Tech celebrities back new Net marketplace
A new online marketplace backed by some big names in the technology world is aiming to lessen the pain of negotiating and bidding on complex technology projects.
IQ4Hire.com, prepping for an official launch later this summer, is backed by a list of marquee investors, including Oracle president and chief operating officer Ray Lane and PeopleSoft founder David Duffield, and recently closed its first round of funding for $3.5 million. The Chicago-based start-up is expected to close its second financing round next month for about $12 million.
Former Andersen Consulting partner Brian Sommer, who is the chief executive and founder of IQ4Hire, said the marketplace will serve as a facilitator and negotiator between buyers and sellers for massive software installations or other major systems integration projects. Larger computer services deals typically range from $500,000 to $1 million.
John Hagerty, an industry analyst at AMR Research, said the marketplace is different from some of the recently announced online marketplaces in that it acts more like a facilitator or a liaison to help close a deal. He said IQ4Hire may help to alter the way services firms have typically conducted negotiations with clients.
"Consulting organizations do spend a lot of time and money chasing business," said Hagerty. "(IQ4Hire) is taking on the broker mentality...It acts as a middle person to direct business (to the firms). It acts as a middle person to find out who best suits" the customer's needs.
Hagerty added that this type of marketplace can help "ease negotiations" and help customers "shop around" for the most qualified consulting teams.
A growing number of industry marketplaces have popped up, as more and more companies begin to eye the lucrative business of helping connect companies with their suppliers, partners and customers over the Net. Leading research firms have the business-to-business market pegged between $2.7 trillion and $7.3 trillion by 2004, up from about $131 billion in 1999.
Other marketplaces that target the professional services industry, such as SkillsVillage.com, Guru.com, FreeAgent.com and SolutionCentral.net, already exist, but for the most part, they link individual consultants to small projects. Sommer said he sees his company competing more with Web sites such as Niku's iNiku.com portal marketplace and ITSquare.com, which both help link buyers and sellers involved in customized computer systems projects.
Companies looking to staff a computer systems project can use the marketplace as a resource pool to help them figure out exactly what type of work they need done, and then they can bid for consulting teams from leading professional services firms that are qualified to meet their specific needs, the company said.
Sommer said the new marketplace will "dramatically reduce" the amount of time it takes to educate a client on the specific capabilities of each professional services firm by as much as 80 percent. Additionally, the site will help cut down the time it takes to finalize negotiations between a consulting team and a customer to 8 to 10 days from the more typical 3 to 6 months, he claims.
IQ4Hire, whose management team consists of former partners from Andersen Consulting and PricewaterhouseCoopers as well as other brand-name professional services firms such as Scient and Cambridge Technology Partners, said it does not plan to completely eliminate the human element in the online transaction.
"Unlike one-click buying like other e-commerce sites, there is more human interaction (when it comes to professional services)," said Sommer. "We still need customers and consultants to physically meet. We're not trying to capture the whole essence of every consultant electronically. We want them to be comfortable with the fit."
"They are trying to change the existing model," said AMR's Hagerty. "(The marketplace isn't) the end-all, be-all. An open market auction online is the be-all. There's still a large amount of human element in this."
Without disclosing any names, Sommer said he expects to unveil marketplace participants in the coming weeks. Hagerty said he expects all the major players in the professional services market to join, including some of the Big Five management consultants and services giants IBM Global Services and EDS.
The company, which currently has about 43 employees, said it plans to charge both buyers and sellers fees based on each transaction.