InformationWeek
Defining The Business Value Of Technology
August 30, 1999
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The shift in focus hasn't been solely on E-business work. Many IT services firms, including IMRglobal, are taking advantage of the Internet craze to open up another key opportunity: maintaining leg- acy apps.
"Y2K has allowed management to look at these applications in a new light--as noncore systems that can be trusted to outsiders," says outsourcing expert Bendor-Samuel. "After spending substantial time and money on Y2K projects with no return on investment, CIOs are again looking to demonstrate their relevance to their businesses. That's not going to happen with legacy application maintenance."
Knowledge Liberation
Since IMRglobal had learned about these systems during the Y2K project, Fingerhut earlier this year awarded IMRglobal a contract to take over the maintenance and support for legacy applications. The services firm is responsible for making upgrades to the systems, fixing problems, and offering round-the-clock technical support. "We were able to free up more than 50 of our people to do other work," Bignall says.
While Y2K opened the door for IMRglobal and others, some bigger services firms such as Andersen Consulting and Ernst & Young intentionally chose to keep their Y2K work to a minimum. "Y2K work was too short-term for them," says Gartner Group's Marcoccio. "You build up expertise, and then it's gone."
Some smaller services firms such as Kanbay Inc., a $50 million, 650-person operation, followed that same route. Kanbay took Y2K projects only from existing clients such as consumer lender Household International Inc. in Chicago, or from clients interested in forming long-term relationships, such as Regents Blue Shield in Seattle.
"We already had a number of people with extensive mainframe and client-server experience. We didn't hire a single person exclusively for Y2K," Kanbay chairman Raymond Spencer says. Y2K conversion work peaked for Kanbay at 28% of revenue last year. That figure is expected to drop to less than 10% by the fourth quarter of this year, Spencer says.
No matter what their approach to Y2K, IT services firms are finding E-business harder to resist. Spencer says the Web enabling of legacy systems, Internet and intranet developments, and related projects are Kanbay's major growth areas. And many services firms share Spencer's stance.
"All of our competitors are on even ground: They all see an opportunity to market professional services around E-strategy, E-building, and E-management," says Keane's Hagaman. "But no one has stood out--yet."
IMRglobal has long been planning for the end of Y2K work. For example, to keep its employees from becoming too specialized in Y2K, the company forbids them from working on more than three millennium bug projects in a row, says IMRglobal president John Hindman. Since late 1997, the firm's sales force has received only a fraction of its standard commissions for bringing in Y2K projects.
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Direct-marketing house Fingerhut Companies Inc. began working with IMRglobal in late 1996 to analyze and convert the more than 15 million lines of Cobol and Assembler code that made up the financial and inventory programs residing on the company's mainframe. "We needed more internal IT expertise focused on the Internet and on customer-service systems--things that help grow the business," says Alan Bignall, senior VP and CIO at Fingerhut, in Minnetonka, Minn. "But that intellect was tied up in old systems."
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