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Home -> Community -> Mailing Lists -> Oracle-L -> (Fwd) Vendors in Turmoil: No End To Hosting Upheaval
http://www.internetweek.com/columns01/ednote090701.htm
---excerpted---
September 7, 2001
Editor's Note
Devise Strategies To Deal With
Services Upheaval
By ROBERT PRESTON
When times get tough and profits get
pinched, vendors scramble for the high
ground. In the IT industry, that safe
haven has been services, with the likes
of IBM, Hewlett-Packard and
Compaq--as well as scores of
second-tier competitors--positioning themselves as
integrators, outsourcers and consultants rather than
straight purveyors of low-margin product.
For the most part, this strategy has worked. IBM, for
instance, derives most of its profits from its services
business (which also drives sales of IBM systems
and applications). Unisys is alive today thanks to its
services reincarnation.
But the economic floodwaters are rising rapidly even
on services vendors--with troubling consequences for
customers.
Consider the industry upheaval in the past several
months. MarchFirst, an Internet services juggernaut
18 months ago upon its creation from the $7 billion
merger of Whittman-Hart and USWeb/CKS, is
defunct. The stock prices of leading Internet
integrators Sapient and Scient are a tiny fraction of
their 52-week highs as the companies try to digest
restructurings. Razorfish, the once-promising
boutique firm, is back in the red after slicing its way
to a profit last year.
Exodus Communications, the world's biggest Web
hosting provider, is running out of cash--and with last
month's three board defections and last week's
resignation of CEO Ellen Hancock, it's running out of
leadership. Much smaller Web hosters teeter near
bankruptcy.
While IBM Global Services, EDS, Accenture and
most of the other full-service IT vendors are holding
their own, they're cutting corners to keep their
numbers up. Compaq, realizing that Digital's services
organization wouldn't be enough to carry it through
the next few years, last week locked arms with HP to
create the world's third largest IT services outfit
(behind IBM and EDS). Rival Dell, meantime, has
sold its Web hosting assets to Sprint, having already
bailed on application service provision and other
services.
[*******************]
So what does all this upheaval mean for customers?
And what can you do about it?
Your IT "partner" today isn't likely to be the
same person working for the same company
tomorrow. Your infrastructure and contracts will
pass from one services vendor to another.
Maintenance and support will be delivered with
patchy consistency. Be prepared to ride out the
bumps.
Keep the crown jewels in-house. As the
distinction between e-business and
business-as-usual blurs, a company's Internet
assets are its core assets. Identify which pieces
are truly strategic--and hang on to them (or bring
them back in-house).
Gravitate toward size and stability. If you must
entrust your Internet infrastructure or operations
to an outsider, it may pay to choose a big,
lumbering vendor that'll be around in a year over
a best-of-breed hotshot that may not.
Negotiate services contracts as if your
company's life depends on them. Take no price,
service level, personnel commitment, business
milestone or other contract detail for granted.
Map out an exit strategy should you want to take
your business elsewhere in the event your
vendor's financial or organizational wherewithal
changes materially.
Don't take upheaval in the IT services industry lying
down. You have options. Explore them.
Robert Preston is editor in chief of InternetWeek. He
can be reached at { HYPERLINK "mailto:rpreston_at_cmp.com" }rpreston_at_cmp.com
---end---
Also:
HP-Compaq: A Lot To Prove: Customers ask, What's in it for us?
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