It is the new American gold rush. Corporations are charging in to exploit the Internet’s potential to increase market share and transform business processes. But one decision that shouldn’t be rushed is which IT services provider to use.

Choosing the wrong IT service provider can mean lost time and money, and worse yet, an ineffective e-business strategy. Stephanie Moore, an analyst for Giga Information Group , says that in order to successfully make the transition, companies need an IT service provider that can build the technology to support an e-business strategy—and that has the skill to advise the company on the operational and cultural transformation needed to run an e-business.

Moore and representatives of two IT service providers weigh in on what companies can do to choose the best service provider for their needs.

Do your homework
Before contacting service providers, Moore suggests doing independent research on companies of interest in industry publications. She noted that company profiles that include information such as the number of consultants on staff and what they earn per head are increasingly available, especially in the Wall Street Journal. “You can also go through companies like Giga and Gartner and submit an inquiry on failed projects and successes to get more insight into a company,” Moore said. She added that you should decide on the criteria you’ll use when evaluating all vendors and apply this across the board to service providers.

Know yourself
In preparation for an initial meeting with a potential IT service provider, John Berry, vice president of marketing for IT services company AppNet , suggests you create a list that covers categories such as these:

  • Your strongest assets
  • Pressures and problems you’re facing
  • Current market dynamics
  • What your competitors are doing
  • Your organizational infrastructure

“Our job is to look at the entire company and find hidden jewels to use,” Berry said.

Another concern involves the coordination of objectives within an organization. Moore believes that before a company engages an IT service provider, it should seek consensus within its own ranks. “Often small parts of companies rush ahead and develop their own Web site and e-business strategy. Lots of companies have multiple Web sites and no one’s in charge. I had a client that had five different Web sites, and there was an internal battle over whose site would be used.”

According to Moore, business and IT personnel within the company need to get together in a cross-functional team and collaborate on an e-business strategy before they engage a service provider. The team should consider the following questions:

  • What do we need?
  • What is our competition doing?
  • What are the limitations of the system?
  • What does our future hold?

Know what you’re getting
Once a company has decided what it is looking for, Moore said, there are several important questions that can help get to the heart of the IT service provider’s capabilities and approach. One central question is, “What are the core technical competencies of the services firm?”

Moore described a situation involving a former client, a large paper company, who stumbled upon a vendor they wanted to hire to develop their Web site. The site would allow their clients to order and check inventory over the Web.

“The vendor knew a lot about creating a pretty Web site and didn’t know anything about connecting that pretty Web site to the mainframe system [already in place]. What my clients needed was a company like IBM Global, with backend integration skills,” said Moore. She suggested that companies “force the consultant to prove the firm’s capabilities [via references and resumes] and consider engaging more than one service provider for the overall strategy, design, implementation, and maintenance.”

Who will you work with?
A second important question is, “Which consultants will actually be working on the project?”

Moore cautions her clients that the “impressive consultants and sales-oriented” force that arrives for the dog-and-pony show may not be on the project team that appears after the sale is made. She has these suggestions:

  • Specify in the contract who the project team will be.
  • Look at the resumes of the project team members and make sure they have done this kind of work before.
  • Be aware of the kind of skills you need first.

Learn approach styles
A third question to consider is, “What is the firm’s approach to creating an e-business strategy?”

More often than ever, IT service providers are being engaged to provide a total e-business strategy. “We don’t just work on one initiative; we provide our clients with a portfolio of e-initiatives that will transform their market share,” said Panna Sharma, chief strategy officer for Internet services firm iXL.

Moore said many of her clients with traditional brick-and-mortar businesses are looking for an e-business strategy. They may have five subsidiaries with five different e-business strategies and supply chains, and they need a consultant who can integrate them.

“Consultants need to work with the company’s technical folks, who understand the limits of the existing technology; and the business folks, who understand the business requirements,” said Moore. She added that it is important to hire consultants who have worked in your industry. If this isn’t possible, consultants need to work with a team of internal people who can facilitate a knowledge transfer.

Berry said AppNet makes sure that it works with a team from the company to ensure that the company’s business objectives remain the focus of the project.

“E-business is more ‘business’ than it is ‘e.’ Internet technology is a means for changing the way you do business. Business is the end,” Berry said.

Taking all the facts into consideration should help you when the time comes to select an IT service provider—but proceed with caution. “If you have any doubts, don’t move forward,” Moore warned, noting that choosing a service provider is like a marriage; you don’t want to be too hasty.
What questions and concerns would you add to this list? What additional advice would you offer other IT managers? Post a comment below or tell us about another topic you’d like to see covered.