The strategy worked well: Everybody wanted a Web site, and Sapient, along with its imitators, quickly had more business than it could handle. It helped Wells Fargo pioneer browser-based banking and assisted Pacific Bell's launch of Internet access services. "With a market growing this large this fast, we're not particularly worried about the competition," Greenberg told Upside magazine in late 1999.
But things have changed. Consultancies such as MarchFirst, Razorfish, Scient and Viant - which each grew frenetically in the late 1990s thanks to their focus on Web design and e-commerce - are now struggling to avoid the same fate as their primarily dot-com clientele. Shares of Scient (which just merged with competitor iXL) recently were trading for 55 cents; Viant's were down to $1.64 and Razorfish's to 46 cents. These stocks cost 20 to 98 times as much a year earlier. MarchFirst fared even worse, filing for bankruptcy in April.
Meanwhile, potential clients are shifting their technology spending away from the sort of Web-integration projects Sapient had specialized in and back toward improving core business operations such as inventory management and supply-chain logistics. In response, Sapient has changed course again, touting its back-office roots and removing Net references from its marketing materials. "The internal message in the winter of 2000 was that the Web is dead," recalls one recently laid-off Sapient employee who still speaks highly of the company. "We're not a Web consulting firm, and no one should describe us that way."
Its pure-play rivals, lacking pre-Net credentials, weren't in a position to pull off that kind of metamorphosis. "They are the Internet," says Greenberg of companies like MarchFirst and Scient. "That's what they're all about, and that's kind of a solution looking for a problem." Sapient's client base has always been more diversified than that of its pure-play rivals: Even at the height of the Internet bubble, when Net-related projects brought in 40 percent of Sapient's overall revenues, dot-com clients accounted for less than 20 percent; its client list includes old-economy mainstays such as Lloyd's of London, Toyota, United Airlines and the U.S. Marine Corps.
While the pure-plays have receded, competition from the Big Five types, from tech powerhouses like IBM and, lately, from hardware giants such as Compaq, Hewlett-Packard and Sun (which are hoping to diversify their revenues by moving into e-services), is only going to grow. "A year ago, the consultants with more of a non-Net presence and revenue streams were seen as the dinosaurs," says Morningstar analyst David Kathman. "Now the opposite is true."
These bigger players have several advantages over a midsize company like Sapient. For one, they have better-known brands; in tough times, the old saying that nobody ever got fired for buying IBM is suddenly relevant again. They also can offer clients one-stop shops, with diversified portfolios of services, for all their consulting needs.
So how does a relatively small player like Sapient - which now has around 2,200 employees - plan to survive in a land of dinosaurs like IBM Global Services, which has 150,000, or Accenture, whose workforce totals 75,000?
The answer depends in part on the company's recently announced global distributed delivery strategy. For more than a year, Sapient has been ramping up operations in New Delhi. So far, it has hired about 250 employees there - mostly programmers - and it plans to relocate up to 100 senior engineers and project managers from the U.S. to India. Because labor and infrastructure are far cheaper in India, and because the company's presence there will allow it to work on a 24-hour cycle, Sapient hopes the move will make it faster and cheaper than the competition.
Sapient isn't the first to recognize these advantages. Other firms, notably Cognizant, have long been active in India, and Indian companies such as Wipro have been snagging business from American firms, particularly on commodity programming projects. (Wipro, in fact, is rumored to be eyeing Sapient as an acquisition; Greenberg wouldn't comment on those rumors except to say that as chief of a public company, he'll never say never.)
