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Net start-ups lure services execs

Seeking new opportunities and a break from the traditional bureaucracy of larger firms, a growing number of services execs are leaving for new and more challenging Internet-related services start-ups.

Executives at big services firms are hearing the call of the Internet.

Seeking new opportunities and a break from the traditional bureaucracy of larger firms, a growing number of executives are leaving for new and more challenging Internet-related services start-ups.

The lure of the Internet has tempted executives in many industries. But the services industry--growing by leaps and bounds--has been particularly turbulent. In the

Services spending on the rise
past few months, the list of defectors from the computer services industry has grown to include the head of Internet services at EDS, the chief executive at Cambridge Technology Partners, and top executives from IBM's Global Services division.

While analysts say this isn't necessarily a mass exodus, they do believe there's a growing movement as more and more senior executives of traditional services, consulting, and software firms seek the larger opportunities and greater creative freedom associated with Internet-related start-ups.

"It's not just the money luring these executives to start-ups," said Tom Rodenhauser, an analyst who heads Consulting Information Services. "It's also the lure of getting into something truly entrepreneurial and the payoff is a bonus," he said.

Susan Scrupski-Miranda, an analyst at IT Services Advisory said that while industry observers immediately say it's the money that's appealing to these fleeting executives, it's actually the appeal of "being a CEO of a pre-IPO start-up."

"You get to build a company. It's a career fantasy. It's an opportunity of a lifetime, especially because most of these executives are still young," she said.

That opportunity has lured some big names. Just two months after touting EDS's late-to-market Internet services strategy, Gary Moore, the head of the division, hit the road for a Silicon Valley start-up.

Moore, the former president of the services giant's E.solutions unit, decided to leave his post to become chief executive of Enterprise Networking Systems, a network services and consultancy company headquartered in Redwood City, California.

Moore, a 26-year EDS veteran, isn't the only one with this added tweak to his career path.

Several other executives from bigger services players like IBM Global Services, Cambridge Technology Partners, and SAP, have moved on to smaller competitors.

Earlier this year, longtime IBM executive Bob Howe left Big Blue to head Scient, a provider of services to companies setting up Internet commerce. Howe played a key role establishing IBM's Global Services division and Integrion, an IBM-backed Net-banking initiative.

Last month, Scient lured Gerry Komlofske, formerly an executive with Technology Solutions Company, to be its chief strategy officer.

Early last week, Cambridge Technology Partner's former chief executive and cofounder Jim Sims left his post to work on more "entrepreneurial endeavors."

Sims told CNET News.com that he wasn't interested in running CTP's operational, day-to-day activities and that he wanted "to take time off to create another company...to challenge the norms." Since CTP's inception in 1991, Sims boosted the consulting and systems integration firm from $9 million in sales to more than $600 million.

CTP has been particularly hard hit. Before Sims, the company lost its former president Bob Gett when he left to become chief executive of Boston-based Internet consulting firm Viant. As reported, Gett said that he decided to leave the company at the height of its success "because the Internet and the digital economy was there and on its doorstep and even CTP could not shift its business model and its culture to attack that new era in a direct way." Viant has since gone public.

Earlier this year, former CTP senior executive Gordon Brooks also left to head application services provider Breakaway Solutions. Sources said that other executives at CTP are planning to depart as well.

High-level defections have also rocked enterprise resource planning software makers, which derive a large chunk of their revenue from services. Before Paul Wahl joined customer relationship management leader Siebel Systems as its chief operations officer, he resigned as CEO of business software giant SAP America for start-up TriStrata Security, a Silicon Valley Internet security software firm.

Rodenhauser said that "we're seeing more of a blending and fusing together of the Internet start-up under the e-commerce services umbrella" with most of the larger name services and consultancy firms. He said that most executives who choose to leave know the jump from a well-established firm to a .com company will be a difficult one.

Rodenhauser added, "There's an excitement there...top execs get a thrill going from an Andersen Consulting to a Lante [an e-commerce services provider]...Instead of being the head of one division in these bigger firms, you get to be the head of one company right there at the forefront of this Internet revolution."

While not completely worried about the future of the services and consulting market, analysts say they believe the obvious shuffle of top execs to head smaller, younger, and more creative companies poses a concern to the big guys losing them.

Scrupski-Miranda said that she questions what some of the values in more traditional services firms will be "when they're left with an army and not a general."

"It's a new level of competition for these guys [leaving established firms ]," she said. "It's their personal careers and their ambition...It's a new playing field for them."

While Rodenhauser said he believes the industry won't see a "mass defection from the services side because certain segments are still booming," such as e-commerce and Internet strategy, he did say that there will definitely be a "depletion of up and coming talent" working for the traditional consultancy firm.

"In three years, you'll see that happening," he affirmed. "There's a lot more wealth to be gained in start-ups...IPOs appeal to this generation. We'll see less folks going through traditional consulting firms, slogging away for eight years to become a partner."