How Traditional IT Companies Are Adapting To A Changing World

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How Traditional IT Companies Are Adapting To A
Changing World
Steven M. Ashley Craig R. KennisonSenior Vice
President Research Associate
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Traditional IT Services Companies

• Analysts International
• CIBER, Inc.
• Complete Business Solutions
• Computer Horizons
• Computer Task Force
• Edgewater Technology

• IMRGlobal
• Keane, Inc.
• kforce.com
• Metro Information Services
• Modis Professional Services
• Spherion Corporation
• Renaissance Worldwide

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Stock Performance
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Sales Performance
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EPS Performance
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Why The Boom Bust?

• Y2K
• Internet

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Near-term Challenges

• Muted Legacy Demand
• Skill Mismatch
• Well Above Average Turnover
• Shrinking Project Duration
• Depressed Stock Prices

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Longer-term Challenges

• Central Vendor Management
• Packaged Software
• Outsourcing
• ASP
• India

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The Positives

• Strong Pipeline
• IT Spending Growth
• Rising Bill Rates
• Growing Shortage Of Labor
• Internet Job Boards
• Consultant Force Been Turned Over

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Why Demand For Legacy Skills So Muted?

• Y2K Fix Really Fixed
• ERP Systems In Place
• Permanent Hiring
• ASP

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Central Vendor Management

• FORTUNE 500 Companys
• CHIMES
• Change Role Of Sales Force
• Place Pressure On Margins

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Evolving Business Models

• Traditional IT Services Companies Evolving
  Business Models
• Add More
• Solutions
• Internet Related
• Realign Business Via Reorganization
• Spin out New Economy Businesses
• Sell Off Staffing
• Why Shifting Service Offering?
• Because thats where the money is

Famous Bank Robber - Eddie Sutton
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Traditional IT Services Companies Transition
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Adding Solutions

• CIBER, Inc.
• Computer Horizons, Inc.
• Metro Information Services
• Modis Professional Services

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Changing Solution Offering

• Complete Business Solutions
• iGate Capital
• Keane, Inc.

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Breaking Up Is Hard To Do

• Xpedior
• eLoyality
• Digiterra
• Products, CHIMES, eb Networks
• Staffmark, Robert Walters plc
• Idea Intefration, Information Technology Division

• Metamor
• Technology Solutions
• CIBER, Inc.
• Computer Horizons, Inc.
• Edgewater Technologies
• Modis Professional Services

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Why Spinout Segments?

• Dichotomy Of Valuations
• Capital Flows On Wall Street
• Baby Boomers
• Mutual Funds

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Supplemental Staffing Units For Sale

• 1999 Sales
• Staffmark 300 million
• Cognizant 230 million
• Complete Business Solutions 30 million

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How Traditional IT Services Companies Adapting To
Changing Worlds?

• Adding Solutions
• Changing Service Offering
• Spinning Out Business Segments
• Selling Supplemental Staffing Business

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Outlook

• Near-term
• Worst Is Over
• Headcount Is Stabilizing
• Bill Rates Should Continue TO Drift Upward
• Longer-term
• Industry If Over Capitalized
• Will See Consolidation
• Staffing And Solutions Will Separate
• VOP Will Pressure Margins At FORTUNE 500
  Customers
• Key Unknowns
• The Pace Of The Recovery
• 2001 Non-Internet Demand
• Success Of ASP Model
• Future Of Average Project Durations

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Questions
For a copy of this presentation, please contact
Jennifer Talsky at jtalsky_at_rwbaird.com