E-commerce secrets – find out what your clients really want

Internet startups and established companies alike need help with everything from deciding on an e-biz strategy to finding finance and dealing with the technology. As Colin Windsor of PricewaterhouseCoopers puts it: “New startups require every service we provide.”

Certainly the Big Five loom large in research company IDC’s top five providers of services to the Internet market. Andersen Consulting comes in at number one, with estimated 1998 revenues of $425m from interactive and on-line services, followed by IBM Global Services, PwC, Ernst & Young and EDS. But profiting from e-business can be as much of a challenge for consultancies as it is for clients. “We are trying to e-revolutionise our own business as well as our clients’ businesses,” says Roger Camrass of Ernst & Young, who realises that getting to grips with this new market requires a radical change of image and mindset – as well as the quick acquisition of a whole raft of new skills.

Where do the consultants fit in?
Check out any of the major consultancies’ websites and you’ll find lots of talk about their e-business initiatives, many featuring names with dots in the middle. At the heart of these initiatives are partnerships and alliances that are helping the Big Five get to grips with every aspect of e-business, from skills transfer through to market penetration.

So what do the consultancies see as their strengths? “We have strong strategic, marketing, partnership, business structuring and resource skills, we know about business processes and modelling, we understand tax structuring, corporate finance and fund-raising, plus we have skills in prototyping and rapid systems building,” says Dr Robin Wood, executive consultant in Ernst & Young’s Connected Solutions e-business group.

“You don’t need management consultancies to set up a simple web site, but their importance becomes apparent when companies start to realise that e-commerce touches every part of their organisation,” says Peter Lauchlan, principal consultant at KPMG. “Restructuring internal business processes is what the consultancies are best at. We come into our own in very big, strategic business-change projects where you need thorough knowledge of the business and implementations. The value we add is our detailed knowledge of our clients’ businesses, and how to implement technology in those businesses effectively.”Nevertheless, the consultancies are aware of yawning gaps in their portfolios, and are looking to partnerships to plug them. Ernst & Young has around 300 e-business partners, ranging from small one-off deals to alliances with technology giants such as IBM, Cisco, Microsoft and Oracle, which are intended to generate $1bn-worth of business. All the major consultancies have similar ventures. So what are they aiming to achieve?

Traditionally, the Big Five have offered their clients solid corporate skills encompassing strategy, business change, financial restructuring and enterprise systems development – not knowledge of highly specialised, rapidly evolving, niche technologies. Yet e-business projects are often based on just these kind of systems. One obvious role for partnerships, then, is to enable large consultancies to offer clients access to the kind of specialist skills that haven’t hitherto been part of their core business. “We’re not into writing ERP applications, databases and web front-end software – we look to partners to help us do that,” says Wood.

Market leader Andersen Consulting is forming a range of alliances with niche technology companies including Blue Martini Software, which sells e-commerce applications, and Internet hosting specialist Exodus. These alliances work in a variety of ways. In Blue Martini’s case, Andersen will train the consultants in its rapid development centres to use Blue Martini’s software to build e-commerce solutions quickly. In the case of Exodus, it’s the other way around: Andersen’s consultants will be based at Exodus’s hosting centres, with a view to enabling the two companies to offer convincing e-business solutions to corporates such as banks, insurers and financial services organisations. Meanwhile, as well as making technical alliances, Ernst & Young is working with web design companies such as Frog Design and with “most of the large advertising agencies” on brand development and marketing strategy.

Power through partnerships and alliances
The consultancies are also teaming up with companies that have specialist knowledge of particular horizontal and vertical sectors in the e-business space. Customer relationship management is one hot area strongly associated with e-business because of the interaction with customers made possible by electronic channels. Electronic shopping sites can monitor customers’ buying choices and send them offers geared to their areas of interest; e-banks can tailor financial packages according to each customer’s income, balance, spending patterns and personal profile.

To tackle this, Ernst & Young has got together with a group of specialist call centre companies (Lucent, Siebel, Genesys Telecommunications, Smart Technologies and Staffware) to form a consultancy-within-a-consultancy called The Centric Group. The aim is for the group to act as a one-stop-shop for customer relationship solution planning and design – it both provides resources to create custom CRM solutions and offers templates that can be used to build a solution quickly.

PwC is teaming up with CRM vendors, including Vignette. As part of the deal, PwC will be preferred systems integrator for Vignette’s products, and will train around 500 consultants in its product range. It will also build a range of shrink-wrapped CRM solutions using Vignette technology to target the high tech, retail, financial services, telecoms and entertainment industries. PwC has also teamed up with Documentum, and the two companies are working together to develop, sell and deliver a solution for managing documents in the pharmaceutical industry. This kind of alliance is designed to enable the consultancy to effectively penetrate specific vertical market sectors. “There are any number of consultancies on the market and any number of technical options – it’s very confusing for the client,” says Doug Dean, partner with global responsibility for content management solutions in the pharmaceutical sector.

“We were looking for an alliance that would differentiate us from other players. Documentum has the technology platform of choice and PwC is the dominant thought leader in the pharmaceutical sector. Pharmaceutical industry customers are basically looking for a safe bet, and that’s what we’re offering them.”According to Thomas Heydler, Documentum’s general manager, the appeal of the partnership from his company’s point of view is “PwC’s global implementation capabilities and vertical industry acumen, coupled with their e-business approach”.

Does this kind of partnership deal adversely affect consultancies’ objectivity regarding product selection? Almost certainly. On the other hand, it does enable them to offer clients a fast-track through the confusing maze of new products coming on to the e-business market and get them to the ultimate goal – a working system – quickly. As Windsor points out, clients can find it reassuring to get joint presentations from the technology company and the consultancy, with consultants providing the solid management-level reassurance – the so called “pinstripe factor” – that most new technology companies may lack.

As well as this, focusing down on a subset of vendors is a practical way for the consultancies to provide their own staff with effective skills in key technologies. “One issue for our clients is that they need a lot of products to build their e-businesses,” Windsor says. “Through technology partnerships, we can ensure that all our consultants get relevant training.”

As well as access to technology and markets, there’s a third very important reason why consultancies are looking to partnerships. The myriad new e-business ventures flooding on to the market are often bursting with good ideas, but lacking the finance to get off the ground. Through joint ventures with their e-business clients and technology suppliers, consultancies can achieve a number of goals: getting access to key technologies, establishing themselves as major e-business players, and hopefully gaining a worthwhile long-term investment.

Many consultancies are starting to set up business incubator schemes to launch fledgling companies, and in many cases these will involve them taking stakes in new companies. Although this increases their risk in the short term, in the long term they stand to reap substantial gains if the e-business market continues to boom – and they’re confident it will.”The boom will continue because there’s nowhere else to go for the big corporates,” says Camrass. “We have the most efficient production platforms the world has ever seen, and the only way forward now is to innovate. We believe that the money out there that is searching for new ideas is enormous.”

Developing in-house muscle
Last December, Andersen announced that it was setting up Andersen Consulting Ventures, an investment division that over the next five years will put up to $1bn into creating new e-businesses. The firm itself has pledged to put up over $500m in venture capital, as well as access to intellectual property. The rest of the money will come from a range of investors. Among Andersen’s early equity investments is Blue Martini, one of its technology partners.

Meanwhile, Ernst & Young is setting up its own incubator scheme, the Dotcom Lab, in which it is teaming up with established technology companies including Sun, Cisco, IBM and Oracle to launch e-businesses on behalf of clients. “Traditionally the management consultancies would come in, do a project and get paid. It was easy to define and negotiate,” says Camrass. “Today, our clients are saying, this is a completely new and uncertain business; we need a partner. They need cash from outside as well as technical support, which means that increasingly we’re having to take equity rather than fee rewards. The new world of consultancy is about financial as well as intellectual capital.”

The Big Five, with their corporate culture and methodical approach, combined with e-business companies with their pioneer spirit – it doesn’t sound like a marriage made in heaven, and the consultancies readily admit that working in partnership isn’t always easy. “We’re looking for synergy – people we think we can get along with,” says Windsor. “But it’s very important that we allow our partner to maintain their own culture, and use the best of it – that we work together without destroying the partner.”

“We’re a set of business ecosystems collaborating and competing in different circumstances,” says Wood. But he argues that there can be such a thing as attraction of opposites: “Not everyone can be good at everything all the time. We seek to complement what we see as our core competencies for clients who want to go global with e-business.”

Your clients’ top 10 demands

1. “We need a strategy!”
Most large companies are now at least thinking about getting into e-business, but for many it’s still strange territory, and they have no idea how best to tackle it. Are there opportunities for selling direct to customers over the Internet? For improving customer relationships? For automating the supply chain? For changing business processes? For offering an entirely new kind of service? Or simply for adding a new form of delivery to the portfolio? Currently, the biggest need in the e-business sector is for help with formulating a strategy for getting into the market – and the consultancies’ strong track-record in business analysis, re-engineering and strategy-setting makes them the obvious place for corporate customers to turn.

2. “No honestly, what do you really think?”
Some companies have already formulated their e-business strategy, but they want an independent view on whether they’re moving in the right direction, or about to make an expensive mistake. Consultancies offer them experience of the e-business market, plus a broad portfolio of skills to assess new business propositions from the perspectives of tax, corporate finance, the law, the market, competition, logistics and the supply chain. Another important quality is the confidence to tell a client: “Sorry, but this just isn’t going to fly,” when necessary.

3. “We need rocket fuel!”
Many companies that have already decided to get into e-business are looking to consultancies, with their broad view of what’s going on in the market, to help them generate ideas, excitement, and momentum. For example, Ernst & Young is putting together a set of showcases and events it calls “.companydays”, to enable people to visualise the possibilities and propel them forward into the e-business space.

4. “Make this happen fast!”
In the digital world, it’s possible to bring new ideas to market faster than ever before. Companies perceive that they need to be quick off the mark if they aren’t going to be left behind. “Three months is the magic time period – everyone wants to launch in three months,” says Colin Windsor of PwC. But companies’ existing business processes may not help them to be light on their feet. Consultancies are often engaged because of their experience of bringing in projects to tight deadlines, and their experience with rapid application development.

5. “We want to go global!”
Companies that until now have operated only in their domestic or regional market may rightly perceive the web as an opportunity to start selling globally. But these companies don’t always have the knowledge of local cultural, regulatory, economic and other issues to operate successfully on a global scale. The major consultancies have years of experience of working with multinationals, and they know the issues involved in going global inside out. So they’re often asked by Internet startups to help develop a global e-business strategy.

6. “We need money!”
Though e-business is a hot topic for the investment community at the moment, it’s still not straightforward for new dot.coms to raise finance. With their extensive connections in the investment world, consultancies are often asked to suggest the best sources of financing for e-business startups, and for help in the process of raising investment. Also, more and more consultancies are themselves taking stakes in e-business startups and sharing the risks.

7. “Help us with this new technology!”
Once a company has formulated its e-business strategy, making it happen means getting to grips with a whole raft of new technical tools, dealing with everything from Java programming to building a firewall. At the same time, myriad new web offerings are coming on to the market each week, many of them fairly immature products. As a result, consultancies are often asked to get involved in the product evaluation and selection process. They may also be asked to help companies deploy these new tools effectively, and to provide knowledge transfer to in-house staff.

8. “Where can we find the right people?”
Companies moving into e-business need people with a host of brand new skill sets – and they need to get hold of these skills quickly. Web-page design, HTML programming, encryption and Internet telecommunications aren’t necessarily skills a company might want in house, or even full-time, so consultancies that keep experts with a wide range of specialist skills onboard are vital to successful e-business solutions. Increasingly, consultancies are themselves partnering with specialist e-business organisations to increase their access to niche skills.

9. “How does this fit with our existing business?”
Established companies moving into e-biz need to understand how to integrate their new business with their old business. Do they treat e-business as a separate company, like First Direct, or should they establish synergy with their existing operations, using the Internet as another delivery channel for existing products and services? Consultancies are often asked to help integrate business processes and systems between old and new. An important part of this will be finding ways of changing the corporate culture to reflect the faster pace, better customer information and greater responsiveness that e-biz allows.

10. “We want a feeling of security!”
Scares about the security risks of doing business over the Internet have deterred many companies from taking their first steps into e-commerce. This is especially true of companies working in areas such as finance, where the costs of security breaches could be high. These companies are all too aware that they need a system that’s not only secure but seen to be secure by nervous end-customers. These companies are calling in consultancies to help them formulate a security strategy encompassing both technical counter-measures and a communications programme to ensure that their customers are reassured that it’s safe to trade on the net.

Candice Goodwin is a freelance journalist.

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