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Commentary: United they stand

Scient and iXL Enterprises are combining more for survival than for growth, and the merger will likely not result in a competitive advantage for the new entity.

    By Frances Karamouzis, Gartner Analyst

    Scient and iXL Enterprises are combining more for survival than for growth.

    Both have experienced significant layoffs, office closings, leadership changes and, most importantly, decreases in their customer base. Continued financial woes have proven too challenging for either to tackle alone.

    The merger will likely not result in a competitive advantage for the new entity. Rather, it may facilitate a stronger--although still somewhat shaky--financial position. With Scient's $88 million in unrestricted cash and short-term investments, along with iXL's recent success in reducing costs, the two firms should be financially more robust as one.

    See news story:
    Scient, iXL ink deal to become one
    The transition will not be easy, however. Any merger requires internal focus on service offerings, methodologies, practices, infrastructure, culture and management of consultant expectations. Generally, such activity detracts from an external focus on clients. Mergers in the services sector have proven incredibly difficult for that reason. Many have resulted in the downfall of previously successful firms, such as MarchFirst, a merger of USWeb, CKS, Mitchell Madison Group and Whittman-Hart.

    Nevertheless, Gartner expects that Scient will remain on businesses' short lists for its user experience and design work. On the other hand, feedback from Gartner's clients is mixed regarding the business value they have received from Scient or iXL for past integration efforts. The two companies also did not take advantage of their knowledge to create repeatable solutions for future customers.

    Gartner believes that companies should diligently evaluate new contracts before signing on the dotted line. Companies should ensure that any consulting resources promised are corroborated with names, resumes and references pertaining to skill sets and competencies. It is critical that they protect themselves with regard to intellectual capital and contingency planning for the entire duration of a contract.

    (For a related commentary on e-business specialty consulting firms, see Gartner.com.)

    Entire contents, Copyright ? 2001 Gartner, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.