InformationWeek

November 16, 1998

Vendors Plan For post-2000 Work

Analyzing The Integrators

Methodology

Fortune One's Outsourcing Challenge

For Some, Small Vendors Are Better

Merger Mania Vs. Merger Meltdown

Palmisano Extends IBM Relationships

CSC Chief Emphasizes Flexibility

Sprinkle Delivers For Deloitte

For Aris, Boutique Is Bountiful

Behind The Numbers: Sizing Up The Integrators

Research Charts

The year 2000 crisis has made a lot of money for certain services vendors. But now that the millennium is almost here and remediation work is nearly complete, those vendors need to identify ways to augment their revenue. For Keane Inc. and Computer Horizons Corp., that means applications outsourcing and integration services.

About 35% of Keane's revenue and 30% of Computer Horizons' revenue come from year 2000-related services. Both companies have started to pad that revenue with applications outsourcing and development projects, and that business is expected to grow, says Brian Keane, office of the president at Keane. "Y2K work won't fall off in terms of revenue in 2000-2001," says Keane. "But close on the heels of Y2K projects will be applications outsourcing and development."

Analysts agree. "What will save these two companies is the emergence of applications outsourcing," says Moshe Katri, a director at investment firm Warburg, Dillon, Reed. Katri says applications outsourcing is an extension of year 2000 work, and adds that Keane and Computer Horizons are in a good position to leverage their relationships with existing year 2000 customers.

Public Service Co. of North Carolina Inc. enlisted Keane for year 2000 remediation work on the natural gas company's mainframe system and several of its custom applications. After that project was completed in September, Public Service, which serves 33,000 customers, decided to give Keane an applications-outsourcing contract to implement a PeopleSoft financial enterprise resource planning application.

"Keane had quite a few folks that learned about our customer information and billing systems from their year 2000 work," says Lauris Nance, CIO at Public Service. "We decided to use Keane to help create interfaces to tie our customer-billing and information applications with the new PeopleSoft applications." The implementation is expected to be completed in January.

Carlson Marketing Group, a division of integrated marketing services company Carlson Companies Inc., enlisted Computer Horizons for a multimillion-dollar, multiyear outsourcing contract for its operations and training center in Plymouth, Minn. Computer Horizons supports several applications for Carlson's MVS and IDMS platforms.

"We interviewed a lot of outsourcers that specialized in this type of work," says Steve Miller, director of IT at Carlson. Although Computer Horizons' bid came in higher than others', Miller says Carlson chose the vendor because it understands Carlson's culture and has more experienced personnel.

Keane and Computer Horizons are also making acquisitions to expand higher-margin businesses, while de-emphasizing lower-margin businesses such as IT staffing. Keane recently acquired Fourth Tier Inc., a provider of front-office applications. The deal marked the fifth acquisition Keane has made this year--and the first that expands its presence in the applications development market.

Computer Horizons has made its share of acquisitions--seven during the past year. In September, the company bought the assets of Enterprise Solutions Group LLC, an ERP services provider, to help it respond to the increasing demand for ERP applications.

--Jennifer Mateyaschuk