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BizReport : Internet : June 29, 2000


Exclusive Interview with Brian Johnson, Partner at Andersen Consulting

As scores of new Internet consultants clamor to cash in on the dot com madness of the last few years, the prevailing perception has been that the older, more traditional consulting firms "just don't get it." But if Andersen Consulting is any indication, that is proving false. Andersen has moved fast to set up 24 "Dot Com Launch Centres" around the world (17 are outside the U.S.) to help companies that have already received seed funding take their online businesses to the next level.

by Michael Grebb, Special Correspondent

That gray area-between initial funding and an IPO-is often where businesses falter. And as the NASDAQ correction forces a new scrutiny of business models, Andersen says e-businesses must find a "path to profitability" or go away. Brian Johnson, an Andersen partner and co-lead in its Chicago Dot Com Launch Centre, took a few minutes to explain why consultants matter more than ever. And why the lines between consultants and venture capitalists are fast blurring.

MG: What's the basic concept of the Dot Com Launch Centres?

BJ: We work with entrepreneurs who have either post-seed stage businesses that have had their first round of venture capital or large corporations who want to spin out their Internet businesses-to more rapidly scale, operationalize, and refine their Internet businesses.

MG: Is that business stage-post incubation but pre-IPO-underserved from a consulting standpoint? Is that why you have moved into this area?

BJ: Yes. There are probably over a thousand incubators that focus on entrepreneurs who are two or three people with no funding yet. So we felt that was a very crowded space that also didn't play well to some of our traditional strengths. There were very few people helping with the "tornado phase" of a business--the refinements to strategies, the rapid scaling of the technology, the building of the operations, and the development of the organization itself.

Another thing we felt was not being addressed in the marketplace was the ability to replicate business models globally. Seventeen of our 24 launch centres are outside the U.S. It allows us to work with a far broader range of entrepreneurs that aren't just those in the U.S. And it gives us the ability to [advise] clients to globalize business at a much younger stage than they normally would have. Most companies should start executing global expansion right after the first venture capital round. Ebay is a good example of a company that should have globalized earlier.

MG: There are a lot of new Internet consulting firms. And there has been a perception that the more traditional consulting firms aren't as Internet savvy. How does Andersen address those perceptions?

BJ: In terms of some of the startup consultants, many of them got their roots in the era when the Internet was about graphics and brochureware, and not about creating an e-business. What we really believe is important is creating a sustainable e-business with a path to profitability, and that has to do with world-class strategy skills that we have. We're one of the largest strategy practices in the world.

MG: Do most of your clients tend to be startups or large companies looking to spin off Internet divisions?

BJ: Before the NASDAQ correction, a majority were dot coms. Post NASDAQ correction, we're seeing some of the dot coms pulling back, and the dot corps moving in. There's very rapid growth, not surprisingly, in the industry-sponsored, B-to-B trading hubs.

MG: Is this correction now an opportunity for large companies that aren't as beholden to the whims of the NASDAQ to regain their footing?

BJ: Yes. For the large companies, it has created an opportunity. They have the capital, and they can use their expertise to create superior B-to-B marketplaces.

MG: What do you look for when considering new clients?

BJ: We've gone from the more pure-consulting measures of whether we want to take on a client to asking the more traditional set of venture capitalist questions. Is this is a market space we feel will generate value at some point? Is this a business that's poised to succeed in that marketplace? Does it have the right business model, the right management team, or the right kind of backing behind it?

MG: Sounds like you're becoming almost a VC rather than just a consulting firm.

BJ: We take a mixture of equity and cash. But for the part of our fees in equity, we are acting like a VC. So that's why we ask the VC questions. Linking consulting fees to value is-regardless of the segment-the trend of the future. We believe it's a broader trend, and this is a place where it's hitting first.

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