, and knowledge management. They will also enhance their skills in integrating new “hot” software into legacy systems and improve their speed at doing so.
4. INTERACTIVE AGENCIES
SOME SEGMENT LEADERS: USWeb, AGENCY.COM, IXL
CORE COMPETENCIES: Internet strategy, On-line marketing/branding, creative/design
OVERVIEW: In the early ‘90s, Interactive Agencies began to emerge from traditional ad firms and small Web-development shops. Now, they are one of the fastest-growing IPS segments. These firms offer a one-stop-shop service for companies wanting a strong interactive presence. Along with offering interactive strategic services, Interactive Agencies can help firms with both off- and on-line branding ad media planning, creative design and information architecture, technology planning and integration, small e-commerce projects and, in some cases, site servicing and reporting.
Speed is their unique selling proposition. Interactive agencies one-stop-shop model is ideal for clients wanting a packaged interactive solution that will allow them to move quickly into the interactive market space. Currently, these firms’ fees are low compared to those of the Big Five and Management Consulting, but their prices are increasing. Interactive agencies are often admired for sustaining an exceptional corporate culture. Somehow, they have succeeded in unifying creative, marketing, strategy and integration teams to deliver cutting-edge, interactive solutions. Additionally, these IPS firms tend to have excellent project management skills and a consumer-centric understanding of the on-line user’s behaviour and needs.
A key problem with Interactive Agencies is their availability. With the demand for their services so high, they sometimes lack the resources to commit to a project; at times, they are forced to outsource to freelance consultants. While these firms have a strong handle on interactive strategy, some run into difficulties when asked to provide value-adding, strategic expertise for overall business planning.
Consolidation is the norm in this category. Interactive agencies continue to merge with Systems Integrators and On-line Marketing specialist to balance their areas of expertise. Unfortunately, only a few of the largest interactive agencies have equal levels of expertise in each of the core components of interactive development.
Clients must also realize that many of these firms are simply too young to maintain an exceptional knowledge-management system. It can be difficult to transfer knowledge and skill sets derived from an interactive project to a client’s own in-house, knowledge-based system. The client must be prepared to learn very quickly, as their interactive agency takes them through the on-line development process at a phenomenal pace.
THE NEAR FUTURE: Consolidation will continue in this IPS segment. Interactive Agencies are now being asked to provide strategic enhancement; therefore the largest ones will seek to acquire the skills of a small Management Consulting firm. There will be continued growth for the top-tier interactive agencies, enabling them to better compete against Big Five Consulting firms for large-scale projects.
Also, more agency-of-record client partnerships will be formed, as large clients look to lock in the Interactive Agency’s resources. Their integration expertise should also increase, as their clients demand more sophisticated sites requiring transactions, personalization, content management, and marketing servicing and reporting.
5. SYSTEM ARCHITECT VENDORS
SOME SEGMENT LEADERS: IBM, HP, Sun
CORE COMPETENCIES: Integration strategy, systems integration
OVERVIEW: Business and retail consumers have been purchasing System Architect Vendors’ (SAV) products and services since computers were invented. They are the back-end experts, and because most interactive sites must be integrated into an SAVs branded-legacy system, these firms hold a unique competitive position in the IPS industry. They know their products the best, and all other IPS firms must know SAV systems inside out if they wish to implement new, value-adding software into their clients’ legacy systems.
SAVs have successfully moved up the interactive development value chain and now provide integration strategy and software implementation. In the process, these firms have developed strong partnerships with software vendors, with some forming interactive strategy relationships with their top clients.
Large SAVs know systems integration, but sometimes lack the creative, design or marketing expertise required for understanding the on-line user experience. They also have a reputation for being, at times, too process-focused. With the noted exception of integration giant IBM, these IPS firms often lack top business-strategy services for corporate goal planning.
THE NEAR FUTURE: The segment will grow steadily. Most clients will continue to use these IPS firms’ standardized platforms, and many will require the expertise of back-end vendors as their sites become more sophisticated. Watch for software partnerships and deals, as many small vendors fight to become the recommended choice of large SAVs.
6. CLIENT/SERVER INTEGRATION FIRMS
SOME SEGMENT LEADERS: Sapient, Cambridge Technology Partners
CORE COMPETENCIES: Integration strategy, integration planning and implementation
OVERVIEW: Client/Server Integration firms have successfully pushed their learning curve out from the days of mainframe, to multi-layered system integration, becoming IPS experts in the process. Their talent pool is exceptional and they continue to attract the top MBA tech grads, as well as experts from all other IT industry segments. These firms are able to provide exceptional systems integration services, and have a solid understanding of the vast array of software offerings. Clients seeking help for on-line projects can choose from thousands of large and small firms all over North America.
The top players are busy, so clients should expect challenges in accessing the resources required for large-scale projects. Clients may also have a difficult time finding one of these firms with creative and marketing capabilities, though many are merging with Interactive Agencies, small traditional advertising shops and On-line Marketing specialists. Like most other large IPS firms, Client/Server Integration firms are striving to eliminate their smaller, less-profitable customers from their client base; this will help them maximize their productivity.
THE NEAR FUTURE: Integration firms will continue to merge with creative and marketing-endowed IPS firms. It will also be increasingly difficult to distinguish Client/Server Integration firms from Interactive Agencies, as they continue to move toward being a one-stop shop themselves.
7. ON-LINE MARKETING SPECIALISTS
SOME SEGMENT LEADERS: OgilvyOne, Carat Interactive, Cone
CORE COMPETENCIES: Branding and marketing strategy, creative/design
OVERVIEW: A smaller, but growing IPS segment is On-line Marketing specialists, an offshoot of traditional advertising agencies. These firms provide creative and marketing services for clients needing unique, on-line branding. Whether they’re extending an existing corporate identity or developing a new sub-branding initiative, they are the experts in creating and sending effective messages to a client’s target audiences.
Creativity is a core capability, as on-line marketing specialists have attracted an exceptionally talented pool of individuals from traditional ad firms.
For full-scale interactive development, these firms often need to partner with other tech-savvy IPS firms, such as Client/Server Integration firms. This can lead to project management constraints, such as resource coordination and communication problems. While some on-line branding specialists are developing an integration expertise, a few firms are finding it easier to consolidate with Client/Server Integration firms and Interactive Agencies to provide the one-stop offering. But most others focus exclusively on providing on-line branding services. Clients may be well advised to go elsewhere for site development requiring high-level feature and functional integration.
THE NEAR FUTURE: Consolidation with Client/Server Integration firms and Interactive Agencies will continue because each is attracted to the other’s competencies. Traditional ad agencies will continue to invest in their on-line divisions, as their top clients spend a greater share of their marketing dollars on interactive initiatives.