UPDATE: Troubled US internet consulting company marchFIRST has called the administrators into its Australian operation, The Industry Standard has learnt. A spokesman for Arthur Andersen confirmed that it had been appointed as the voluntary administrator.
MarchFIRST halted trading on Nasdaq today and it has been reported in the New York Times and The Standard that the firm plans to reduce its already trimmed work staff by 3,500, half of its staff.
Industry sources revealed that the local operation was forced to close its web development area recently, but marchFIRST could not be contacted for confirmation.
The troubled firm offers a range of services starting with strategic consulting and web development, but has seen its share price dropped from a 52-week high of $47.13 to today's share price of 16c.
MarchFIRST is the latest in a long string of internet consulting firms from the US to fall into bad times. Razorfish, Oven Digital, Sapient Australia and ZIVO have all closed their doors and web solutions group XT3 and KPMG Consulting have undergone staff cuts. So how did they get it so wrong?
WSA Online CEO Richard White-Smith said that the demand for services is still high, but after the tech wreck there has been a "run to security" as burned companies seek "an established traditional management consultant, rather than dabble with web consulting firms".
The founder and managing director of web development company Hothouse Interactive, Simon Van Wyk, said that the Australian market is a tighter, more pragmatic market than the US assumed. "They thought it was going to be easier than it turned out to be, that the fun would never end. That they could come out here and buy the market, but that proved more difficult than first thought," said van Wyk. Many US consulting firms thought Australia was a "safe bet" and over-engineered their expensive products, but this proved too expensive for the Australian market, he said.
For a while there was a belief in the marketplace that the US prices meant extra value. White-Smith cited the example of Razorfish consulting for Village Roadshow's Scape. "In my understanding, had they used a local operator, the costs would have been considerably lower, but Village believed going with Razorfish would get them extra value."
The Australian market is also more mature. "The change in valuation and decision making at the client end has changed a lot," said White-Smith. "There was a time when companies thought that if you put an 'e' in front of your name it added x times value. Now it is almost seen as detrimental."
The primary reason that US internet consulting firms are pulling out of Australia is problems back home as US firms lop off the non-profitable parts of their business, van Wyk said.
But the management of the local operations is also a factor. "From our experience in going head to head with US consulting firms, they successfully use their experience in US markets to win business locally. But the reality is that the staff have come from local operators with the skill sets of a local operator," said White-Smith.
Van Wyk agreed: "They presented that they had overseas experience and were 18 months ahead of the crowd, but that was not the case at all."
- Courtesy of the Australian Industry Standard - www.thestandard.com.au