Net Service Marts Raise Qualification Doubts

BOSTON (05/31/2000) - The Internet is quickly turning out a new crop of digital middlemen who claim they can help companies negotiate and close outsourcing contracts faster and more efficiently than ever before. But buyers must also beware.

At issue is the quality of the service providers, since many of the new marketplaces do little, if any, real evaluation of the vendors they recommend for users' specific information technology projects.

"The piece that's missing is the vetting of the vendor. At many of these business-to-business sites, there's no qualification. You could be Joe's Fly-by-Night House of Web Services. But you pay your fee, and you're included," said Julie Giera, an analyst at Giga Information Group Inc. in Cambridge, Mass.

On the upside, new business-to-business IT service marketplaces, such as Newmediary Inc., and IQ4Hire Inc., can cut weeks or even months from the process of bringing in qualified technical help from the outside.

The marketplaces also provide at least a partial directory of vendors to the growing ranks of neophyte IT service buyers. Dataquest in San Jose estimates that by 2004, 60% of IT purchasing decisions will be made by people outside IT.

At Chicago-based IQ4Hire, providers must pay to be listed on its Web site. The firm also takes a cut of 3% to 4% of the value of the project from both the buyer and the seller. The marketplace, which is scheduled to launch in July, is aimed at companies with IT projects exceeding $500,000.

Registered buyers use the site's software to plan a project and craft a detailed request for proposals (RFP); then vendors respond. An IQ4Hire implementation expert reviews the RFP process.

"Based on what we know of consultants' billing rates, we then can estimate what the project will run," claimed CEO and co-founder Brian Sommer, a former consultant at Andersen Consulting in Chicago.

IQ4Hire also provides buyers with its choice of the five best-qualified service providers from its list of 200 vendors. Deals are completed off-line.

Other exchanges, including ITradar in Minneapolis, Newmediary in Newtonville, Mass., and Inc. in Edison, N.J., offer users tools to craft RFPs but don't charge fees. However, Newmediary's and ITradar's vendor qualification efforts are minimal.

"Other than making sure they're not a one-person shop pretending to be a company, we don't go in and check their work. We'd have to have a team of experts to go out and check all of the firms," said ITradar CEO Don Peterson.

Newmediary is developing a rating system through which buyers and sellers can rate one another's performance.

Steven Nevill, CIO at Gerald Stevens Inc. in Tampa, Fla., said he'd be very reluctant to tap any of the new marketplaces for strategic projects. Gerald Stevens is a $300 million floral and gift retailer.

"Through his own knowledge and by asking a few questions, a good CIO could pretty quickly come up with the top five companies that could do certain things," Nevill said.

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