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Eighteen months ago, business managers in charge of e-commerce initiatives were picking boutique integrators with an emphasis on creativity and speed to market. What a difference a recession makes.
This week, the IT Services Marketing Association will release a study that highlights the changing IT landscape, showing that IT departments control the budget for major technology-based business efforts, professional services companies are chosen for their technical skills and prior experience, and incremental projects that quickly show return on investment are being funded over large-scale efforts.
The first part of the two-part study looks at the customers perspective of professional services pricing. Some 200 IT users from primarily Fortune 1000 companies were queried for their opinions on a range of issues.
The study found that companies have learned their lessons and have put IT organizations in control of the purse strings for major technology initiatives, according to Julie Schwartz, an analyst at ITSMA, in Lexington, Mass. Nearly half of the respondents, representing companies ranging from $100 million to more than $10 billion in revenue, said IT makes the call.
“A lot of [line-of-business units] lost a lot of money and dont have much to show for it, so now there is a lot of caution,” Schwartz said.
That caution has also led many enterprises to look to minimize risk in funding projects. The emphasis now is on quick results and smaller, incremental projects.
For example, when Avis Rent-a-Car System Inc. decided to revamp its reservations Web site, the project was given to a smaller service company that had already proved its mettle in other work. The total cost of the project was less than $10 million, and the job is expected to pay for itself in less than a year.
Criteria used to select professional services companies also yielded some surprises. At the top of the priority list were technical skills and prior experience with the provider. Price was at the bottom of the list.
“That isnt to say that price isnt important—vendors have to be price- competitive,” Schwartz said. “But companies are wary of the providers that low-ball a bid. They think the provider doesnt have the skills or resources to complete the job. Only 20 percent of the sample said they are somewhat or very likely to go with the low-cost bidder.”
In evaluating the top global outsourcing companies for a $1.4 billion outsourcing contract, Cendant Corp. chose a trusted business partner in selecting IBM Global Services, in Armonk, N.Y. “Theyre a large customer of ours, and were a large customer of theirs. A lot of the existing infrastructure is IBM[-based], and they had good knowledge of our operations,” said Tom Christopoul, chief administrative officer at Cendant, in New York.