InformationWeek

Goodyear chose to work with a single third-party service provider-IBM-"because one partner makes life easier," extranet manager Rick Godic says. "Working with fewer partners simplifies things."

Like many other companies, Goodyear decided to hire an outside company because it didn't have the staff to do all the Web work itself. "Doing it ourselves wasn't an available option," Godic says. "We're resource-restrained. It's difficult to attract key talent with all the right skill levels. Working with a partner, they have those resources, and so we were able to handle the full range of activities. We also wanted to host this externally."

One downside to working with a third party is that it's more expensive than handling projects in-house. "There's a price premium," Godic admits. Only 5% of companies that have hired or will hire a service provider cite cost savings as the primary reason. Instead, most companies concur with Goodyear's motivation: personnel constraints. The top three reasons for farming out E-business activities are lack of IT staff experience (cited by 32% of survey respondents), lack of IT talent or sheer manpower (23%), and the need to keep IT staff focused on other projects (18%).

Similarly, project cost finishes low-tied for fifth place-in a survey question on E-business project-management priorities. Finding the right talent was third, behind two factors that many would argue are no-brainers: data quality rated an average of 9 in importance on a scale of 1 to 10, and application quality, 8.4. Finding the right talent rated 7.6, time to implementation 7.5, legacy integration and project costs each at 7.3.

"It simply gets down to resources," says Beth Smith, director of E-business at Vision Service Plan in Sacramento, Calif. The company, which manages optical care benefit plans for 35 million people, is evaluating professional service providers to help with the startup of EyeFinity, a Web portal to help eye doctors run their practices more efficiently.

"In this tight labor market, we need to get to market quickly with the very best skills out there, and we don't have everything we need on staff," Smith says. "Six months ago, [Web technology experts] could choose from about 10 E-commerce jobs in our area. Now there are at least a hundred." VSP is evaluating third-party providers of Web design, programming, and hosting.

UnitedHealth Group Corp., an $18 billion health-care service provider in Minneapolis, turned to IBM and Unisys to outsource its data centers and all its Web hosting for another reason: volatility of demand. CIO Paul LeFort says the two companies provide hosting for UnitedHealth's 500 intranet sites, 165 extranets, and 30 transactional sites. "One month a site might get 10,000 hits, but the next month it might jump to 2 million hits," LeFort says. "They can handle that. They run the iron, but also take care of 25 other things that are involved with Web performance. You've got to be able to handle the peaks and valleys, 24-by-7."

Even some companies that built their own E-business systems now find themselves looking outside for help with Web-based innovations. Darby Group Companies Inc., a privately held distributor of health-care equipment with more than $500 million in revenue, built its own E-commerce applications and has run them since late 1997. As with many other companies seeing strong E-business momentum, Darby Group's Web orders from medical and dental offices doubled last year from 1998.

The company wants to add interactive voice capability to its Web site and is considering outsourcing some of that work to Synchrony Communications Inc. "We're realizing that the skill sets and personnel we have may not be enough," says Peter Bavoso, VP of E-commerce at Darby Group, in Westbury, N.Y. "More and more new features are going to be part of the customer's whole Internet experience, and no one company is going to be able to have all those things."