In recent months, specialty Web integrators have weathered heavy criticism, and deservedly so. As a group, they ran their businesses haphazardly and failed to manage investor expectations; over-promised deliverables and under-delivered solutions; misrepresented their "end-to-end" capabilities, and generally treated their customers as annoyances. One result is a rash of client lawsuits.
But there are limits to how much blame should be assigned to the consultants. The sad saga of Verde Media, a provider of online "green information" that launched last March and went bankrupt within 90 days, is a good place to explore those limits.
According to published reports, the Web developer Scient began work for Verde in mid-1999, back in Scient's glory days of breakneck growth. While Verde execs were debating their business strategy--whether to be a basic content company or a GeoCities-like entity enabling other environmental non-profits to create their own sites using Verde tools--Scient was busy building an expensive and elaborate e-commerce back-end.
While Verde's strategy shifted in the wind and its financial situation grew more and more precarious, Scient collected more and more development fees, ultimately raking in several million dollars, a significant chunk of Verde's total funding. In Verde's June bankruptcy filing, among the $7.8 million in claimed liabilities was yet another $1.8 million owed to Scient.
To be sure, Scient did not distinguish itself in this engagement. It was reportedly too hung up on "rigid" methodologies to respond to Verde's constantly changing needs, and it lacked in-depth knowledge of Verde's marketplace. But did Scient bear responsibility for the client's poorly conceived strategy and funding problems, or did the consultant's responsibility begin and end with building a world-class back-end?
Scient officials won't comment, citing a confidentiality agreement with the customer.
Industry observers, including some familiar with the engagement, say this case illustrates an ancient IT maxim: regardless of its inexperience and naiveté, a customer is ultimately responsible for managing its relationships with services providers and ensuring the project's success.
Experts say it also behooves the customer to treat its integrators more like independent contractors than strategic allies, particularly since many Web-based projects are so complex that they require multiple vendors to handle individual pieces.
While this dilemma isn't a new one within the IT industry--professional services vendors have always employed fancy partnering models as ruses to get their customers to let their guards down--the sheer number of dot-com clients with no experience in third-party management virtually guarantees oceans of bad blood.
"We'd like to think that all consultants are trusted advisers, that they recognize the importance of word of mouth and they're all committed to the long-term success of their customers," notes Josh Randall, an e-services analyst at Kennedy Information.
"But that's not the reality. It always pays to be skeptical about your Web developer. It's critical that the customer understand precisely what it's buying, or everybody involved will be flailing around."
Experts add that a healthy dose of skepticism is warranted even when a vendor has taken an equity stake in the client.
"You would assume that a vendor that owns a piece of you will be a little more interested in whether you survive," says Bob Gleason, CEO of Riverton Corp., a Burlington, Mass.-based e-services startup. "But that in no way offloads your responsibility for overseeing the relationship."
In the end, argues Gleason, everybody--VCs, investment bankers, vendors and customers--shares the blame for the "giant Ponzi scheme" that enveloped the e-biz consulting market.