I have yet to purchase this stock, even though it is one of the class acts amongst the consultants. Given the implosion in this sector, it has performed well. They will certainly be a survivor.
chicagotribune.com
Almost venerable, in Net time
By Rob Kaiser
Tribune Staff Writer
December 3, 2000
Inforte Corp. is an up-and-comer in the Internet
consulting business.
That used to mean something, but now it's kind
of like being the most talented player on the
Chicago Bulls' bench -- a point of distinction,
but hardly on par with glories gone by.
While competing Internet consultants have seen
their stocks plummet more than 95 percent this year, shares of Inforte have
plunged a mere 80 percent or so.
So it wasn't surprising to find six Inforte executives and marketing officials
huddled in a small room on a recent Monday morning, plotting how the firm
can win more work from large corporate clients. "They may have called us in
to fix a tooth," Dave Sutton, an Inforte vice president, was telling his
colleagues, "but they need a root canal."
The Internet consulting business itself, meantime, seems to be lurching toward
a mouthful of extractions. As the dot-com collapse took out lucrative clients,
leaving few start-ups with the money for outside advice, Inforte and its kind
are fighting for a limited pool of assignments at bigger, established companies.
Winning that Darwinian struggle could be the only way to survive the current
period of layoffs, restructuring, consolidation and in some cases, inevitably,
dissolution.
The stakes are especially high for Chicago, where locally based Internet
consultants like Inforte, MarchFirst, Lante and Xpedior make up one of the
most important sectors of the city's fledgling tech community. Opportunity
remains alive for these firms, which specialize in helping companies of all sizes
plug into the Internet and other technologies.
Just as in the glory days when dot-coms were booming, the lure for clients is
the same: the promise of big productivity gains for those embracing
information technology.
Recent innovations enable companies to analyze their supply chains with
unheard-of precision, for instance, or gauge the reactions of customers to
new products and marketing with unprecedented speed.
"This stuff is still on the top of the spending list for companies around the
world," said Greg Gore, an analyst at the W.R. Hambrecht brokerage firm in
San Francisco.
So far, Inforte has fared better than most, avoiding the pitfalls of relying too
heavily on teetering dot-coms and attracting big clients such as Toshiba,
Primedia, R.R. Donnelley & Sons and CompUSA. At least part of Inforte's
resilience owes to its relatively long corporate history -- in Internet time, that
is.
Phil Bligh, Inforte's 33-year-old chief executive, and the company's other
founders met in 1989 while working at Chicago's giant Andersen Consulting
-- a rich spawning ground for Internet consultants.
A London native, Bligh moved to Chicago in 1991 with the idea of starting
his own business. He mulled over various ideas -- including one to develop
software so oenophiles can keep track of their wine cellars -- before
concentrating on helping companies adjust to the Internet.
Bligh started the consulting outfit in 1993 by calling on former clients and
contacts. The company's first gig was a project for Waste Management,
equipping its service workers with wireless devices so they could stay in
touch with the office.
By the time companies surged online in the late 1990s, Inforte had an
experienced sales force and a discipline born of the leaner times that
prevailed earlier in the decade. Other firms founded during the Internet boom
period were caught flatfooted when their phones stopped ringing.
"For the first time, these companies had to go out and find business
themselves," Gore said. "The sales force had grown fat and lazy."
Even during boom times, Bligh said, Inforte tried to keep its focus on projects
that would help firms' long-term performance. These include installing systems
to check the status of orders from key suppliers and pulling together
departments electronically to order office supplies in bulk and thereby save
money. Other e-consulting companies, Bligh said, made the mistake of
focusing more on flashy Web sites and other inconsequential innovations.
"Those kind of things have really been clouding management thinking," Bligh
said. "The rest might be cool, but it won't really affect their competitive
advantage."
As "new economy" bravado peaked in 1999 and early this year, many
Internet consultants invested in start-ups and piled into projects for dot-com
companies.
Inforte, conversely, concentrated on consulting and cut down its exposure to
risky start-ups by capping dot-com billings at 20 percent of total revenue.
"Sometimes you have to leave the money on the table and walk away," Bligh
said.
Also, when it became apparent that many start-ups couldn't cover their bills,
Inforte bumped up the amount those firms had to pay up front.
The day of reckoning for the two dozen or so publicly traded Internet
consultants came with third-quarter results. About half missed Wall Street's
earnings estimates, sending their stocks into a tailspin.
The explosion of poor returns by so many players in a single business was
"really unusual," said Nick Padgett, Inforte's chief financial officer and a
former financial analyst. "I don't remember a sector that has suffered so much.
There's been a lot of carnage in a very short amount of time."
Inforte exceeded its expectations, posting net income for the quarter of $2.1
million on $17.8 million in revenues, but didn't escaped unscathed. Its stock
price reflects investors' pessimism about the Internet consulting industry in
general.
On the day Inforte went public in February, its shares flew through the roof,
peaking at slightly more than $100. Since then, the stock has plunged to less
than $25, climbed back above $50, and then plummeted again, closing
Friday at $17.87 a share.
Now Inforte is trying to bulk up its strategy practice, including by publishing
articles and possibly a book with Harvard Business School professor Michael
Porter, who is on the consulting firm's board. It is also trying to attract
business with testimonials from more traditional clients, such as CUNA
Mutual Group.
"They didn't come into our organization saying technology is going to solve all
of our problems," said Wayne Benson, chief officer of sales and marketing
with the Madison, Wis.-based mutual fund company.
Inforte must now continue growing its business in an increasingly tough
industry, complete with a rise in competitors, drop in orders and likely fall in
rates.
Still, given the ongoing technology transformations by firms worldwide,
Padgett can still give his industry an odd-sounding endorsement given its
depleted status: "The long-term outlook has not changed at all." |
